It’s Election Day, and I hope you have exercised your right to vote! You can’t complain about politics if you aren’t willing to participate. I hope everyone made educated votes and wish everyone luck as we wait for the results.
There isn’t a lot of change in the big picture of the real estate market. You can see on the following slides that many trends continue to move in the same direction. While it’s easy to focus on the details in front of us, we must remember to look at the big picture (as referenced in a comic on a later slide).
If we look at the negative, sales are down, as are median home prices. Inventory is relatively flat, and the days on market is slightly up. Sound familiar? But let’s look at the market over the past couple of years to put things into perspective.
The pandemic may have been a challenging time for many reasons, but it also created a lot of opportunities in the housing market. As people left offices and remote work became more regular, our region saw many transplants from the bay area, Orange County, and other high-cost areas. The value of what could be purchased here vs. there was quickly realized, and those buyers cashed in and relocated here. Many paid over the asking price as inventory was at an all-time low. Combine that with record-setting low-interest rates, and you had a market that was on fire! That’s great for sellers, but buyers had a challenging time, which wasn’t a healthy or sustainable market.
As we transitioned out of the pandemic, rates increased, prices rose, and affordability became an issue. Since then, we have leveled out and remain in a neutral market. It would be hard and unfair to compare today’s market to last year’s atypical market. Stepping back and looking at the big picture, things aren’t so bad. Please also remember that the equity in your home is only relevant when you are planning to sell or refinance. If you’re staying put for a while, you should be fine.
Staying on the positive, we know that California has yet to keep up with population growth when it comes to building homes. However, even when other areas are seeing developers rescind or put projects on hold, Southwest Riverside continues to plan ahead, with tens of thousands of units being developed in the near future.
Let’s take a closer look at the numbers for our region.
The median home price in Southwest Riverside County was down 2% from a month ago ($560,000/$573,000) but was up 4% from a year ago ($538,000) and up 24.4% from 2 years ago ($450,000). Unsold inventory remained at 4 months (6 months is considered a healthy market), and the median time on market increased again from last month to 25 days. This is up from 9 days last year and significantly higher than 2 years ago when it was 6 days. Unit sales decreased by 12% from the previous month and are down 38% from last year. Unsold inventory was flat compared to the previous month but is considerably up from last year, with an increase of 81%. Median prices were up in most of our local cities, with only a few seeing a dip compared to last year. Remember that the median price is the price right in the middle, so a one-off low or high-priced sale can impact this figure. Please refer to the slide that also shows ”Average House” for more information.
I attended an informative economic update from our State Chief Economist and am including some of his presentation slides for your review. It covers some great information on the effect of rising interest rates, best-case and worst-case rate predictions for 2023, and the California Housing outlook for 2022 & 2023.
On the Legislative Front, I’d like to mention a Federal Bill, H.R. 9015. As you may be aware, capital gain exemptions have been set at $250,000 for single filers and $500,000 for joint filers for the past 25 years. With rising prices, some potential sellers are not able or willing to sell as they would be subject to taxes exceeding the current capital gains exemption. H.R.9015 would raise the capital gains exemption to $500,000 for single filers and $1,000,000 for joint filers, and it would also include an annual inflation adjustment to the increased amount. This bill could be a significate help to sellers and help to open more inventory for buyers. While this bill won’t make it through this year, it has already received bipartisan support and is planned to be brought back in early 2023. I will track this bill and keep you updated on any progress it makes.
While things remain busy, 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.