by Gene Wunderlich

It’s been that kind of year. Nothing really exciting happened to our housing market in 2011 – no big boom, no big bust, no big dump of bank owned homes. As a region, Southwest California sold 71 fewer homes this year than last and the median price of a home ticked down 1 percent. As you’ll see in the following charts, it was a pretty good year for our market overall.

Sales stayed strong in this first post-bust year without a stimulus program of some sort. You’ll recall the last half of ‘09 and the first half of ‘10 the market benefitted from 1st time and move-up buyer program from the feds and a new home purchase program from the state. This year all we was buyers and sellers. It’s estimated that some 40% of current transactions involve cash buyers – a mix of investors and regular homeowners. The other 60%? At least 60% of those are 1st time buyers lured by the promise of their own home along with move-up or relocation buyers. Impecunious lending practices and uncertainty over future governmental regulation on the industry continue to dampen the housing recovery. 2010 was a record sales year for the region with Temecula, Murrieta and Lake Elsinore posting historic high water marks, so dropping from 7,529 to 7,458 this year isn’t bad – a one point drop.

All cities fared slightly better or worse than that curve. Our median price in the region has fluctuated within a $4,000 range for the past three years. During that time our market demographic has shifted from 92% distressed properties (primarily REO) to a market with 40% equity, or standard, sales. Some 60% of those are investors flipping properties,. but an increasing proportion is made up of regular folks. As much doom and gloom as we hear about housing, 70% of our homeowners still have equity in their homes and they can buy or sell whenever they want. Not for whatever they want, but whenever.

Moving companies tell us that more people moved into California last year than moved out for the first time in awhile. Unemployment numbers seem to be improving, if those numbers are believable/sustainable. And some builders are starting to edge back into the pond, although the demand right now in most parts of the country is for multi-family housing. Single family is still weak and 2011 may well be the slowest year in the past 20 for our local building industry . The new year also brings renewed legislative challenges ongoing at both the state and federal level. With the recent recess appointment of a Chief for the Consumer Financial Protection Bureau, many in the lending and housing industry are concerned with the scope of this new and unregulated organization with it’s far reaching powers.

We are cautiously optimistic that no legislator will touch the 3rd rail of mortgage interest deduction during this election year although there is some possibility that million dollar homeowners and 2nd homes will be affected. You rich folks. While our local market appears to have weathered the worst of it, many areas of the country continue to experience sever problems. A lack of buyers, continuing price erosion and 20+ month inventories have prompted some cities to bulldoze neighborhoods.

Fannie & Freddie are entertaining ways to convert some of their inventory into rental properties – a move which would not be good for our region. Conforming loan limits are down and loan qualification is tight but historically low interest rates should continue through most of the year. That’s good news for qualifying buyers. The Wall Street Journal recently posted an article “5 Issues for Housing 2012”. What to watch out for according to WSJ?

1. 1.Confidence and jobs
2. 2.Foreclosures
3. 3.Rising rents
4. 4.Mortgage Credit & Rates
5. 5.Regulation

I couldn’t have said it better myself. I’m moderately bullish on our market for 2012. Of course that’s just my opinion, I could be wrong.

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