May Realtor Report

Waiting Around the Bend… 2012 is starting off as a banner year for Southwest California housing. Both unit sales and median prices are up over 2011. Better yet, they’re running ahead of 2010, which was our benchmark year for sales. In political terms, the difference would not constitute a landslide but it’s still a gain. This mirrors our most recent national reports which show that 1st quarter home sales in 2012 were the strongest they’ve been in 5 years. Pending home sales predict a repeat in the 2nd quarter. Our local inventory of homes for sale is just over 1 month. At the national level, existing home inventory is the lowest it’s been in 6 years and the national inventory of new homes is the lowest it’s been in 50 years!

In Sacramento we’re still worried about some bills that made it through the crossover - especially a suite of bills sponsored by the Attorney General. We’re concerned that our state legislature is viewing the housing industry as nothing so much as a ‘cash cow’, and may stifle any nascent recovery in the market. This is not just a housing issue but an important jobs issues as well, as housing has historically been a major contributor to any recovery.

In Washington DC, Realtors® staged a rally at the Washington Monument on May 17th. You probably didn’t hear about it on the news, just 14,000 Realtors from around the world and a few Congressional members talking about the American Dream. Maybe we shoulda brought tents or gotten naked or smoked a bowl and we’d have made the grade to newsworthy. We had productive visits with our Representatives Ken Calvert & Duncan Hunter – both of whom understand our concerns. Both have local roots and real estate experience. That’s a good combination.

Its probably just coincidence that the day after our visit, California Congressmen Gary Miller (R-Brea) and seven other California congressional members introduced legislation that calls for the Federal Housing Finance Agency (FHFA) to cease its plan to sell Fannie Mae-owned foreclosed homes in California to large investors.

H.R. 5823, the “Saving Taxpayers from Unnecessary GSE Bulk Sale Programs Act of 2012,” prevents the FHFA from implementing an initiative to sell Fannie Mae real estate-owned (REO) properties in California to institutional investors. The bill’s co-sponsors include Ken Calvert (R-Riverside), Judy Chu (D-El Monte), Brad Sherman (D-Sherman Oaks), Dana Rohrabacher (R-Huntington Beach), Elton Gallegly (R-Simi Valley), Susan Davis (D-San Diego), and Joe Baca (D-Rialto).

This is the program I’ve talked about the past couple months that would further deplete our already dismal inventory of homes to sell along with city revenue expectations. We also heard from Ed DeMarco, Acting FHFA Head, Timothy Geitner, Gene Sperling and others representing the administration swearing this the best thing since sliced bread.

Possibly. But not in California.

There are pockets of the country with 2 years worth of inventory but no buyers. In Ohio and Michigan they are bulldozing houses because there are no takers. The pilot program might benefit those blighted areas – assuming there are still people around to rent them. It would be a disaster in California.

The Feds also extended the National Flood Insurance Program for another 60 days. We are cautiously optimistic that either the Lame Ducks or the new Congress will swiftly enact the 5 year extension of this program, a bill we have been working on for 5 years with numerous short-term extensions. Last year they allowed the extension to lapse for 30 days and more than 42,000 real estate transactions were either cancelled or postponed due to lack of insurance availability. We think the longer extension would bring a measure of stability to an edgy market.

There’s still serious talk about doing something with the mortgage interest deduction next year but it’s a moving target. Not on primary residence, primary but above $1,000,000, or $500,000 or $250,000, only on investment properties or vacation homes. It won’t go down without a fight.

Congratulations (I think) to all the primary winners. Demand a recount immediately. Now the real fun starts. And if you didn’t make it this time, thanks for stepping up. We wish there were more like you. I’ve met a lot of great candidates so far this year and I sincerely hope they stay involved and try again. (I’ve also met a few that I hope move to Ohio).

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Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake

Southwest California Homes Single Family Homes

Sales continued strong through May. Temecula led the way with a 31% gain over May 2011 (144/209). Murrieta was up 26% (171/232) and Menifee was up 15% (159/183). Sales were up across the Region by 20% (636/796) over last May. Year to date sales are up 10% from 2011 (2,945/3,276) and up 3% from our previous high water mark in 2010 (3,179/3,276). And remember, after the 1st time homebuyer tax incentive expired in June of 2010, the market feel off a cliff until a December spike. If we can keep enough homes available to sell, our region could have a pretty decent year.

