Regional real estate market hot as ever
In my recent presentations for the Building Wealth Initiative and Rancho Mirage Rotary Club, I had the chance to dive into real estate data for the first time in a while. I thought I’d share with you some of the things I learned along the way.
As many of you know, the real estate market has been hot throughout the pandemic. A California Association of Realtors slide deck showed the percentage of homes that sold above asking price; link to the slides here (figure on page 26). There is usually some seasonality to this statistic – the percentage is higher in the summer buying season when the market is more competitive, and then it declines through the rest of the year and into the winter. But in 2020, it started going up in April/May after the initial pandemic-induced slump, and then it just never went down again! In April 2021, 68.2% of California homes were sold above asking price, which appears to be a series high – at least since the last housing bubble.
Will the market cool down? People keeping their eye on it say there are some signs that we’ve hit the peak, but it might be market-specific at this point. In the Inland Empire, conditions remain frothy. Two indicators that support this assessment are median time on market and unsold inventory. As time on market or unsold inventory increases, it becomes more of a buyer’s market and less of a seller’s market and so prices start to come down. Here is what both of these metrics look like out here as of April 2021.
Time on market continues to trend down – in April 2021, the median home was on the market for only 7 days, and unsold inventory for both counties has been stuck at around 1.5/2 since last July, suggesting very tight conditions. Both statistics are from the California Association of Realtors.
While Bill McBride over at Calculated Risk sees some signs that inventory is picking up nationally, this does not appear to be true yet in the Inland Empire. John Wake is also seeing some signs of a turnaround in Phoenix.
I am not an expert on the real estate market, but for now I think we will continue to see considerable price appreciation in this region.