Southern California

Inland Empire New Home Market: On Watch for Upgrade from “Warm” to “Hot”

February 17, 2017

The Inland Empire new home market is showing signs of rapid improvement with rising new home sales volume driven by lower prices than Coastal markets, rising job growth, an increase in the FHA loan limit and low levels of resale inventory. If current trends continue, look for an upgrading of our market hotness ranking from Warm to Hot.

  • New home sales in the Inland Empire (Riverside & San Bernardino Counties) were up a remarkable 40% in January 2017 on a project-by-project basis compared to the same month a year ago.
  • Builders averaged 3.5 sales per project in January 2017 vs. 2.5 sales per project a year ago.
  • The YTD sales rate is the fastest since 2013.
  • The “drive to qualify” markets are coming back. Some of the fastest sales rates in January were in areas like Beaumont and Moreno Valley, where the average sales rate was over 5 homes per project.
  • Although our monthly survey of builders in the Inland Empire indicated that 80% held prices flat in January, history indicates that if builders maintain the current sales pace, prices should rise.
  • At least one challenge to maintaining rising sales is the impact that higher interest rates and rising prices have on housing affordability. Affordability at the end of 2016 was at the lowest level since 2009, but still relatively good compared to the mid-2000s peak. So far, declining affordability has not negatively affected sales.

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