Q2 Southern California Real Estate Market Update | Gardner Report
The following analysis of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere agent.
ECONOMIC OVERVIEW
Unexpectantly, the counties covered by this report — Los Angeles, San Diego, San Bernardino, Orange, and Riverside — saw total employment drop by 10,700 jobs (-0.1%) year-over-year. However, while Los Angeles and Orange counties reported declines, the smaller Riverside, San Bernardino, and San Diego counties saw employment rise. This is a significant reversal from the growth rates that have been in place for quite some time and may be due to re-benchmarking, which is when the government compares its sample to broader, historic data. I suspect that this is an anomaly and will reverse course, but I will continue to follow employment data closely as we move through the balance of the summer to see if this is a trend.
Over the past year, the unemployment rate in Southern California dropped from 3.6% to 3.4%, which further points to a data issue rather than a new trend that we need to be concerned about. I’ll know more when we publish the third quarter Gardner Report.
HOME SALES
- There were 49,996 home sales in the second quarter of 2019. This was a drop of 3.6% from the same period in 2018 but 46.4% higher than the first quarter of this year.
- Pending home sales (an indicator of future closings) rose by 3.7% compared to a year ago, suggesting that total sales in the third quarter are likely to be an improvement over current levels.
- Following a trend that started last fall, home sales fell across the board. The most noticeable decline was again in San Bernardino County, which fell by 6.7%. The smallest drop was in the relatively affordable Riverside County.
- There was an average of 40,174 active listings in the second quarter — up 13.1% from a year ago and 6.7% higher than in the first quarter of the year.
HOME PRICES
- Year-over-year, average prices in the region were flat but were 5.3% higher than in the first quarter of 2019.
- As stated above, affordability issues continue in most Southern California markets and this will likely lead price growth to taper.
- Price growth in second quarter was mixed. Riverside County continues to have the greatest annual appreciation (+4.1%). Price gains were also seen in San Bernardino and San Diego counties. There were modest drops in average sale prices in Los Angeles and Orange counties, but this is not of great concern at the present time. That said, it is clear that affordability issues are present in these markets.
- On a year-over-year basis, I still expect to see home prices continue to rise, but this likely only due to the very competitive mortgage rates. If rates move higher, this will have an impact on price growth.
DAYS ON MARKET
- The average time it took to sell a home in the region was 44 days. This is an 8-day increase over the second quarter of 2018 but is down 9 days compared to the first quarter of 2019.
- All markets saw the time it took to sell a house increase compared to the second quarter of 2018.
- Homes in San Diego County continue to sell at a faster rate than other markets in the region. In the second quarter it took an average of just 29 days to sell a home. I would note that this is 5 more days than it took a year ago.
- Market time is increasing, which may concern some, but it is simply a move back to historic averages.
CONCLUSIONS
The speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.
Rising inventory levels, and affordability concerns in many markets will likely lead to slower price growth as we move through 2019. That said, mortgage rates are still very attractive, and this can offset affordability issues to some degree.
Given rising inventories and slower price growth, I have moved the needle just a little more toward buyers, though it still remains a sellers market.
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
Q1 Southern California Real Estate Market Update | Gardner Report
The following analysis of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere agent.
ECONOMIC OVERVIEW
The counties covered by this report — Los Angeles, San Diego, San Bernardino, Orange, and Riverside — added 165,000 new jobs between February 2018 and February 2019. This represents an annual growth rate of 1.7%. In the same timeframe, the unemployment rate dropped from 4.4% to 3.9%. Employment growth in Southern California picked up a little in the late winter. Los Angeles County led the way, adding 96,500 new jobs. My 2019 forecast for employment in Southern California is for continued growth at around 1.5%.
HOME SALES
- There were 34,142 home sales in the first quarter of 2019. This was a drop of 12.4% from the same period in 2018 and 13.9% lower than the final quarter of last year
- Pending home sales (an indicator of future closings) were just 2.8% lower than during the same period a year ago, but down 18% compared to the fourth quarter of 2018. This suggests that second-quarter sales are likely to disappoint.
- Home sales dropped across the board, but the most noticeable decline was again in Orange County, which fell by 15.2%. This drop is probably temporary and was more than likely driven by the 49% increase in inventory and high home prices. The smallest drop was in the more affordable Riverside County.
