8 city rept
5
We Don’t Do Normal Anymore. One of the problems we run into in this business is trying to make sense of numbers that are, at times, nonsensical. Yet we’re all addicted to the numbers. We anxiously await the release of the latest numbers. We rely on these numbers to guide us, to dictate our future plans, to build our budgets around and to dictate our own purchases. And we usually rely on the pundits and prognosticators who provide those numbers to tell us what they mean. Are they good numbers or do they say one thing while meaning something contrary? How accurate are they, how applicable are they and does the prognosticator have an agenda behind the commentary? For example, you might have read recently that housing sales dropped 27% in July in Denver, 42% in Minneapolis, 45% in Milwaukee, and 21% in California. After ‘plummeting’ in June, they ‘plunged’ again in July supposedly due to expiration of the homebuyer tax credit. Except we already know our local sales didn’t plummet in June, nor did they plunge in July. Our sales did drop about 16% across the region in July but only after posting an 8% hike in June. Even with that drop sales were up 19% from January. The national numbers are not applicable. Median prices were up 3% region-wide in July over June and up exactly $55 per home over January. Prices have fluctuated within a $17,000 range since the first of the year, up a little one month, down a little the next. That trend extends back to the beginning of last year indicating that our market has achieved some price stability regardless of what the national market is doing. Temecula’s median price was up 11% over January while Murrieta improved their median by 5%. The percent of homes selling across the region is edging down to 60% from the 70% we enjoyed for the past year, and our inventory levels are pushing 3 months now instead of 2. I’ve included comparative demand charts illustrating this. But neither of those numbers is particularly distressing. What’s driving them is the short-sales that make up 50% of our market and are failing at a 70% rate. Behind the numbers that means the 609 homes active in Murrieta right now is actually less than 400 since statistically 50% are short sales of which 70% won’t sell. If we also back out the homes over $1 million, which are also selling very slowly, we still have an effective inventory of less than 2 months and a much higher percentage of actual salable homes selling. The numbers say one thing – mean something else. Finally, in an ode to self-fulfilling prophecy, the Washington Post last week had an excellent article (Shhhh…Don’t Say Recession ) on how perception is driving the market. The more the media reports on ‘the recession’, the more people talk about ‘the recession’, the more recessionary we become. I applaud our local leaders for recognizing reality and accentuating the great positives about our area. Maybe that’s one reason we’re bucking the national trends so consistently. Of course that’s just my opinion – I could be wrong.
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July housing statistics for Southwest California including Temecula, Murrieta, Lake Elsinore, Menifee, Wildomar & Canyon Lake. Unit sales, median price, sales by price point and demand.
Transcript of 8 city rept
We Don’t Do Normal Anymore.One of the problems we run into in this business is trying to make sense of numbersthat are, at times, nonsensical. Yet we’re all addicted to the numbers. We anxiouslyawait the release of the latest numbers. We rely on these numbers to guide us, to dictateour future plans, to build our budgets around and to dictate our own purchases.
And we usually rely on the pundits and prognosticators who provide those numbers totell us what they mean. Are they good numbers or do they say one thing while meaningsomething contrary? How accurate are they, how applicable are they and does theprognosticator have an agenda behind the commentary?
For example, you might have read recently that housing sales dropped 27% in July inDenver, 42% in Minneapolis, 45% in Milwaukee, and 21% in California. After‘plummeting’ in June, they ‘plunged’ again in July supposedly due to expiration of thehomebuyer tax credit. Except we already know our local sales didn’t plummet in June,nor did they plunge in July. Our sales did drop about 16% across the region in July butonly after posting an 8% hike in June. Even with that drop sales were up 19% fromJanuary. The national numbers are not applicable.
Median prices were up 3% region-wide in July over June and up exactly $55 per homeover January. Prices have fluctuated within a $17,000 range since the first of the year,up a little one month, down a little the next. That trend extends back to the beginning oflast year indicating that our market has achieved some price stability regardless of whatthe national market is doing. Temecula’s median price was up 11% over January whileMurrieta improved their median by 5%.
The percent of homes selling across the region is edging down to 60% from the 70% weenjoyed for the past year, and our inventory levels are pushing 3 months now instead of2. I’ve included comparative demand charts illustrating this.
But neither of those numbers is particularly distressing. What’s driving them is theshort-sales that make up 50% of our market and are failing at a 70% rate. Behind thenumbers that means the 609 homes active in Murrieta right now is actually less than400 since statistically 50% are short sales of which 70% won’t sell. If we also back outthe homes over $1 million, which are also selling very slowly, we still have an effectiveinventory of less than 2 months and a much higher percentage of actual salable homesselling. The numbers say one thing – mean something else.
