When it comes to real estate news, it’s impossible to escape the media’s fascination with the theory that there is a large problem with available housing inventory. Whether your news source is talking about the lack of new residential home building, the lack of affordable housing, or the increase in rents as more people become renters, it all seems to blend together as real estate white noise.
So what is the actual truth about housing in our Riverside area? Are the media reports accurate? And what does that mean to buyers and sellers in our city? Let’s take a look at our local picture, because as usual, the media only has part of the story correct.
YES…there is a lack of new home building in our Riverside area to meet the demand by buyers, but that has been the case for many years. This is not new (why all the fuss now for an issue that has existed for quite a while is beyond us.) YES…rents have gone up the past few years, but they have done so at about the same rate as homes have appreciated, which is also pretty much the norm.
So what has the media missed? Simple…and here is your real estate snippet of information guaranteed to make you look good at your next social gathering when the conversation turns to real estate.
All real estate data regarding inventory is determined by price range…and the market and subsequent sales activity is different for each price level. Therefore, you cannot make blanket statements about “inventory”, or “sales activity”, or “affordability”, or much of anything else without first knowing what price range you are talking about.
As an example, in our Riverside area, there are lots of homes for sale in the $300,000-400,000 price range, but since this is the most active price range in our market, the homes sell quicker. Therefore, if you take a static snapshot on any day of the number of homes for sale, it will show a relatively low number…but that’s because most of them are sold! However, these sold properties are constantly replaced by other homes for sale, which means there are usually enough homes for a buyer to choose from. Whether the perfect home is there when a buyer wants is another story…that is always the case. However, patience is normally rewarded, because new homes come up for sale every day.
As you climb the price range ladder, it should come as no surprise that the higher you go, the slower the market, and the more properties that may be for sale at any one time. Again, common sense dictates that there are more people who can afford a home priced at $350,000 than at $650,000…and so on. Last year in 2016, 43% of all Riverside closings took place in the $300-400K price range, as opposed to 17% for the 400K-500K range, and 7% in the 500K-600K range…and the numbers continue to drop as you go even higher.
So what does all this mean for sellers and buyers in the Riverside area?
First, as we have stated in previous newsletters, Riverside will always present itself as the affordable housing alternative to our neighbors in Orange and LA Counties…and this keeps our housing market strong and active.
Secondly, beware of the national media and their interpretation of the “housing inventory crisis.” Sure, our market could handle a few more houses for sale, especially in the $300K-$400K range, but be careful what you ask for. A strong real estate market is all about balance, and right now we are fairly balanced, with a slight tilt towards needing more inventory. Remember, a totally out-of-balance market is bad for either a seller or buyer (depends on which way we are tilting!). Nobody wants a repeat of the crazy market of 2000-2007, which was followed by the housing disaster of 2007-2012.
Remember…all real estate is local…and right here in Riverside, our prices and the availability of low interest rates gives us a strong housing foundation that is good for everyone.
Take care, and as always, I am only a phone call away if needed.