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Slowly, Slowly…

The watchword for the Southwest California housing market in August was SLOW. Home sales dropped 16% from July’s pace and we sold 1(one) less home across the region than we did in 2014 (905 / 904). That’s a little slower than anticipated even with pending sales down the prior month. The bad news is, pending sales are down another 5% this month so we can expect September sales to be even lower. Probably. The good news is unless it completely falls off a cliff, we’ll still sell more homes this year than last.

The better news is that prices continue to climb. Again the watchword would be slow. As a region, median home prices climbed a scant 1% month over month and 3% over last August. Individual cities did somewhat better with Murrieta posting an 8% year-over-year increase ($379,155 / $405,729), Menifee up 6% ($271,298 / $287,306), Lake Elsinore up 9% ($288,450 / $302,693) and San Jacinto up 11% ($193,775 / $$218,505).

Of course, with increased prices comes decreased affordability. CAR’s Housing Affordability Index (HAI), widely regarded as the definitive measure of housing health in the state, measures the percentage of households that can afford to purchase the median priced home in the state and regions of California based on traditional assumptions. Overall affordability is down statewide to 30%. Riverside County has dropped 2% Q1 to Q2 to 40% but our primary feeder markets, San Diego (25%) and Orange County (21%) keep our region attractive from a housing / lifestyle perspective. Only 16% of folks can afford a place in Santa Barbara and just 10% in the Bay Area.

When sales drop, revenue for the region drops as well. SFR sales contributed 17% fewer dollars to local economies in August, only slightly offset by the rise in prices. July SFR sales generated over $358 million dollars, a portion of which goes to city, county, school district and state taxes and fees. In August that fell to just over $296 million. However, through the first half of the year, housing has brought in 17% more revenue to our local municipalities this year than last, from just over $1.4 billion to nearly $1.7.  Billion. That’s not chump change, my friends.

We have not seen any appreciable rise in distressed properties in spite of earlier concerns tied to the end of early round loan modifications. So far, so good on that. We’ll likely get an opportunity to see what impact the Fed’s decision to start ratcheting interest rates will have. Some say it will depress the market, others claim it will stimulate the market. I won’t even hazard a guess on that. We are seeing more builders coming into the market throughout the region. That will provide a much needed boost to housing stock, job growth and economic expansion. Multi-family is all the rage right now but there’s a broad range of buyer requirements out there so build a diverse housing mix. A focus on energy efficiency makes good sense if you’re watching the general direction of Sacramento’s favorite legislation du jour. And work local – no gas for you! 

And finally, we have just passed the Labor Day weekend. It’s not just a holiday dedicated to BBQ, but a holiday to honor the American labor movement and the contributions that workers have made to the strength, prosperity, and well-being of their country. We could use a few more workers in California but Sacramento seems intent on sending as many of them as possible elsewhere. Maybe 2016 will be better. One can always hope, can’t one?

Written by Gene Wunderlich, Sr. Staff Writer

Prior to his retirement in 2021, Wunderlich served on a number of local non-profits and boards. He spent the past decade as a legislative advocate for the housing and real estate industries as well as a coalition of local Chambers of Commerce advocating on behalf of small and local businesses.

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