Welcome to another edition of the REALTOR® Report! Last month, I was reporting to you from our National Association of REALTORs® conference in Washington, DC. If you recall, I had just attended a meeting discussing the debt ceiling and some not-so-positive repercussions if a deal could not be reached. Many people and organizations feared an instant 2008/2009-like recession. I am happy to write this report with that crisis averted. The deal may not be what everyone wanted, and it may not be what you wanted, but I think we can all agree that avoiding an instant recession is a good thing.
Staying on the positive news, May was a fantastic month on many levels. Unit sales were up, the overall median price was up, and days on market decreased again. The total sales volume from the region was the largest since September 2022. If you know anyone going through a transaction, I’m sure they will tell you it’s busy and competitive again. So why all the doom and gloom in the news? For starters, comparing today’s market to the past couple of years is almost unfair. That market was on fire with record statistics, and we knew then that there was no way we could continue on that growth path. Yet that is the most current time in our heads, so that’s what we compare it to. Additionally, there continues to be a shortage of inventory, which is why days on market goes down, and prices remain flat or even increase. The main challenge right now is unit sales. We are far behind the pace of previous years, and it is forecasted to remain the same for the rest of the year. As mentioned before, I believe this is primarily due to the increase in interest rates.
My report only covers the resale of a home, not new construction. So that activity isn’t directly included here, but that market does impact the overall housing community. Last week, we hosted City Managers from Beaumont, Hemet, Moreno Valley, Perris, and San Jacinto for our annual breakfast with the city managers event. Of course, we were interested to see what development is planned in those communities, and I’m happy to report that well over 10,000 units are currently permitted, approved, and/or under construction. That’s great news for our region’s housing supply!
Now, let’s take a closer look at the numbers for our region from May 2023.
The median home price in Southwest Riverside County increased 3% from the previous month ($588,000/$569,000), but it remains down 2% from a year ago ($600,000). Comparing the median price to where it was 2 years ago, it has increased by 10.9% when the median price was $530,000. Unsold inventory remained at 3 months (6 months is considered a healthy market), and the median time on the market decreased substantially by 29% to 15 days. This is up from 8 days last year and significantly higher than 2 years ago when it was just 5 days. Unit sales significantly increased by 19% from the previous month but are down 28% from last year. Unsold inventory decreased from the previous month by 4% and is down from last year, with a decrease of 27%. Median prices flattened a bit, with a total median price variance from -9.4% to 1.6%.
I would also like to share an updated figure on the economic impact of a typical home sale in California. This considers all of the ancillary services associated with a transaction, purchases made as a result of the transaction, and the impact a new homeowner has on the community, to name a few. If you had to guess, what would that impact be? If you guessed almost a quarter of a million dollars, you’re right! $246,700 is the total economic ripple effect on California’s sales of a median-priced home. This may help explain how important the housing market is to our economy!
While in Washington, DC, I attended a presentation from our National Chief Economist, Dr. Lawrence Yun. He discussed many economic factors, including inflation and the impact of raising interest rates. He showed us data proving inflation is on its way down and commented how raising interest rates is unnecessary and shouldn’t be done. We share his feelings and hope to see some flattening or even a small decrease in future interest rates. He forecasts that rates will still be slightly higher than in 2022 but should see a reduction towards the end of 2023 and into 2024. His prediction for home sales was similar, with a slight decrease in 2023, with sales picking back up in 2024. I am including these slides for your review as well.
On the Legislative side of things, we just hit a crucial deadline in the legislative calendar known as crossover. This is when bills introduced in one house must pass out and make it over to the other house to stay alive. Many of the bills we have been monitoring were defeated, but we still have our work cut out. I will have a more detailed report on that next month as we continue navigating through the many bills we are tracking.
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…