Welcome to the Realtor Report for January 2010. The attached charts summarize Southwest California housing activity for the year just past and provide some perspective on where we’ve been and where we are today. It’s going to take somebody far sharper than me to figure out where we’re going.
The first chart is always interesting in that it gives us a six year window on the market. One of the first thing you’ll notice is that sales were off 2008 levels – about 20% in Temecula, Murrieta and Lake Elsinore, 40% in Wildomar and Menifee and just 7% in Canyon Lake. However, when you drop down to the Demand Chart you’ll note that we’re still selling 70% of the properties that come on the market and our inventory is still minimal.
What that suggests to me is that even though sales were off, it was primarily a factor of product availability, not a decline in demand. 2008 was a record sales year in most of our cities and that absorbed much of the available housing stock dropping inventory levels from 20-22 months in December 2007 to 2 months or less in December 2009. A ‘healthy’ market inventory is considered to be 5 – 6 months.
After bottoming out in Oct-Nov 2007, sales have generally posted a gradual increase proscribing a shallow ‘smiley face’ trend line – again with sales volume only constrained by available product. (6 Year Sales Graph)
Another thing to note in our sales – you’ve all heard recent reports trumpeting housing sales off by 40% or more nationwide in December, the biggest monthly drop since Lincoln was a lad. But not in Southwest County. Our unit sales were actually UP December over November by an average of 25%. 12% in Temecula, 17% in Murrieta, 36% to 40% in Wildomar, Lake Elsinore & Canyon Lake and 5% in Menifee. (24 Month Sales Graph)
The Median Price of homes in the region continued to decline year-over-year in 2009 – down 15%, on average, from 2008. That ranged from dips of 22% and 24% in Menifee and Wildomar, to 14% in Temecula, 11% in Murrieta and just 2% in Lake Elsinore. That brought our peak-to-trough median price down 66% in Lake Elsinore, 58% in Canyon Lake, 52% in Menifee & Wildomar, 49% in Murrieta and 45% in Temecula. (24 Month Median Price Graph)
Ready for some good news? I mentioned peak-to-trough pricing in that previous paragraph because it appears – appears – that our prices may have bottomed out, or be very close to it. Looking at quarter-to-quarter run rates, we have showed 1st to 4th quarter declines every year since 2006. In 2009, 1st to 4th quarter showed nearly a 5% increase in Temecula, 4% in Murrieta, 24% in Canyon Lake and drops of just 1% in Lake Elsinore & Wildomar and 6% in Menifee for a region-wide median price increase of 4%. If we can just keep that up for the next 10 years we’ll be back to where we started.
The last maps show the current status of pre-foreclosure and bank-owned properties in the region. These numbers could change, perhaps dramatically, during the next 60 days. Banks typically hold off foreclosure activities during the holiday season plus some moratoria and loan-mod efforts are scheduled to expire in the first quarter, so the number of notices of default (pre-foreclosure) could increase significantly.
Similarly, there has been a lag between NOD’s filed and actual trustee sales to the banks. As banks get more aggressive about clearing their books of non-performing assets, we may see the banks taking more properties back followed by an increase in releases to the re-sale market – as has long been rumored. Given our current lack of inventory, the extension of the First Time Homebuyer credit, continuing strong demand and historically low interest rates, this could only be good news for our Valley. Of course that’s just my opinion – I could be wrong. (ForeclosureRadar Maps).