by Gene Wunderlich
The good news is we’re getting the trough over early and hopefully the market starts back up next month. There’s an old saying that home sales pick up after the Super Bowl. Don’t know what that says about us but let’s hope it holds true. January sales for the Southwest California region were down 30%, from 865 units in December to 614 in January. When December’s pending sales are down that doesn’t portend a bounteous January and it lived down to expectations. January 2013 was the lowest month of last year and this January was even lower – soooo, nowhere to go but up!
Leading the sales decline – Temecula sales dropped 33% from December (156/104) and Murrieta was down 27% (143/110). Prices held their own with the region dropping 5% from December but still 1% ahead of last January. We’ll probably continue to see soft prices for awhile as inventory has increased while sales have slowed. It’s all up to the consumers and that’s hard to peg. In spite of some good economic news on the jobs front, the GDP ended the year at just 2.4% annual growth rate for 2014. That’s just a touch better than the sluggish average of the recovery since September of 2009 and still well off the 4%+ pace we were enjoying in the 90’s.
But households went on the biggest spending spree of the last 9 years in the 4th quarter due to the drop in fuel prices and a year-end surge in hiring. How long they will sustain that confidence is anybody’s guess. As part of the international market, what happens in Greece’s parliament and Kuwaiti oil fields will impact us here. Gas prices are down which is great news for a lot of us but it’s causing layoffs in related companies and is having a negative impact on oil patch cities and states. And gas prices are headed back up. The U.S. dollar is stronger against many currencies right now and that should be good – except that makes it cheaper to buy imports and more expensive for foreign countries to buy our exports. That causes the trade balance to widen , which sliced 1 percentage point off economic growth last year.
It’s a topsy turvey world. One of the advantages pointed out by prognosticators is the relative affordability of housing in our region. That’s been one of our competitive strengths for years and lead to runaway growth during each of the past two boom cycles. While affordability has dropped the past 18 months with home price appreciation, relative to coastal cities we are still a bargain.
What we need are Buyers. Speaking with FHA Commissioner Biniam Gibre at our recent state meetings, we asked if they watch market share as a measure of the their success. His response was, “We’re more focused on purchase volume, not market share. From 1995 – 2005 the FHA originated between 5 and 5.5 million loans every year. From 2006 – 2008, that number rose to 7 million. Between 2009 – 2012 that volume dropped to 3 million loans and that’s about where it is today. We’re trying to find where those extra 2 million loans are and how do we get those people back into the market?”
Well, after last month there’s nowhere to go but up. Let’s hope the market agrees.
Gene Wunderlich is the Government Affairs Director for Southwest Riverside County Association of Realtors. If you have questions on the market please contact me at GAD@srcar.org or to keep up with the latest legislative and real estate trends go to http://gadblog.srcar.org/