Finally, in an ode to self-fulfilling prophecy, the Washington Post last week had anexcellent article (Shhhh…Don’t Say Recession) on how perception is driving the market.The more the media reports on ‘the recession’, the more people talk about ‘the recession’,the more recessionary we become. I applaud our local leaders for recognizing reality andaccentuating the great positives about our area. Maybe that’s one reason we’re buckingthe national trends so consistently.
Of course that’s just my opinion – I could be wrong.
These recent graphs from USA Today illustrate some of the more positive trends we areseeing develop across the housing market. Chart #1 shows that sales of new & existinghomes hit bottom sometime last year and bounced. This is certainly accurate for ourarea having hit our trough last June. After the bounce they are forecasting continued,but slower expansion in housing sales. Some areas have yet to see their bounce.
Chart #2 calls for an end to falling home prices sometime this year followed by roughly12% appreciation through 2012. That may be a bit optimistic for the national picturewherein many areas are still experiencing declines. But since we appear to have reachedour bottom in the 4th quarter of 2008, we are ahead of this curve. Depending onvariables, we may exceed this projection over the next couple years.
One of those variable is the number of housing starts. Again Moody's chart #3 is showingnew starts increasing right now and escalating through the next two years. I hope that’sthe case. But while we are seeing some new housing starts locally, the national HomeBuilders Association clearly disagrees with this rosy scenario. Their numbers nationallyare still down and declining as builders are unable to obtain financing to acquireproperty or fund construction. Those that do are finding it difficult to build a productthat is competitive with the REO bargains that still abound.
If housing construction doesn’t pick up soon, the spike in median prices may be evenmore noticeable – especially in areas like ours where demand may again outpace supplyand drive prices higher on the limited product available.
The final chart shows the anticipated drop-off in defaults which they are projecting tostart pretty soon. By most estimates this may be wildly optimistic as the default rate hasshown no sign of abating yet with another round of interest rate resets on the horizonand increasing strategic defaults. However, the graph is accurate in that once defaultsstart to decline, the drop-off will be precipitous returning us to a more normal marketwith default rates running at historic norms of around 1%. It’s just the timing that’s inquestion.
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Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake
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Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake
2009-2010 Unit Housing Sales
2009-2010 Median Price
Data courtesy of MRMLS & Chicago Title
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600
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On Market (Supply)
Pending Closed (Demand) Days on Market % Selling Months Supply
609
367
195
65
60
3.1
460
316
200
62
66 2
.3
385
215
124
68
56
3.1
287
191 1
09 6
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67 2
.6
130
54 2
7
81 5
74.8
92
80
28
47
57
3.3
Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar
July Demand Chart
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On Market (Supply)
Pending Closed (Demand) Days on Market % Selling Months Supply
320
293
159
59
68
2
431
299
193
52
70
2.2
286 2
41
133
59
73
2.1
188
174
87 5
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67
2.2
80 5
7 30
79
72
2.5
95
38
25
64
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Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake
December 2009 Demand( So we can see where we’ve been)
July Market Activity by Sales Type
Active Closed Failed In Escrow % Activity
Bank Owned 21% 39% 10% 30% 26%Short Sales 48% 34% 70% 51% 49%Standard Sales 31% 27% 20% 19% 26%Other 1% 1% 2% 1% 1%
Data courtesy of StatsforAgentsResale market only. Report intended to be generally descriptive, not definitive.
60 Day Market Activity by Price PointPrice On 60 Day 60 Day REO PercentPoint Market Close Fail Close Selling
Temecula, Murrieta, Lake Elsinore, Menifee, Wildomar, Canyon LakeSun City, Hemet, Winchester, Perris & San Jacinto
$100,000 329 269 192 130 58%
$200,000 1,304 977 716 277 58%
$300,000 1,084 837 474 208 64%
$400,000 388 274 180 42 60%
$500,000 100 43 68 6 39%
$600,000 72 20 31 5 39%
$700,000 52 18 31 4 37%
$800,000 36 2 20 2 9%
$900,000 36 5 4 2 56%
$1,000,000 26 1 13 0 7%
$2,000,000 92 5 33 0 13%
$3,000,000 16 0 5 0 No Sale
$4,000,000 4 0 0 0 No Sale
$5,000,000 2 1 1 0 50%
$10,000,000 4 0 1 0 No Sale
$25,000,000 1 0 0 0 No Sale
TOTAL 3,546 2,452 1,769 676 58%
