This month’s keywords are Recession, Inflation, and Interest Rates. You can’t turn on the news or open a newspaper without hearing or reading these words in a headline. So what exactly does that mean for our housing market, and more specifically, the housing market in Southwest Riverside County?
Economically speaking, we have entered our 2nd quarter of negative GDP, which usually signifies a recession. However, does that mean we’re in a housing recession? Sure the number of sales has dropped, and days on market and inventory have increased, but the median home prices have also increased. You can see those figures later in the report. What was once a booming seller’s market has quickly cooled/corrected and is now headed towards a neutral market. Houses initially priced based on sales just a few months ago are most likely experiencing price reductions. However, houses that have been priced correctly are still selling relatively quickly, although not quite as fast as the previous few months. A housing recession would generally see an increase in foreclosures, but thankfully we’re not seeing a lot of those types of properties hitting the market. The amount of earned equity and qualifying mortgage factors are why we don’t see a flood of foreclosures in our communities. So while some figures in my report appear negative, I don’t believe we are in or headed into a housing recession.
Inflation and Interest Rates almost go hand in hand. There is no doubt that inflation is affecting everyone, and that includes prospective buyers. Mortgage rates have also increased in the previous few months, leading to some buyers no longer qualifying for their loans. The Feds increased the interest rate again last week, and it’s already forecasted that they could raise rates again as early as next month. However, it’s important to note that Fed rates and mortgage rates are not the same. In fact, mortgage rates actually decreased when the last Fed rate increase happened. So it’s essential to work closely with your lender and fully understand what impact, if any, the fed rate has on your current mortgage rate.
My words of advice? If you are selling your home, work with your REALTOR® and price your home based on today’s market, not the market from a few months ago, or trying to compete with what your neighbor sold their house for. If you are a buyer, double-check that you’re still pre-approved. If you were trying to buy just a few months ago and lost out to cash offers or those buyers willing to pay over the appraised value, now is your time! The competition isn’t as fierce, and you don’t have to feel so pressured into making the first offer you can. But remember, it’s not quite a buyer’s market, so you still need to make a competitive offer. If you are a REALTOR®, educate your clients! Help them understand as the market shifts, and don’t forget about the buyers you may not have been able to help earlier in the year.
Let’s jump into the data for our area.
The median home price in Southwest Riverside County was down 6% from a month ago ($580,000/$615,000), but was up 5% from a year ago ($550,000), and up 33.3% from 2 years ago ($435,000). Unsold inventory increased again to just under 4 months (6 months is considered a healthy market), and days on market increased again from last month to 14 days. This is up from 6 days last year and actually higher compared to 10 days 2 years ago. Unit sales dropped again, down 25% from the previous month and 37% from last year. This is the lowest number of sales in 1 month since I started this report in March 2021. Unsold inventory continues to increase, up 33% from last month and 107% from last year. While the increase in inventory is a good thing, we are far from where we need to be. Once again, median prices are up in all but one of our local cities. Once city saw a decrease of 3.2%, while the remaining cities all ranged in an increase of 2.4%-13.6% Year-Over-Year. The percentages have decreased, but median prices continue to increase across the region.
The Chief Economist of the National Association of REALTORs® recently gave a presentation on the housing market nationwide. Much of his presentation mirrors what we see locally. He commented that foreclosures currently make up 1% of the market, and even as the economy tightens, he doesn’t predict foreclosures will top 2% of sales for the remainder of the year. This is again due to the gap between the value of the home and the mortgage amounts owed. He predicts that 2022 will end with a dip in unit sales and an 11% increase in home prices. 2023 would have a flat year in sales and a slight home price increase of 2%. I have included a few of his slides at the end of my report for your review.
On the Legislative Front, the legislative session is nearing an end, and our legislators are back in Sacramento, wrapping up the 2-year cycle. REALTORs® have successfully played a lot of defense with a few positive bills still alive. The filing period for elected official candidates closes this month, and we will soon know who has qualified for the many positions up for election this November. The Southwest California Legislative Council will also be wrapping up its review of the qualified ballot initiatives and will share those results soon.
A lot is going on, and I hope I have covered everything that affects you and your business. Please let me know if I left anything out or if you need anything explained further.
If you’d like a copy of my entire report including the mentioned slides, or to be added to the distribution list, please email me at Adam@srcar.org.
As always, I am available if you have any questions about the report. Until next month…