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Good luck finding a new home to buy in Southern California these days-the supply of new home projects open and selling in Southern California is currently at a 20-year low. Cautious capital, a lack of finished lots, and notoriously slow planning departments are all contributing to a serious deficit of new for-sale housing in the region.
There are currently just 419 actively selling new home projects in Southern California. In comparison, the market has averaged 1,045 actively selling projects annually over the last 20 years. In peak years, there have been over 1,600 actively selling projects. The current supply is 60% below the long-term average and 75% below peak years.
The number of active projects in Southern California would need to be 2.5 times higher than today just to return to the average of the last 20 years.
New home sales reportedly spiked in October. Huh?
Builder stocks spiked right after the Census Bureau release Wednesday morning, and we are sure that many believe we are in a strong housing market again because of the headlines. On Fox Business, I explained what is actually going on. We discussed:
- The data quirk behind the simultaneous release of plunging September sales followed by a return to a more normal trend in October
- 444,000 sales being just more than half of normal new home sales
- The missing entry-level buyer
- My anticipation for low homeownership due to the tremendous disincentives to lend to the credit-challenged borrower
As a kid, I remember the Apollo lunar module losing all communication for about one hour as it orbited around the back of the moon. We all held our breath for that hour, waiting to hear that all was okay.*
That is what happens with the housing market each winter. Sales slow during the holiday season and don’t pick back up until the sun shines. That sun shines brightest first in Arizona and Florida, which is where we will be turning our attention in January as the first indicator of 2014’s housing market.
The Cool Fall