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Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake Linear (Murrieta)

Southwest California Homes Single Family Homes

Median Price

Prices also improved last month. Temecula’s median price spiked 16% over May 2011 ($286,047/$339,228). It’s amazing the impact a few upper end homes has on the equation. Temecula sold 7 homes over $800,000 last month and has posted a median over $300,000 for the past 3 months. Murrieta prices were up about 5% over 2011 ($261,000/$276,055). Murrieta also had 5 sales of homes over $800,000. Menifee prices were up 4% ($173,417/$180,976). Regionwide our median was up 9% ($232,084/$255,199) over last May and up 3% year to date ($231,240/$239,152). For the sake of consistency, we are also up 1% over 2010 ($235,622/$239,152) . That looks pretty much like a flatline for the past 2 years.

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On Market (Supply)

Pending Closed (Demand) Days on Market Months Supply Absorption rate *

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Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar

* Absorption rate - # of new listings for the month/# of sold listings for the month

May Demand Chart

While sales have increased by 30% since January (561/796), the inventory of available homes to sell has plummeted 67% (2,240/974). Our Closed graph almost equals our On Market graph while the number of pending homes exceeds both. As you’ll see on the following chart, it’s so tight out there right now even short sales are selling at a respectable rate. This keeps up I’ll have to change ‘Months’ supply to just ‘Month’. 3 of our cities are selling more than 2 homes for every new listing coming on the market, 2 more are selling 1 ½ for every new one. That can’t go on for long. You have to wonder what the market would be like if we had more homes to sell. And you have to wonder at what point do prices start to reflect the extreme scarcity of product.

May 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 179 74% 106 51% 1 0% 40 19% 46 19% 60 29% Murrieta 163 62% 120 52% 18 7% 40 17% 68 26% 68 29% Wildomar 19 40% 16 46% 7 15% 8 23% 19 40% 10 29% Lake Elsinore 75 50% 35 30% 21 14% 49 42% 46 31% 30 26% Menifee 94 48% 79 43% 19 10% 42 23% 75 38% 54 30% Canyon Lake 57 66% 10 48% 9 10% 6 29% 20 23% 5 24% Regional Average 587 57% 366 45% 75 9% 185 26% 274 29% 227 28%

This is the information that feeds the demand chart. Standard sales have made up more than 50% of our active market for the past quarter. REO sales, which made up 90% of our market just 4 years ago, is under 10% and short sales are at 30%. What’s even more encouraging is that as recently as January, Standard sales were successful only 35% of the time, last month it was 62% and 45% of the closed market. Short sales, which have consistently been failing 70+% of the time, failed just 17% last month and were 28% of the solds. And of course for every 1 new bank owned home that was released to the market, we sold 2.5 which contributed 26% to the sold volume.

Foreclosure Data

Courtesy of ForeclosureRadar.com

(Time you can live in your home without making a payment)


Riverside CA


Temecula CA


Murrieta CA


Lake Elsinore CA


Menifee CA


Wildomar CA


Canyon Lake

I’ve included a few slides from our mid-year presentation by NAR Chief Economist Dr. Lawrence Yun. This is always a highlight of my treks back to DC – to hear what Dr. Yun has to say about the state of housing across the country. He was fairly upbeat this year as many indicators are pointing to continued improvement. However, as he also point out, there are several factors that could impact the housing recovery from continued government manipulation of the market to outside forces like a melt-down of the European Union, or elements there-of. You can access the entire presentation here:

Housing & Economic Outlook, Dr. Lawrence Yun.

http://www.realtor.org/educsessMid.nsf/sphandout/2012_MY_Yun_Residential_Forum.pdf/$FILE/2012_MY_Yun_Residential_Forum.pdf



The Last Word…

May Realtor Report

Business

Transcript of May Realtor Report