Mid-year housing report

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June housing report for Southwest California

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Mid-year housing report

  1. 1. The recession might be over, but we’re not necessarily over the recession. “It’s been more than seven years since the housing market last experienced the increase that we saw in May, with indications that the summer months will continue to see significant gains. As we approach the half-way point of 2013, home prices continue to respond positively to the reduction in home inventory thus far,” according to Mark Fleming, Chief Economist for CoreLogic, a leading property information and analytics firm. Indeed by CoreLogic’s HPI calculations, 97 of the largest metropolitan areas in the country posted year over year increases with 33 metro areas showing double digit increases. For May, Nevada posted the highest year-over-year home price appreciation at 26%, with California 2nd at 20.2%, Arizona coming in at 16.9%, Hawaii at 16.1% and Oregon rounding out the top 5 with 15.5%. Just two states posted year-over-year price declines, Alabama at -0.1% and Delaware at -0.6%. At 18%, the Riverside/San Bernardino/Ontario metropolitan area was 3rd in the nation for appreciation, just behind Phoenix at 18.3% and LA/Long Beach at 19.8%. Utilizing their own proprietary analytics, Case-Shiller reports the nationwide housing price index up 10.2%, with their select 20 city index up 12.5%. Whether by a little or a lot, it would appear the housing market is finally out of the doldrums. We can discuss the myriad reasons this has come about and we can debate whether it is sustainable and for how long, but for the time being it’s upon us. Certainly in Southwest California our cities are performing well with the region showing a 22% median price increase over June of 2012. We’ve posted month over month gains every month this year and our June median of $325,088 for the region is the highest we’ve recorded since March 2008. If you were prescient enough to buy a home in April of 2009, when our prices troughed at $210,317, you’ve seen your property value appreciate 35%. That appreciation in value is one reason foreclosure filings are down nearly 55% from a year ago and why the inventory of bank owned homes is down some 35% across the state. Unfortunately if you bought earlier, like when we peaked in March 2007 at $508,559, you’re still 36% underwater but getting better. At $416,271, Temecula has made back slightly more than half their equity loss ($575,935 in 6/06 - $263,118 in 1/09) and the other cities are moving up as well. How long can this drive continue? Well, there is still significant pent-up demand, interest rates, though climbing, are still attractively low and a lack of inventory is driving a sellers market. But national uncertainty over tax reform, healthcare and other issues are serving to keep the jobs market from flourishing and until employment improves, we won’t see the full potential of this housing market. In fact, could see some dampening of demand if economic concerns linger. For more on that see The Last Word…
  2. 2. 0 50 100 150 200 250 3/11 6/11 9/11 12/11 3/12 6/12 9/12 12/12 3/13 6/13 Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake Southwest California Homes Single Family Homes Unit Sales $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 3/11 6/11 9/11 12/11 3/12 6/12 9/12 12/12 3/13 6/13 Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake Southwest California Homes Single Family Homes Median Price June Transaction Value: Temecula $79,507,795 Lake Elsinore $21,937,938 Murrieta $65,328,373 Wildomar $10,678,997 Menifee $39,377,470 Canyon Lake $13,658,210
