OK, now I’m a bit worried.
The local homebuying slump extended itself into the start of the traditional house-shopping season – and Southern Californians certainly can’t blame “bad winter weather” for the sluggishness.
DataQuick reported that buyers in six counties in the region – Los Angeles, Orange, San Diego, Riverside, San Bernardino and Ventura – closed on a modest 17,638 homes in March. It was the slowest-selling March in six years, but there’s also more to be nervous about:
• While March’s sales count is up 26 percent from February, that’s limited oomph for the unofficial opening of the prime house-hunting period. February-to-March sales have averaged a 36 percent increase since 1988.
• March sales were off 14 percent in a year, the sixth consecutive year-over-year drop. Half a year of any trend – up or down – is worth examining.
I fired up my trusty spreadsheet and looked back over a quarter-century of DataQuick homebuying patterns for the six local counties. The collective sales counts have fallen on a year-over-year basis for six straight months only five times. So the housing market is in rare territory.
The five previous six-month dips were tied to the two most recent housing debacles. That’s already a reach-for-the-antacids analysis.
And my spreadsheet tells me that such buying slowdowns don’t end quickly. So Southern California history says not to expect a sales rebound any month soon. It’s clear that these slump periods were tinged with economic change that put off, at a minimum, the anxious shoppers.
Curiously, selling prices don’t react as quickly. I’m guessing one reason is that economic uncertainty often initially nudges out the financially weak house seekers or buyers of lower-priced homes, so the remaining shoppers have deeper pockets and can – and do – pay up.
History should not be ignored – nor is it a perfect prognosticator. So let’s review the five previous six-month strings of buying slumps for any hidden meanings.
• November 1989: The region’s grand 1980s housing expansion came to an end. Home sales a year later would slow by another 34 percent – though prices didn’t budge. All told, sales volumes would fall on a year-over-year basis for another 24 consecutive months. Remember, a key source of lending – savings and loans – was collapsing. And the region and the nation were headed into recession, a mild one for the U.S. but an ugly one for us. The job market, so key to homebuying, would shrink in 1991, 1992 and 1993.
• September 1992: The 1980s real estate boom didn’t end pretty. The local housing market had trouble getting into gear, and this slump was in many ways just another dip in the middle of an extended down cycle. Sales volumes would drop, year-over-year, for eight of the next 10 months – but within a year they were up at a 17 percent annual clip as the Federal Reserve made money cheap. Prices would dip 4 percent by September 1993.
• May 1995: The Fed did the region no good in 1994. Interest rates were jacked up to cool a hot national economy, which had not spread its vitality deep into Southern California. (Rising rates pushed Orange County into bankruptcy, thanks to its wrong-way bond bet!) However, you could say that this housing sales slump was the last throes of the long real estate downturn. Sales did fall, year-over-year, for 10 more months, but by May 1996 they were rising at a 31 percent annual pace. Local housing was nearing its lengthy revival, as regional jobs would grow from 1994 through 2007.
• March 2006: The longest sales drop in 11 years was an early red flag that bad stuff was about to happen – a housing-induced nationwide Great Recession. The abrupt end of stupid lending practices, which overinflated the housing market, was the final straw. The local job market cratered in 2008 through 2010. Southern California homebuying would fall on a year-over-year basis for 15 more months – including an annualized drop of 32 percent by March 2007. Intriguingly, prices would rise 5 percent in the year after March 2006, only to tumble by 24 percent in the following 12 months.
• December 2010: When various midrecession government homebuying incentives ended throughout 2010, shoppers initially balked. This sales slump was brief, though, running only another seven months – though prices did dip 7 percent over a year. This slump set the stage for the real estate rebound that ran through 2013 as local job counts increased three straight years. In the second year after this six-month sales dip, sales were rising at a 5 percent annual pace, and prices were up 20 percent.
BY JONATHAN LANSNER / STAFF COLUMNIST
Published: April 20, 2014 Updated: April 21, 2014 3:32 p.m.
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