Housing market continues to grow

By Gene Wunderlich
Vice President of Government Affairs Southwest Riverside County Association of Realtors®

In this topsy-turvey world we’ve been living the past year, we’ve seen our economy and our lives tossed into turmoil. Record low unemployment rocketed to near-record peaks in a matter of weeks. Record GDP performance was followed by one of the steepest quarterly declines in history. A President who presided over both extremes was booted from office amidst demands for more, or less, of everything.

Our housing industry was certainly not immune to these gyrations. Following the lockdown and dismal Q2 sales, 2nd half demand pushed our region to the highest sales volume of the past decade. Record low interest rates and record low inventory lead to record high sales volume and record high price appreciation.

Since the dawn of this century the housing market remains in uncharted waters. Some of you may recall that Riverside County led the nation in price appreciation between 2003-2008 with the median price of a home soaring some 155%, or 30% every year. Of course, that was followed by the great melt-down which saw owners’ equity evaporate by 2/3 in just 18 months. Nobody was buying and the glut of bank-owned homes threatened to blight the market forever.

We’re now entering our 11th consecutive year of gently appreciating prices, an unusual phenomenon in California where we average a boom and bust cycle about every seven or eight years. The key to maintaining this one has been the nature of the appreciation, averaging a sustainable 5%-6% a year over the past decade.

That has allowed homeowners to gradually build back equity in their homes while avoiding the temptation to refinance every six months to squander their cash reserves. That equity cushion is also what will (hopefully) provide the difference between the foreclosure crisis of 2009-2010 and the aftermath of what we’re experiencing today.

So let’s look at some numbers. After finishing 2020 with landmark December sales, as anticipated, January volume dipped by 29% (1,149 to 815). However, lest ye despair, January 2021 sales were 17% stronger than January 2020 (679 to 815). That’s a good start and pending sales are up, indicating February should remain strong.

Realtors continue to report extraordinary activity surrounding new listings with stories of 15-20 offers being submitted within hours. With the recent Fed indication that interest rates will remain low for the foreseeable future, don’t look for demand to decrease anytime soon. Record low interest rates equals record demand.

And record low inventory equals record price. The median price of a home in our region surged 17% over last January ($395,188 to $466,065). (Canyon Lake median price over last January increased 11%, from $520,000 last year to $586,000 this year.)