  3. 3. $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 3/12 6/12 9/12 12/12 3/13 6/13 Southwest California Murrieta Temecula June Median Price: 2012 2013 % Temecula $304,994 $416,271 27% Murrieta $303,196 $355,046 15% Menifee $182,861 $223,087 24% Lake Elsinore $190,820 $243,755 22% Wildomar $219,150 $305,114 29% Canyon Lake $329,125 $390,235 16% Southwest California $255,024 $325,088 22% Southwest California Homes Single Family Homes Year-Over-Year Median Price
  4. 4. SW Market @ A Glance Reporting Period Current Period Last Period Y ear Ago Change from Last Period Change from Year Ago Existing Home Sales (SFR Detached) June -13 700 686 757 2% 8% Median Home Price June -13 $325,088 $307,440 $255,024 6% 22% Unsold Inventory Index (Months) June -13 1.3 1.1 1.3 16% Median Time on Market (Days) June -13 52 48 87 8% 40% Source: CRMLS June Market Activity By Sales Type Standard Sale Bank Owned Short Sale Active % of MKT Sold % of MKT Active % of MKT Sold % of MKT Active % of MKT Sold % of MKT Temecula 232 92% 154 81% 11 4% 10 5% 6 2% 24 13% Murrieta 203 91% 133 72% 5 2% 8 4% 9 4% 39 21% Wildomar 32 84% 23 64% 3 8% 0 0% 2 5% 11 31% Lake Elsinore 113 88% 55 61% 6 5% 7 8% 6 5% 19 21% Menifee 125 86% 116 71% 6 4% 11 7% 10 7% 33 20% Canyon Lake 71 95% 27 77% 3 4% 2 6% 0 0% 5 14% Southwest California 776 89% 508 73% 34 8% 38 5% 33 4% 131 19% Remember just a few short years ago when banks ruled the market? When we had a 22 month inventory of homes for sale and 92% of those were foreclosures? When I suggested that if we could only reduce that percentage of distressed homes to under 50% or maybe 30%, we would be back to a ‘normal market’? Well, we’re there. Distressed properties made up just 12% of the active market last month and 24% of solds. Yet the market is far from normal – or maybe it’s just California normal – which is certainly different from normal in most places. From my January 2010 report to you, Murrieta had 387 bank owned homes, Temecula had 276 and Lake Elsinore had 333. Today those numbers are 5, 11 and 6. Normal? I can tell you where the market has been and where it is today. But where it’s going? I don’t make nearly enough to know that. Not only is our median price up 22% over last year, it’s up 19% just since January. If the 2nd half of the year is as crazy as the 1st half…
  5. 5. 0 50 100 150 200 250 300 On Market (Supply) Pending Closed (Demand) Days on Market Months Supply Absorption rate * 2 2 2 2 4 6 1 8 4 5 3 1 . 2 1 . 9 2 5 3 2 2 2 1 9 1 4 3 1 . 3 1 . 8 1 2 9 1 3 9 9 0 3 9 1 . 4 1 . 3 1 4 6 2 3 3 1 6 4 3 8 0 . 9 1 . 9 7 5 3 9 3 5 1 0 5 2 . 1 1 . 6 3 8 4 8 3 6 3 6 1 . 1 1 . 4 Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar * Absorption rate - # of new listings for the month/# of sold listings for the month June Demand Chart 0 500 1000 1500 2000 2500 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 1 4 6 2 1 4 4 6 1 7 6 7 1 4 6 9 1 5 6 2 1 7 4 4 1 7 9 4 1 9 6 3 2 0 7 2 2 1 9 7 2 1 5 4 2 1 7 1 2 2 2 4 2 2 4 0 2 0 4 5 2 1 2 0 2 0 8 7 2 0 0 9 1 9 9 7 2 0 0 9 1 9 7 8 2 1 3 2 1 8 8 2 1 8 1 2 1 9 9 7 2 2 4 0 1 4 1 9 1 1 8 8 9 7 4 8 6 2 8 4 1 7 9 5 7 7 8 7 2 5 7 8 2 5 8 1 6 7 9 6 1 7 6 0 2 6 3 9 6 7 7 8 6 3 Inventory 2010 2011 2012 2013 Some other numbers are also heading in the right direction. Sales are holding steady, off 8% from last June but the highest volume yet for 2013. Keeping resale demand in the 700 range is a healthy target for this region given the paucity of inventory. Inventory jumped 22% to its highest level since last June, which bumped available inventory to 1.3 months from 1.1. Absorption also blessedly dropped from an average of 2.5 homes sold for every new listing to 1.6, the lowest level since March of last year. Still troubling but seemingly trending positively for the market.
