August was a busy month in all areas I typically cover in this report. Unit sales were back up month over month, candidates for the General Election have been certified, and the State Legislative session came to an end. I also attended multiple economic forecast presentations, with two of those focused on our region specifically. So let’s jump right into some of the details.
My mentor used to joke that if you listened to three economists, you would get four different outlooks. Well, in August, I attended three presentations from economists and actually heard three very similar presentations. Let’s kill the elephant in the room and remind everyone that this is not 2008, and we are not heading for a major housing crash! The housing market is simply cooling off and returning to a much more normal market. One of the economists, Steven Thomas, still called today’s market a slight seller’s market. All three economists agree that we are dealing with a supply vs. demand challenge, and we don’t have enough supply. Sound familiar?
The other factor in the market is interest rates. As the cost of borrowing goes up, the demand decreases, and the time on market increases. You can see those figures later in my report. On the positive side, our unemployment rate (3.6%) has never been this low, and spending is up. These are both indicators of a strong economy. However, there are some things to continue watching moving forward. Inflation continues to affect the economy, and interest rates continue to play a major part in sales. If you are looking at rates today, which are right around 6% for a 30-year fixed mortgage, and thinking those are still reasonable rates, you’re not wrong. But you can’t compare them with the high rates of the past due to today’s pricing. While you or someone you know may have purchased their home with a 10%, 12%, or even 15% rate in the past, there is no way they could have done that with today’s home prices. Dr. Chris Thornberg may have said it best – “We don’t have a housing affordability problem; we have a housing supply problem.” If we go back to the simple supply vs. demand concept, increasing supply not only helps the housing market but also brings many jobs and economic growth to the community where the housing is being developed. Overall, the consensus was that, at least for the short term, things are looking pretty positive here in Southwest Riverside County. Potential corrections in the market are coming, and as Dr. Thornberg put it, ”you don’t need to jump in your bunker yet, but also don’t stray too far from your bunker.”
As we look at the figures for our region, I want to remind you that this report covers Single Family Homes only (no condos, townhomes, or multi-family) and only resale homes. I have often been asked to include data on new construction homes, especially with so many being built in our area, but unfortunately, there just isn’t a data source to properly track those sales.
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 median home price in Southwest Riverside County was flat (0% change) from a month ago ($580,000/$580,000) but was up 5% from a year ago ($550,000) and up 28.9% from 2 years ago ($449,900). Unsold inventory increased slightly to just over 4 months (6 months is considered a healthy market), and days on market increased again from last month to 19 days. This is up from 7 days last year and higher than 2 years ago when it was also 7 days. Unit sales increased by 13% from the previous month but are down 21% from last year. Unsold inventory continues to increase, up 6% from last month and 77% 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 minimal decrease of 0.3%, while the remaining cities all ranged in an increase of 0.4%-15.3% Year-Over-Year. The percentages are reflecting slower increases, and I would anticipate similar trends for the remainder of the year.
On the Legislative Front, the legislative session has ended, wrapping up another two-year cycle. Things moved very quickly in August, and those bills that survived are now on the Governor’s desk. As a reminder, he has three options: He can sign the bill into law, he can veto the bill, or he can ignore the bill, and it will still become law in 30 days. I will have a recap on the bills that we have been tracking next month once we know the final outcome. The Southwest California Legislative Council has also completed its review of the 7 propositions that will appear on the ballot, and I have included those recommendations at the end of my report. Finally, the certified list of local candidates is official, and campaigning has definitely started. As always, I will encourage you to reach out to the candidates in your area, ask them questions and get to know their stance on the issues that concern you. Please don’t just rely on who has more signs or whose ad you may have seen. Look for events in your area so you can meet the candidates personally. Next month I will include a list of candidates that our State and Local Association has endorsed for your reference.
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…