December 20

THE VALLEY BUSINESS JOURNAL
20 www.TheValleyBusinessJournal.com
December 2020
The Definition of Insanity
REAL ESTATE
by by
Gene Steve Wunderlich Fillingim
Let’s start with congratulations to all
the recent election victors. Thanks as well
to those who stepped up, gave it a run and
came up short. Thanks for volunteering
to be of service to our communities. A tip
of the hat to all us survivors of another
political season as well. There’s still a
lot we don’t know about the outcome as
of this writing, but it appears that while
California residents justifiably and loudly
complain about how the state is being
run, they sent all the same lawmakers
back to Sacramento, apparently expecting
a different result, so…
Housing continues to perform well
as across our region we posted another
month-over-month increase in sales, up
3% (1,168 / 1,206) and up 18% over last
October (992). That not only catches us
up to last year-to-date (9,380) but puts
us ahead of 2019 by 2% (9,543). Pretty
amazing considering the cliff the market
tumbled off back in March. From our
low point in May (695), we’ve averaged
1,145 sales every month since. Pending
sales dipped 7% coming into November
so we can expect some normal seasonal
slowing ahead, but we should still finish
well ahead of last year’s pace.
Pushed by this heavy demand, shrinking
inventory, and record low interest rates,
median prices continue to appreciate,
up 1% month-over-month ($444,500 /
$446,486), but up a stellar 12% over last
October ($391,433). The forecast for 2020
median appreciation was pegged at around
3% - 4% but year-to-date we’re running
a solid 8% ahead of 2019 ($385,150 /
$418,429). After a slow start in January,
Temecula’s median price has exceeded
$500,000 every month, venturing as high
as $555,000 in August. Driven by 17 sales
in excess of $1,000,000, Temecula posted
an average price of $621,365 last month.
Not to be left too far behind, Murrieta had
16 sales in excess of $1,000,000, their 2nd
month above $500,000 median and an
average price of $569,859. Canyon Lake,
Menifee, and Lake Elsinore each posted a
$1,000,000+ sale last month as well.
Meanwhile our inventory of homes for
sale contracted by another 4% last month,
down to just 855 homes across ALL price
ranges. That’s down 61% from last October
when buyers had 2,205 home to select
from. We also lost another 3 days off the
inventory – down to .7 of a month from
.8 last month. That’s literally 3 weeks of
inventory when a normal market is 6-7
months. Homes are languishing on the
market for just 6.2 days on average whereas
last month they were sticking around for a
solid week. That’s down 76% from a year
ago when the average home stayed on the
market for 25.4 days. Aside from being
a hyper-competitive market right now,
some of that reduction in days-on-market
is due in part to a new practice in our MLS
allowing agents to show ‘Coming Soon’
listings. This gives aggressive buyers a
few days’ notice of an upcoming property,
providing a jump on the market resulting
in quicker sales.
How can you sell 1,206 homes when
you only have 855 available? Absorption!
In addition to what’s on the market, we’re
selling virtually every new listing that
comes on the market (99%) in less than
a week.
The California Association of Realtors®
just provided their update and
forecast during what would normally
have been our annual meeting and there’s
some fascinating info in it. In summary,
the trends we’re seeing locally are being
repeated across the state with sales and
prices both up to record levels. Inventory
is also sagging statewide – down to 2
months, and properties are only staying
on the market 11 days on average. As a
result, median price hit an all-time high
for the state of $706,900, which negatively
impacts housing affordability across the region.
Yet in spite of declining affordability,
the share of first-time homebuyers rose to
38.4%, exceeding the long run average of
37.2 for the first time since 2010.
Here’s some other startling, but
unsurprising, factoids of the market. In
2019, and estimated again in 2020, 30%
of sellers were leaving the state. That’s
the highest number since 2005 when 31%
hightailed it for greener pastures. Another
36% are moving within the same county
and 18% to another county. LA County
lost an estimated 200K residents to the
IE between 2010-2018, their first choice,
with another 80K moving to OC, 60K
to Texas, etc. So if LA County residents
are increasingly moving inland as their
first choice, where are inland sellers
going? Not within California, that’s for
sure. First choice is Arizona (apparently
taking their political habits with them),
then Texas, Utah, Nevada, Georgia, and
so forth.
While most cities in our region boast
homeownership rates of 60% - 70%,
46 of California’s largest cities are now
majority renter cities with Santa Monica
leading at 72% renters, LA and SFO at
63%, and even San Diego and Escondido
at 54% and 51% respectively. Those cities
have created their own problems with
restrictive and pricey housing policies,
but they must also govern a majority
renter city differently than we do. Where
there is no pride-of-ownership, quality of
life, education and public safety assume
different priorities – hence the return of
rent control initiatives every couple of
years.
So, hang in there – this bumpy ride’s
not quite over yet but there may a light at
the end of the tunnel. Of course, it’s 2020
so that may just be another train coming.
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.