  6. 6. ‘Housing Market: A decade of boom, bust and recovery.’ From wildly gyrating markets like California and Florida to relatively stable states like Virginia, you can chart the progress of our housing market over the past decade. Courtesy of CoreLogic
  7. 7. WOW! Wasn’t that fun? (Eeeeeh, not so much)
  8. 8. The Last Word… Two items for your consideration today – the first being the proposed re-instatement of Prop 90 for Riverside County. Prop 90 is a constitutional amendment that allows senior citizens, under certain circumstances, to transfer a property’s base tax value from an existing residence sold in one county to a replacement residence in another county – usually resulting in substantial tax savings. Riverside County offered Prop 90 until 1995 when it allowed the measure to sunset based on specious arguments from the Recorder/Assessor at the time. Currently 8 other counties offer this incentive for seniors including our neighbors in LA, Orange and San Diego. This gives them a decided advantage in attracting more fiscally stable senior home buyers with disposable income. Supervisors Kevin Jeffries and John Benoit have re-introduced the measure as a way to encourage seniors to consider Riverside County. I have attached a Q & A for you and would encourage you individually as well as your city to consider adding your support to the measure. The County Auditor/Controller has conducted a cost analysis (based on 1995 data) that shows the county (and subsidiary agencies including cities) could lose as much as $4.7 million annually from lower tax assessments on these homes (your City Manager has a copy of that). Not included in that analysis was data from a Harvard Center for Housing study or studies from both the National and California Association of Realtors® showing that Riverside County could also benefit by gaining almost $220,000,000 in economic benefits and 1,150 new jobs. Our current Assessor/Recorder Larry Ward is a supporter of the measure. A decision by the Supervisors has been delayed until July 30 to allow for public input on the issue. Supervisor Stone is currently the only Supervisor to have stated opposition. I indicated on Page 1 that there are still several items that have the potential to derail the current housing recovery including tax reform, lack of job growth and economic uncertainty. In California one additional item that is having a deleterious impact is the result of last years Homeowners Bill of Rights, a measure championed by Attorney General Kamala Harris and passed with great fanfare by a Democratic majority in Sacramento. Realtors® opposed the measure and decried the overreaching knee-jerk elements of the bill warning that the unintended consequences could negatively impact our market in ways similar to that of a bill passed in Nevada the previous year. We managed to effect a few changes but it passed substantively unchanged and we are now left to deal with those anticipated and unanticipated consequences. One immediate impact has been on the rate of banks foreclosing on properties which, on the one hand has been positive but on the other hand has significantly reduced inventories while not addressing the underlying problem. There are still numbers of vacant homes and homeowners who have not made a payment for years – the so-called ‘shadow inventory’, that will need to be dealt with at some point. But due to the potential for criminal charges being brought for any mis-step by the bank during the foreclosure process, the tap has been turned off since last November. The Wall Street Journal recently carried a front page article ‘Foreclosure Squeeze Crimps Vegas Market’ detailing the negative impact the bill has had on the Nevada housing market after being in place for 2 years. We are seeing the same results in California after just a few months. Is it enough to derail the housing recovery? No, but it is one of the issues contributing to the inventory shortage and the unsustainable run-up in prices we are seeing throughout our market.
  9. 9. Restore Prop 90 What is Proposition 90? Proposition 90 is constitutional amendments passed by California voters that provides property tax relief for persons aged 55 and over. It allows these persons, under certain conditions, to transfer a property's base year value from an existing residence in one county to a replacement residence in another county. The provisions of Propositions 90 may result in substantial tax savings since it allows the adjusted base year value of the original (sold) property to be transferred to the newly purchased or constructed home if eligibility requirements are met. One critical requirement is that the county where the new home is being purchased or constructed must allow Proposition 90 transfers. A separate amendment, authorized by Proposition 60, allows similar property value transfers between properties within a county. Detailed information and answers to Frequently Asked Questions about Proposition 60 and 90 are available from the California Board of Equalization at: http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm#1 Is Proposition 90 in effect in Riverside County? Not at the present time. Proposition 90 transfers were permitted in Riverside County until 1995 but the law allowing them was not renewed. Will Proposition 90 be reauthorized in Riverside County? The Riverside County Board of Supervisors will conduct a public hearing on that question on July 30, 2013 and will vote at the conclusion of that hearing on a proposed ordinance, Ordinance 920, to extend Proposition 90 for five years. Why wouldn’t the Supervisors vote to approve Proposition 90? The County Auditor Controller has conducted a cost analysis of Proposition 90 which concluded that public agencies in the county could lose up to $4.7 Million annually from the lower assessments on homes purchased through Proposition 90. Supervisor Stone is currently the only Supervisor with a stated opposition to the measure.
