Housing market - cooling off, or just a return to normal?
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Last Friday we had an excellent interview segment with Bobbi Albano of Cal Curb Appeal – if you haven’t checked it out yet, you can do so by clicking here. Also, drop a comment if there’s a business or group you’d like to see interviewed next.
Bobbi’s interview focused on the real estate market, so for this edition of the newsletter, I will add a few additional comments based on where things are right now in the region. According to the California Association of Realtors (“CAR”), in January 2022 the median house price in San Bernardino County was $450,000; in Riverside County it was $590,000. Both numbers are up about 40% since January 2020, although Riverside County’s growth has been slightly higher than San Bernardino County’s.
Most of the price growth started in the summer of 2020. After the initial months of the pandemic, there was a huge outburst in the demand for homes. The market lost all sense of normalcy – a ridiculous amount of above-asking price offers, very low inventory, and super short times on the market. Things continued like this for over a year, and in some markets, conditions remain hot.
While house prices are still high today, the latest statistics show some signs that the market is slowing down, or at least returning to normal. It’s too early to tell either way, because these months are generally slower anyway. But with recent increases in mortgage rates, and further increases in rates expected, this year could be cooler than last year. From the data, the main reason to call a slowdown over a simple return to normalcy is that the CAR reported a negative change in homes sold in the Inland Empire between January 2021 and January 2022. Sales were down 5.7% from last year at this time.
Another useful indicator is “median days on market”, which has been steadily creeping up. In the Inland Empire, the median home spent 16 days on the market in January 2022, up from just 7 days in June 2021. The only caveat to this observation is that there is some seasonality to these data (the housing market is hottest in early-to-mid-summer), shown in the graph above. Notice in 2019 and 2021, median time on market declined in the summer months and was higher outside of those months. Median time on market in 2021 is still, on average, much lower than back in 2019. But as this graph also notes, last year somewhat bucked the trend of rising median days on market late in the year - again because the market was red hot and nothing like normal, suggesting at the very least a return to a more “normal” set of market dynamics this year.
As we move into those summer months, it will be important to track the annual change in sales. If sales continue to drop year-over-year, that would be the definite sign of a cooldown.