- There was an average of 37,641 active listings in the first quarter — up 30.5% from a year ago.
HOME PRICES
Year-over-year, average prices in the region rose a very modest .3% and were 2.4% lower than in the fourth quarter of 2018.- Affordability remains an issue in most of the Southern California counties contained in this report, which, in concert with growing inventory, will likely continue to limit home price growth.
- Price growth was varied. Riverside County showed the greatest annual appreciation (+4.3%). Average home prices dropped 1.4% in Orange County.
- On a year-over-year basis, I expect to see home prices continue to rise through 2019, but the rate of growth will be more modest than the market has seen in several years.
DAYS ON MARKET
- The average time it took to sell a home in the region was 53 days. This is a 10-day increase compared to the first quarter of 2018, and eight days more than in the fourth quarter of 2018.
- All markets saw an increase in the time it took to sell a house in the first quarter of this year compared to both the first and fourth quarters of 2018.
- Homes in San Diego County continue to sell at a faster rate than other markets in the region. In the first quarter, it took an average of 37 days to sell a home, which is eight days more than it took a year ago.
- Market time is increasing, which may concern some; however, it is simply a move back to normal averages.
CONCLUSIONS
The speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.
The Southern California economy saw a bit of a boost in early 2019, which is good news. But rising inventory levels and low affordability in many markets will lead to slower price growth. Affordability remains a significant issue and I will be watching proposed legislation, such as Senate Bill 50, to see whether there is enough interest in addressing this obstacle to home ownership.
Rising inventories and slower price growth has led me to move the needle a little further toward buyers.
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
Southern California Real Estate Market Update – Q4 2018
The following analysis of the Southern California real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere agent.
ECONOMIC OVERVIEW
The counties covered by this report — Los Angeles, San Diego, San Bernardino, Orange, and Riverside — added 139,000 new jobs between November 2017 and November 2018, representing an annual growth rate of 1.4%. The unemployment rate held at 4%. Employment growth in Southern California continues to slow but, as I discussed in the third quarter Gardner Report, the market is heavily affected by the substantial Los Angeles County market, which is seeing significantly slower employment growth. My 2019 forecast for employment in Southern California is for growth to continue at around 1.5%.
HOME SALES ACTIVITY
- There were 39,655 home sales in the final quarter of 2018. This was a drop of 13.5% from the same period in 2017 and 16.2% lower than the third quarter of this year.
- Pending home sales (an indicator of future closings) were 8.8% lower than during the same period a year ago, and down 21.6% compared to the third quarter of 2018. This suggests that total sales in the first quarter of 2019 are likely to also be down.
- Home sales dropped across the board, but the most noticeable decline was again seen in San Diego County, which fell by 15.4%. I am still attributing this to the significant rise in inventory (+51.7%) as well as high average home prices. Interestingly, however, price growth in the San Diego area remains robust.
- There was an average of 41,199 active listings in the fourth quarter — up 38.2% from a year ago.
HOME PRICES
- Year-over-year average prices in the region rose 4.1%, but they were 2% lower than in the third quarter of 2018.
- Affordability remains an issue in most of the Southern Californian counties contained in this report, which, in concert with growing inventory, continues to limit home price growth.
- Price growth was varied, with San Diego County showing the greatest annual appreciation (+7.3%). The slowest appreciation was in Orange County, which saw prices rise only 2.5%.
- Home prices will continue to rise in 2019, but the rate of growth will continue to taper as the economy slows and income growth remains muted.
DAYS ON MARKET
- The average time it took to sell a home in the region was 46 days. This is a three-day increase compared to the fourth quarter of 2017, and seven days more than in the third quarter of 2018.
- No market saw the time it took to sell a house drop compared to the fourth quarter of 2017. It also took more time to sell a home in the fourth quarter than it did in the third.
- Homes in San Diego County continue to sell at a faster rate than other markets in the region. In the fourth quarter, it took an average of 35 days to sell a home, five days more than it took a year ago.
- Market time is increasing, which may concern some; however, it is simply a move back to normal averages.
CONCLUSIONS
The speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.
The Southern California economy continues to slow and the number of homes for sale is rising. This combination will lead to slower price appreciation, but I do not see it as anything to worry too much about. We are simply trending back to a “normal” housing market. Given these factors, I have moved the needle a little further toward buyers.
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governor's Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
