Unless the market completely shuts down between now and the end of the year, 2015 will go into the record books with a slight increase in sales over 2014 and maybe even a little improvement over 2013. After falling 16% in August, September sales ticked back up 5% for the region and stayed 6% ahead of last August. So even if our 4th quarter is no better than our 1st quarter (which wasn’t great), we will still sell a few more than the 10,618 units sold in 2013. So far through 3 quarters we’re running 9% ahead of last year (7,626/8,356). However pending sale, that indicator of what the future holds, is at its lowest point since January so that doesn’t bode well for October sales volume.
Prices are holding up but softening. Our regional median prices dipped 1% from August to September led by Murrieta with a 6% month-over-month drop and Temecula falling 2%. We still held a 6% advance over last August and looking at the cumulative 3 quarters of the year we are 4% ahead of last year ($299,439/$312,901). For the region we should end the year ahead of last year again marking the 5th straight year of price appreciation for the region.
Some folks that get paid for their opinion believe we’ll see price stagnation or even reduction over the next 12 months as new homebuilders ramp up and increase the supply past the demand curve. Yet others will tell you that pending interest rate hikes by the Fed will have a dampening effect on sales. I think they’re both right but not necessarily for our region. It’s been less than three years since those same prognosticators were bemoaning the ‘fact’ that the Inland Empire would be lagging the rest of the state in recovery, that our region would never again see the prices we did in 2007, that our jobs market would not rebound with the rest of the state.
WRONG!
Turns out the IE is leading the state in jobs creation. And while our prices have not rebounded to the levels we saw in 2008, that’s not a bad thing. The OC and San Diego have bounced back strongly making us once again the affordable housing destination for Southern California. What sweetens that pot is that not only are we affordable, but we have established a firm reputation as a quality of life destination as well. Now if those pesky Millenials would just start forming households and buying homes…
In addition to the potential for interest rate hikes, the housing industry is also facing TRID, the TILA RESPA Integrated Disclosure (TRID) rule. Making its debut on Monday, October 3rd, this massive rule weighs in at nearly 2,000 pages and impacts all businesses that touch a residential mortgage, as well as homebuyers. The Consumer Financial Protection Bureau (CFPB) is ready to enforce this rule. Compliance presents a challenge, as it requires large-scale operational changes for lenders, title companies and many more.
In response to NAR and others, the CFPB has indicated that from now through yearend their involvement will be ‘advisory’ rather than ‘punitive’, but effective 2016 the CFPB will start flexing their rather ominous (and unregulated) muscle. At the very least, TRID marks the end of the 30 day escrow with compliance issues expected to stretch the ‘normal’ closing period to 45 days or more.
For a variety of reasons the next three months represent the best home buying opportunity we’re likely to see for the foreseeable. Do your part. Buy a home. Already got one? Buy another. Heck, buy two. Rental rates are skyrocketing but prices and interest rates won’t be this low again so we’re counting on you to make this economy work. Don’t let me down.