A comprehensive summary of the housing market in Southwest California where we're enjoying the strongest Seller's market in years in July. Sales posted their 2nd highest month in the past decade, up 17% over June and up 11% over last July. Median prices continued to climb as well, advancing 6% year-to-date. We are now measuring inventory of homes for sale in weeks, not months.
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Strongest Sellers Market in Years
1. Strongest Sellers Market in Years!
2020 just keeps getting weirder and weirder. As if the pandemic and all that entails isnât enough, weâve
introduced Murder Hornets, Rabid Bats, Chinese Mystery Seeds, and radioactive Chernobyl ants to the mix,
among other oddities. And donât even get me started on the dysfunction that defines Washington D.C. and
Sacramento right now, plus factoring in the upcoming election, weâve taken weird to a whole other level.
Fortunately the housing market is behaving rationally. Oh wait, thatâs not even close to the truth. The housing
market is just as weird as everything else right now. Lets start with sales. We may be in a lockdown but weâve
just posted the 2nd highest sales month of the past decade. Sales were up 17% over June (1,036 / 1,250) and
even up 11% over last July (1,107). Weâve only had one stronger sales month in the past 10 years and that was
in June of 2017 (1,357), a record year. Considering the circumstances RealtorsÂŽ are working under with
restricted showings, open house by appointment, and distance and virtual selling, this is an amazing feat. Weâre
still running about 4% behind last yearâs pace year-to-date (6,337 / 6,101), but pending sales indicate that
August should also be a strong month whereas last August dropped off. So weâll see where that takes us.
What makes it a sellers market? Combine strong demand with weak supply and thatâs what you get. Our
inventory of homes for sale is at the lowest point since mid-2013. The number of homes for sale declined
another 13% last month (918 / 799), down a whopping 66% from last July (2,406). The last time we saw
inventory this low we were just coming out of the housing crisis/financial meltdown. All the bank owned homes
and short sales had been sold but regular sellers didn't have enough equity to move yet. So we hit a point in
December of 2012 where there were only 518 homes for sale across the region. Listings pick up again by mind-
2013 and, while weâve never exceeded a 3 or 4 months supply in the past 6 years, this level is concerning.
Weâve now had two months where sales have exceeded inventory. Weâre not even measuring inventory in
months anymore, weâre literally down to 2 weeks in some cities! Weâre not only selling everything on the
market, weâre cannibalizing new listings with an absorption rate of 105%, meaning for every new listing than
comes on the market weâre selling 1.05 homes. You canât build inventory that way. Oh, and theyâre selling
FAST!! 12.6 days on average last month down from 22 days in June. But you canât sell what you donât have!
How about median price? Sellers got to love that too. After a brief stall in June, prices ticked up another 2% into
July ($411,606 / $420,701) maintaining a 6% lead over 2019 year-to-date ($381,866 / $407,452). Our housing
market has posted ten straight years of year-to-date price appreciation totaling 51% increase, or a little better
than doubling your value since 2010. (That means if you bought a house in 2008-2009, youâre almost back to
break even. Wait, thatâs not funny!) However, that level of equity position has driven distressed properties to an
all-time low as a percentage of our market across our region. Nationwide they claim that even in a good
economy you can expect a 4% foreclosure rate as people are beset by a range of issues. Our market this month
has a distressed property rate of just 1.3% - thatâs bank owned AND short sales combined.
Could that figure change over the next few months? You bet. Homeowners who have experience job loss or
other hardship due to CV-19 have anywhere from 90 days to a year deferment and/or extension of mortgage
payments. How long this economic lockdown continues and what the impact will be on homeowners and lenders
is being hotly debated by better minds than mine (I hope!). Of potentially greater concern is the impact on the
rental market, both residential and commercial. As our legislature debates extending the eviction moratorium to
some date uncertain, with no relief built in for landlords, and with delinquency rates climbing into the high 20%
range as the lockdown drags on, this has the potential to have an even more sobering affect on the market and
could result in increased foreclosure activity down the road.
Meanwhile, interest rates continue to plumb new depths and buyers seem only to anxious to brave the Covid
waters to put a roof over their heads right now. Who am I to disagree?
Stay well.
2. Southwest
California
Reporting
Period
Current
Month
Last
Month Year Ago
Change from
Last Month
Change from
Year Ago
Existing Home Sales
(SFR Detached)
July
2020
1,250 1,036 1,107 17% 11%
Median Home Price $420,701 $411,606 $394,594 2% 6%
Unsold Inventory Index
(SFR Units)
799 918 2,406 13% 66%
Unsold Inventory Index
(Months)
0.6 0.9 2.3 33% 74%
Median Time on
Market (Days)
12.6 22 24.7 43% 49%
SW Market @ A Glance
Source: CRMLS
6. July Demand
Supply (918 - 799) 13%
Pending (1,310 â 1,321) 1%
Demand (1,036 â 1,250) 19%
Days on Market (22 â 12.6) 43%
Months Inventory (0.9 - .6) 33%
Absorption (99% - 105%) 6%
Month over Month
Youâll notice in the top graph on the preceding chart that the blue bar has disappeared the past two months. The
reason for that is simple. And scary. We are once again in a position where we are selling more homes than we
have in inventory. I had to dig back into the archives to find the last time that happened and had to go clear back to
2013 when our inventory dipped precipitously and sales outpaced the existing stock of homes. Inventory for most of
2013 was very low â even lower than it is today. Or at least as of today â by next month it might be even lower. This
month we have 799 homes available down from 918 last month.
Starting mid-2012 we saw a similar decline hitting a record low for our region with just 581 homes for sale in
December 2012. That was the aftermath of the financial meltdown where we had great inventories of 2,200+ homes
coming into 2011 but few buyers. Prices hit their low point about the same time bringing more buyers, including first
timers and investors into the market. That inventory shortage resulted when most of the bank-owned homers and
short sales got bought up but regular homeowners didnât have enough equity in their homes to sell â so we had
more buyers but no sellers â a reverse of the prior couple years where we had distressed sellers but no buyers.
That ties into graphs below showing that our absorption rate is again over 100% meaning we are cannibalizing new
listings quickly. For every new home that comes on the market we are selling 1.05 homes, which doesnât allow you
to build inventory. And with properties selling in an average of 12 days, this is the very definition of a sellers
market. Sellers right now are shaken by CV-19, reluctant to put their homes on the market, donât want a gaggle of
strangers wandering through and not sure if they can find anything on the other end. Agent stories today are replete
with tales of home being listed, open houses scheduled at 15 minute intervals over a weekend, and ending up with
10, 12, or 15+ offers by Monday. Itâs happening.
One final consideration. There has been much speculation about the potential for rampant foreclosures as a result
of job loss, income declines, tenants not paying rents, etc. The final chart of sales by type gives us a picture of an
extremely upbeat market â one of the strongest in recent years. Weâve shown distressed properties (bank-owned
and short sale) at about 2% of our market for the past three years. Nationwide even in a ânormalâ market we can
expect a foreclosure rate of approximately 4% even in good times. Our current market is running less than 1.5%
distressed at this point. We may see some uptick in future months or years, and some REO agents are salivating at
the prospect, but right now there is no pandemic driven distress in the housing market.
2 weeks
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Southwest California Homes
SFR sales I-15 corridor
Southwest California Homes
SFR sales I-215 corridor