Big ifs, ands and buts

BY

For anybody keeping track, our state legislators introduced 2,297 new bills this session. Last Friday was the deadline and legislators lost no time cranking out 10, 15 or 20 bills apiece, seeking in some way to tax, regulate or otherwise impact our lives. Some, maybe a couple hundred, would impact us positively but most of them probably stand very little chance of passing.

The vast majority will impact us negatively, some very negatively. Hopefully most of them won’t pass either but the odds are against us. While Republicans eliminated the legislative super-majority last November, meaning they can’t just pass any tax they want, it only takes a simple majority to pass most other bills, including “fees.”

So while meaningful California Environmental Quality Act (CEQA) reform is probably dead, measures to make CEQA more intrusive may succeed. While easing regulatory pressure on California manufacturers won’t make much headway, the Global Warming Solutions Act will propose they reduce emissions even further – to 80 percent below 1990 levels.

And while a bill to eliminate minimum franchise tax for new businesses may advance no further than it did last year, expanding statewide taxes to include all services is on the table, as are discussions to make it easier for municipalities, school districts and water boards to raise our local taxes.

And Wildomar and Menifee probably still won’t get their Vehicle License Fees back.

So how about housing? Well, even for a short month, February outpaced January – not that that was much of a challenge. February sales were actually up 3 percent across the region month-over-month, although they were still 5 percent below last February. Perhaps more surprisingly, prices posted unexpected gains – up 2 percent over January.

The median was also up 7 percent year-over-year; but since last February prices were at their lowest point of the entire year, being on the plus side of that equation is a good thing.

As you look at the attached graphs, you’ll note that sales continue to trend downward over the past three years while our median price for the region has flattened after a surge in 2012-2013. We’ll have to see how the rest of the year plays out but if you keep your expectations low you probably won’t be too disappointed.

That will be particularly true given the data reported. As I’ve discussed before, we’re entering a period where loan modifications initiated during the early days of

HAMP and HARP are starting to re-set. And guess which state has the largest number of loans that will re-set?

With an estimated 645,872 loans scheduled to re-set over the next four years, California leads the pack. Here’s the scary part of that – 66 percent of those homes are still seriously underwater. That’s not as bad as Nevada where 84 percent are still underwater, or Arizona with 77 percent. But Arizona only has 122,000 re-sets and Nevada even fewer.

IF prices continue to climb and IF interest rates stay low, the negative impact of these re-sets to our market will be minimal. But even under the best scenario, we will still see

a local increase in distressed properties with the potential for continued price softening. The nature of our market – big if, ands and buts.

Local sales

Inventory was down a little last month while both closed sales and, more encouragingly, pending sales were up. Hopefully that means buyers were starting to come out again and springseason sales will start ticking up.

That 3 percent sales increase, combined with a 3 percent drop in inventory, reduced our months inventory figure back to 4 months from 4.5 months in January. Again, keep in mind that a market considered to be “in balance” is six to seven months. Technically we have been in a strong buyers’ market for the past 12+ months. It would appear that a lot of buyers have not gotten that memo. Yet.

Properties are staying on the market a little longer, up to about 83 days on average and, in spite of a sales increase, we absorbed fewer new listings in February; which means inventory is likely to climb again in March. Hopefully sales will climb to meet the challenge.

This November 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 Gene’s Realtor Report do not appear here. Direct questions to GeneWunderlich@srcar.org.