  10. 10. Prop 90 would cause a little property tax loss but aren’t there economic benefits for the county from the new residents who would move to Riverside County? Yes. A study conducted jointly by the Bureau of Economic Analysis, the Harvard Center for Housing Studies and the National Association of REALTORS®, updated in March 2013, found that every new home sale in California produced approximately $95,000 in local economic benefits. Those benefits derive from all the goods and services typically associated with a home purchased and the income earned by those who sell the good and perform the services. Other studies show that one permanent job is created from every two home sales. The Auditor Controller estimates that 2300 home sales per year in Riverside County would come under Proposition 90. Applying the Harvard/NAR formula means that by authorizing Prop 90 our county gains almost $220,000,000 in economic benefits and potentially 1150 new jobs. Harvard/NAR Economic Impact of Housing Sale: http://www.realtor.org/sites/default/files/reports/2013/Economic%20Impact/eco nomic-impact-real-estate- activity-california-2013-03.pdf Home Sale Impact on Job Creation: http://www.realtor.org/topics/home-ownership-matters/jobs-impact-of-an- existing-home-purchase Some might argue that the many of those using Prop 90 benefits would have moved to Riverside anyway so Prop 90 is just a giveaway. The California Association of REALTOR® conducted a survey that found that at least 52% of those using Prop 90 in other counties based their purchase decision primarily on the availability of Proposition 90 tax benefits. Again applying the Harvard/NAR economic benefit formula, Riverside County would annually reap over $114,000,000 in benefit and almost 600 permanent jobs just from those whose primary reason for choosing Riverside County over another county is the existence of Prop 90. Do any other counties allow Prop 90? Yes, eight other counties currently allow Prop 90 assessment transfers. Most importantly, our neighbor counties of Los Angles, San Diego and Orange, all provide Prop 90 benefits, giving them an edge in the competition to attract new permanent residents. What can I do to help assure the passage of Ordinance 920 to allow Proposition 90 benefits in Riverside County? 1. Email, call or write your Riverside County Supervisor. Here’s a link to their contact information http://www.countyofriverside.us/government/boardofsupervisors.html 2. Sign and send the attached letter. 3. Sign and circulate the attached petition. 4. Attend the public hearing on July 30 at 9:00AM at the Riverside County Administrative Center at 4080 Lemon Street, Riverside, California.
  11. 11. Print Name: Signature: City: Print Name: Signature: City: Print Name: Signature: City: Print Name: Signature: City: Print Name: Signature: City: Print Name: Signature: City: Print Name: Signature: City: Print Name: Signature: City: Print Name: Signature: City: Print Name: Signature: City: RESTORE PROPOSTION 90 A petition supporting proposed Riverside County Ordinance 920. Riverside County Supervisors: The undersigned, residents and voters in Riverside County, urge you to vote YES on Proposed Ordinance 920 when it comes before you for a vote. This measure would authorize one-time, inter-county transfers of property assessments to Riverside County pursuant to the California Constitution as amended by Proposition 90. Under Proposition 90, counties may allow 55+ primary home purchasers to transfer their property tax base value once from one county to another. By restoring Proposition 90 benefits, Riverside County will encourage thousands of 55+ home buyers to choose Riverside County for their new, permanent home. And, Riverside County will annually gain over $100 Million in economic benefits, create over 1,000 jobs and attract thousands of new residents who contribute much to their neighborhoods and demand little from government. Supervisors, Please vote Yes on Proposed Ordinance 920 to authorize Proposition 90 transfers in Riverside County Fax completed Petition to SRCAR at 951-864-2572 OR Email completed Petitions to GAD@srcar.org
  12. 12. Riverside County Board of Supervisors 4080 Lemon Street Riverside, California 92501 Re: Proposed Ordinance 920: Authorizing Proposition 90, inter- county property assessment transfers. Dear Supervisor: I write to express my support for proposed Ordinance 920. This important measure would authorize 55+ home buyers to purchase a home in our county and transfer their property tax base from their prior residence in another county as allowed by the California Constitution (Proposition 90). Studies by the Harvard Center for Housing Studies and the National Association of REALTORS® show that every home purchase generates nearly $95,000.00 in local economic benefits. Every two sales create one new permanent job. Applying the Harvard/NAR impact formula to the County Auditor Controller’s analysis of Ordinance 920, demonstrates that our county could annually reap over $200,000,000 in economic benefits and gain over 1,000 jobs from the implementation of Ordinance 920.. Riverside County could gain in other ways from adoption of Ordinance 920. The typical home buyer using Proposition 90 are financially secure individuals who will become valued, long-term residents of our community, contributing much to their neighborhoods and imposing little or no cost on public services. The County’s adoption of Ordinance 920 provides the classic “Win/Win”. At very small cost in property tax foregone, the county gains hundreds of million dollars in economic benefits, potentially thousands of new jobs, no additional costs and thousands of wonderful new, contributing neighbors. Please vote to help 55+ home buyers make Riverside County home. Please vote to grow our county’s economy. Please vote yes on proposed Ordinance 920 when it comes before you on July 30. Sincerely,

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