Orange County’s home sales show solid signs of maintaining health. I like my real estate “healthy” rather than “hot.”
As the spring shopping season winds down, I’ve started to wonder what kind of financial shape the region’s housing markets are in. Yes, we know CoreLogic stats show it’s been busy across Southern California – the second fastest-selling April since 2006. And it’s been a tad pricey, too: the highest median selling price since 2007. But is the upswing sustainable at a county level? I loaded my trusty spreadsheet with key metrics of real estate performance for Southern California’s six counties: median selling prices and sales volumes from CoreLogic archives; “market time,” the pace of new escrows vs. listed resale-house inventory, by Steve Thomas and his Reports on Housing; share of homes that are “affordable” on local incomes, by California Association of Realtors (CAR); and job growth and unemployment trends from Beacon Economics. What defines a healthy housing market? To me, it’s rising prices and growing sales activity backed by solid job growth. After the last boom-to-bust cycle, the durability of the upswing is paramount. My study found that when it comes to housing, as in other areas of the economy, the closer it is to the ocean, the stronger the business climate.
So here’s how I rank Southern California’s six counties for housing health, based on my analysis of the data:
No. 1 Orange
• Median Price, April: $600,000, up 4.2 percent in a year
• Sales, first four months of 2015 vs. previous seven: Up 14 percent
• Months to sell inventory, as of May 21: 2 vs. 2.61 a year earlier
• Jobless rate, April: 4.4 percent vs. 5.5 percent a year ago
The region’s healthiest market saw its median selling price reach the highest point since August 2007 – within 7 percent of the old, bubble-inflated peak. No Southern California county is closer to record high pricing. Home sales in the first four months of the year were up 4 percent vs. 2014; it was the fastest start to a year since 2006; and Orange County posted the biggest sales increase, compared with its seven-year average, of all the Southern California counties. Sales of old problems in Orange County are minimal. Just 3 percent of listed homes are categorized as “distressed properties,” the smallest share of any county in Southern California. And powering the surge is the lowest unemployment rate in the region at 4.4 percent. Yes, Orange County will stretch any house hunter’s wallet with the region’s highest prices and lowest affordability (22 percent). But an above-average rate of home purchases amid a hiring spree seems very sustainable to me.
No. 2 San Diego
• Median price, April: $455,000, up 4.6 percent in a year
• Sales, first four months of 2015 vs. previous seven: Up 7.8 percent
• Months to sell inventory, as of May 21: 1.79 vs. 2.13 a year earlier
• Jobless rate, April: 5.1 percent vs. 6.5 percent a year ago
San Diego buyers are paying up, with the highest median selling price since October 2007 – leaving the market just 12 percent below its all-time high. But has San Diego become too expensive? April marked the second-slowest year-over-year price gain since June 2012. And by CAR’s calculations, only one county has lower affordability – Orange County! The best news is that jobs are plentiful, with 3 percent year-over-year employment growth in April. Unemployment runs 5.1 percent – behind only Orange County for the region’s best.
No. 3 Los Angeles
• Median Price, April: $485,000, up 10 percent in a year
• Sales, first four months of 2015 vs. previous seven: Up 3.4 percent
• Months to sell inventory, as of May 21: 1.94 vs. 2.61 a year earlier
• Jobless rate, April: 7.6 percent vs. 8.3 percent a year ago
Los Angeles is getting pricey. Maybe too pricey? Its median selling price for April is the highest since November 2007. L.A. has been second to Orange County in Southern California home pricing for three straight months. That has never happened in DataQuick records dating to 1988.The deals that are being made go quickly. The selling speed of the market, as measured by Thomas, is up 35 percent in a year. Only Ventura enjoyed a swifter improvement.But L.A. house hunters haven’t kept pace: The county’s home buying represented 32 percent of all regional sales in April – L.A.’s lowest share of the Southern California market since 2009.Perhaps it’s because shoppers are nervous. L.A.’s job picture has improved, but it’s still shaky: Its unemployment rate in April was the highest in the region. Still, annualized jobs growth of 2.4 percent isn’t shabby.
No. 4 Riverside
• Median price, April: $310,000, up 8.3 percent in a year
• Sales, first four months of 2015 vs. previous seven: Down 8.2 percent
• Months to sell inventory, as of May 21: 3.24 vs. 3.77 a year earlier
• Jobless rate, April: 6.2 percent vs. 7.8 percent a year ago
It’s not clear why Riverside’s market looks pokey. The median selling price was above $300,000 for the past three months. Last time such a streak occurred? The first three months of 2008. And affordability is comparatively high, with 42 percent of household incomes estimated to comfortably cover a median-priced house – the region’s second-highest level. So why do resale homes turn over so slowly? Thomas’ “market time” of 3.24 months to sell all inventory at the current pace is the region’s worst. Is it a question of too many choices? Riverside’s for-sale inventory has grown by 8 percent in a year while the supply in the rest of Southern California has dropped by 5 percent. Don’t blame the job market. April’s unemployment rate is the lowest since 2007. And the Inland Empire (Riverside and San Bernardino counties) had 4.4 percent year-over-year job growth in April, the best in Southern California.
No. 5 Ventura
• Median price, April: $480,000, up 3 percent in a year
• Sales, first four months of 2015 vs. previous seven: Up 3.5 percent
• Months to sell inventory, as of May 21: 1.55 vs. 2.64 a year earlier
• Jobless rate, April: 5.6 percent vs. 6.7 percent a year ago
The region’s mystery market: Why the sudden strength? Sales in the first four months of this year were up 23 percent vs. a year ago – the biggest gain among the six Southern California counties. This was also the fastest-selling start of a year since 2007. One explanation is that it’s a seller’s market. Thomas’ market time places Ventura at 1.55 months to sell the entire inventory at the current sales pace – the region’s most improved over 2014 and the fastest pace among the six counties. But what worries me is that this buying spree comes with a broad business backdrop of only 1.1 percent year-over-year job growth – the slowest among Southern California counties. A warning signal? Maybe that’s why real estate watchers at Clear Capital put Ventura – along with the Inland Empire – on a recent list of markets showing “bubble” risks.
No. 6 San Bernardino
• Median price, April: $252,500, up 5.2 percent in a year
• Sales, first four months of 2015 vs. previous seven: down 7.7 percent
• Months to sell inventory, as of May 21: 2.70 vs. 3.03 a year earlier
• Jobless rate, April: 6.1 percent vs. 7.7 percent a year ago
This market hasn’t truly recovered from the housing crash and Great Recession. Yes, it’s Southern California’s best bargain, relatively speaking: Fifty-eight percent of its residents have the income to afford a median-priced home, according to CAR’s affordability measure. But its median price is still 34 percent below the all-time high of the bubble period – the largest gap in the region. And bargain hunters aren’t biting much. Closed deals in the first four months of 2015 are down 2 percent from the same period last year – the only county in the region with a year-over-year drop. It’s also the slowest start of a year since 2008. Maybe it’s because of nagging problems with distressed properties: Of homes listed for resale in San Bernardino County, 7.7 percent are foreclosures or short sales, according to Thomas’ report of May 21. That’s the highest in the six-county Southern California region and compares with 3 percent for Orange County – the regional low.