A Perfect Storm is Brewing – Real Estate Tide is Rising

If the old adage “a high tide floats all boats” is true, then the rise in the real estate market should help the economy, governmental agencies, and the private sector in general, as well as the average Joe.

And, it is true. The link between the real estate market and the economy in Southern California cannot be understated. Here in Southwest Riverside County, the Real Estate industry drives the economy so when we see signs on the horizon that the weather is changing in our local market, we tend to get excited.

“It’s a good time to be in the market, whether you are a buyer or a seller,” says Mike Diaz, President of Rancon Real Estate. “The inventory of distressed homes has fallen dramatically, standard transactions are on the rise, mortgage rates are low and equity is building. It’s like a perfect storm, and the tide is coming in.”

In October, Mark Boud of Real Estate Economics delivered a quarterly report on the state of the real estate market in the Inland Empire. Boud noted in a private webinar presentation that we are currently seeing “stable and improving economic growth,” and “ a huge drop in inventory” of both distressed and new homes.

“The burn off rate for distressed housing has contributed significantly to the decline in inventory, and there’s not a lot of new product coming on the market,” said Boud. “Based on what we are seeing in the way of job forecasts and improvement in the economy, increases in new housing supply will not keep up with increases in economic-driven housing demand.”

Boud said that job creation in the I.E. had been steadily increasing from 1991 to 2007. In 2011 the I.E. created more than 3,800 jobs, the first positive swing in job growth in four years. Using Bureau of Labor statistics, Boud estimates the area will create nearly 21,000 jobs by the end of 2012.

The largest category of year-over-year (August 2011 to August 2012) job growth came in the professional and business services space, with trade, transportation and utilities making significant gains as well. Manufacturing and construction also showed positive growth. Only “government,” saw a reduction in the workforce.

While housing sales volume has been trending up since 2010—“gains in volume always precede increases in price,” said Boud.—sales of new homes in 2012 were less than half of what they were in 2010. In fact, the inventory of new housing, according to Boud, is the lowest since 1996.

Boud said that while the market is still oversupplied, it is moving steadily toward equilibrium, after which a new cycle of under supply will begin.

“The window of affordability is closing and the fundamentals of land will soon be in play,” said Boud. “The increase in new housing will not match the demand.”

For information on available land, with finished and “blue top” lots in Southwest Riverside County, please visit our Available Properties page, or contact Darryl Stephenson.


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    • Herb

      January 30, 2013

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