VBJ August 20

THE VALLEY BUSINESS JOURNAL
20 www.TheValleyBusinessJournal.com
August 2020
Is this the V we’re looking for?
REAL ESTATE
by by
Gene Steve Wunderlich Fillingim
While the media’s grim reapers
continue to predict catastrophe from
the CV-19 pandemic, it’s hard to look
at our current housing numbers with
anything but optimism. I suppose this
could be tempered going forward as
the Governor selectively shuts down
business that survived his first round
of closures and had successfully reopened,
but for now we’ll seize on
some good news.
As I’ve stated here before, this
virus crisis appears to be equal parts
science, politics and economics. On
any given day, one or the other of those
narratives takes the forefront, apparently
predicated on which message
will drive the greatest compliance from
a divided citizenry.
In today’s commentary I’ll refrain
from addressing the science, which is
confusing and contradictory at best,
nor will I address politics, because
depending on our perspective we’re all
too familiar with that already.
So, lets talk about the economy.
Despite dire warnings to the contrary,
the U.S. economy added another 4.8
million jobs in June dropping the
unemployment rate from 13.3% to
11.1%. Still some 3X where it was
just a few months ago but improving
steadily the past two months. Almost
40% of people who lost jobs during
the early pandemic lockdown have
returned to work, including low-skilled
and lower-wage workers. Nearly all
industries have benefitted with large rebounds
in leisure and hospitality, healthcare,
manufacturing, and non-department
retailers like big-box stores and on-line
merchandising.
To be sure, there have also been corporate
bankruptcies in business sectors
like J.C. Penny’s, Hertz and 24- Hour
Fitness, and we continue to harbor major
concerns about the survival of our local
small business base.
It is estimated that nationwide as
many as 41% of businesses currently
closed will not reopen, including 26%
of gyms, 35% of retailers and a shocking
53% of restaurants. Assistance and relief
provided by federal, state, county and
city loan and grant programs provide
a lifeline to some, but not all. That will
slow our recovery, especially in states
like California that deployed a deeper
and longer lockdown and has allowed
only staggered reopenings followed by
staggering reclosures. But I digress.
That positive economic news translated
to equally positive housing news
in our local market. You’ll recall that
pending sales coming into June were
up 28% from May. What resulted was a
33% increase in month-over-month sales
across the region (695 / 1,036), only off
2% from June 2019 (1,059). Considering
that last June we were operating in a ‘normal’
non-lockdown, non-masked, open
house environment, this year’s volume is
a strong indicator of the resiliency of the
market. Some cities posted 40% - 50%
gains like Temecula (127 / 203), and
Murrieta (125 / 204), but even Canyon
Lake, normally selling +/-15 homes a
month, put up 42 sales in June, including
eight in excess of $1,000,000! Temecula
posted nine $1 mil+ sales as well, and
Murrieta had three. With pending sales
up another 10% coming into July. There
is no reason to assume June was a oneoff
anomaly.
Obviously given the slow start to the
year, 2020 will not be a record-breaking
year as we had hoped back in January/
February. Through the first half of the
year, year-to-date sales are running
some 7% below last year’s pace (5,280
/ 4,851) and 19% behind 2017’s record
level (5,986). Politics and science will
determine how well we do the rest of
the year, but with interest rates breaching
new lows, the incentive for buyers to act
now is strong.
Median prices continued their apparently
inexorable climb remaining
some 6% ahead year-to-date ($379,744
/ $405,244) in spite of a month-overmonth
break even. First half prices are up
51% over the decade ($197,894). That’s a
steady appreciation averaging 5% a year,
the longest run-up in our local market
and a sustainable rate going forward,
eschewing the 30+% annual increases of
much of the last decade.
Of grave concern (again discounting
politics and science), is the status
of our inventory. Homes on the market
declined another 23% in June (1,193 /
918) and dropped 62% from last year’s
more robust 2,431. That translates to
an inventory of less than 1 month!
That hearkens back to late 2012 and
2013 when inventory last dipped below
1,000 units before starting a slow
climb. This, more than anything, will
constrain future sales because you
can’t sell what you don’t have.
Meanwhile, stay safe, stay healthy,
and don’t sing in church.
Gene Wunderlich is Vice President,
Government Affairs for Southwest Riverside
County Association of Realtors.
If you have questions on the market,
please contact me at GAD@srcar.org.
“
To be sure, there have also been corporate bankruptcies in business
sectors like J.C. Penny’s, Hertz and 24- Hour Fitness, and we continue
to harbor major concerns about the survival of our local small
business base. It is estimated that nationwide as many as 41% of
businesses currently closed will not reopen, including 26% of gyms,
35% of retailers and a shocking 53% of restaurants.