This May “Realtor Report” is provided by Gene Wunderlich, director of government affairs for the Southwest Riverside County Association of Realtors. For space reasons, some of the comments and charts in the Realtor Report do not appear here. Direct questions to GeneWunderlich@srcar.org.
Good and not-so-good
By Gene Wunderlich
SRCAR Director of Government Affairs
Another good month for the Southwest California housing market. Not a great month, but pretty decent. Sales stayed up, rising 2% over April and remaining 13% ahead of last year’s pace. In fact it was the best regional sales total since June of 2012.
Pending sales are down slightly, so next months sales figures may not be quite as strong; but hopefully we can keep pushing through the summer.
Prices across the region dipped slightly, falling 1% from April but staying 1% ahead of last year. As always, some cities fared better than others with Temecula hitting it’s highest median price since December of 2007. At $457,247, it’s still 21% off the peak $575,935 reached in June 2006, but up 42% from the $263,118 trough in January 2009. The same holds true for all our cities in Southwest California. We’re still a ways off our peak pricing but have rebounded strongly from the trough.
Our national prognosticators are optimistic about the long term health of the market, even though the current housing market is still not as strong as had been forecast.
We’re still anticipating a substantial pent-up demand from current renters converting to homeownership IF the economy continues to improve. And we still have a huge bubble of Millennials moving into what is historically the prime household formation years. When that surge will hit is the subject of much conjecture as the demographic has thus far defied most attempts to define them by previous norms. But conventional wisdom still says they will start building families and buying homes at some not-too-distant date.
In addition to some excellent discussions, a conversation with Mike Huckabee and updates on all things political and legislative, our annual visit to DC met with some successes and some failure. We are confident that, at least for the foreseeable future, there will be no efforts to eliminate the mortgage interest deduction or capital gains relief from the tax code.
We also were successful in encouraging some 275 Senators and Representatives to sign a letter to the Consumer Financial Protection Bureau (CFPB) requesting a five-month transition period on their August 1 implementation of the new Truth in Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure (TRID) regulation.
The TRID promises to be a major shift in the way home sales are transacted and will effectively eliminate the possibility of a 30-day close; 45-day escrows likely will become the norm based on new rules enacted by this unregulated regulatory body.
Speaking of unregulated regulatory bodies, a singular success/failure also came about with the EPA’s ruling on Water of the United States. After a five-year battle trying to mitigate their attempt to redefine “navigable waterways” to include every puddle and seasonal trickle, the House passed a resolution while we were there to direct the EPA to stop their overreach. Success!
Two days later, President Obama came out in support of the EPA’s overreach; thus the rule likely will be implemented with great potential to impact private property rights, building, development and commercial ventures across the country. Fail!
Finally, this week marked the cross-over deadline for bills in Sacramento to be passed out of their house of origin. Most of the bills the CalChamber and Southwest California Legislative Council labeled as Job Killers were passed while most of the bills labeled as JOB Creators failed.
Among the more onerous bills impacting cities is AB 287 (Hernandez), which would require any city over 100,000 population to elect council members by district, is moving on, as are SB 3 (Leno) minimum wage escalator, SB 32 (Pavley) mandating 80% emissions reduction by 2050 and AB 1335 (Atkins), raising the price on real estate transfer documents to $75. Never met a tax or regulation they didn’t absolutely love.
Local Sales Statistics
Inventory increased slightly last month – up about 2% from the prior month but still 9% less than a year ago. Sales were also up 2%, offsetting the inventory increase, while absorption held steady at 102%. That means for every 100 new properties coming on the market, we’re selling 102.
This caused a modest 12% increase in months inventory. While 12% looks significant, the raw number increase went from 2.3 months to 2.6; still less than the 3% of a year ago and still less than half the 6% to 7% considered to define a market in balance.
Homes are staying on the market a little longer than they were a year ago, 57/69, but less than they were last month (75/69).
The trendline for sales in both the I-15 corridor and I-215 corridor markets is describing a very modest uptick after declining throughout 2014. Median prices are trending very moderately upward after the steeper appreciation through 2012-2013.
We have experienced a couple months (not consecutively) of price points lower than a year ago, but overall have maintained a positive trend in price movement since mid-2012.
With a still low inventory and reasonable demand, it’s safe to assume that some of the upward pricing pressure is being mitigated by new home construction. With some level of development in virtually every one of our markets, some of the demand is being absorbed by that new product.
And while water continues to be an issue, and will be for the foreseeable future, development continues unabated, with conservation measures increasingly making new homes more water-efficient than their aging counterparts.