Spring has only just arrived, but it feels like summer is already around the corner, especially in the Valleys. Temperatures and gas prices are rising and clothing and inhibitions are being shed rapidly. Every year these signs of life quicken the pulse of realtors across the land in anticipation of the the big thaw: the emergence of the real estate market from hibernation, the surging and swarming of buyers and the sweet blossoming of sales.
March, April and May are traditionally, and most often statistically, the strongest sales months for real estate (see the sales charts and historical sales analysis tables from SRAR (the Southland Regional Association of Realtors, “the ‘voice for real estate’ in the San Fernando and Santa Clarita valleys”). Each spring the housing industry looks to these months as cave dwellers must have once looked on the the retreat of glaciers and the life-giving return of the sun: as critical, life-renewing events.
But this year may prove to be particularly decisive. Spring 2008 may be the indicator that tells us if housing will rebound from its lethargy, or if it’s doomed to repeat the long multi-year pattern of past housing cycle booms and busts.
As Redfin users have noticed - at least those who take advantage of the “listing updates” feature that emails new and updated listings in selected areas to them daily - inventory has begun to swell in the Valley in the last couple of weeks. Many sellers who have been waiting out the winter – hoping the sales slowdown has just been a seasonal symptom – are now casting their bread upon the waters.
But will there be a comparable increase in buyers? No doubt we’ll see an uptick in sales this spring, but it’s far too early to tell if the numbers will amount to anything resembling the beginning of the long-hoped-for housing recovery. In truth, it seems unlikely.
Last spring (in its May 2, 2007 edition) Business Week published a gloomy piece entitled “No Spring Thaw for Housing.” The upshot: ”Spring is usually the hot time for home sales. But this year, March results were terrible—and April and May don’t look much better.”
Seeking an explanation, the article quoted the National Association of Realtors’ Chief Economist (and cheerleader) David Lereah, who put most of the blame on the “new stricter lending that reduced the pool of potential buyers.” (That’s the same David Lereah who a year earlier published the prescient classic Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade – And How to Profit From Them. Amazon.com lists used copies available for 30 cents.)
Business Week went on to this conclusion:
The housing market has not hit bottom. Poor home sales in cold-and-quiet February may be excusable, but in March, April, and May, they are a sure sign of distress. The latest numbers indicate that the spring of 2007 will go down as one of the worst real estate seasons in years.
The article also quoted a housing economist for Moody’s Economy.com, who observed, “Many people think, ‘if I can just hang on ’til the spring,’ they will get an offer. This spring, they’ll be lucky to sell.”
After years of decline, it’s true housing affordability has improved in many national markets, and lower-end markets locally. But since last year’s assessment by Business Week, lending standards and credit markets have only grown stricter and tighter. The overall economy is winding down. The pulse of consumer confidence is barely detectable. We will learn soon enough if spring 2008 will be a season that delivers hope, or delays it.