fering as much as $100,000 in incentives; however, most official incentives remain in the $5,000 to $30,000 range. On the other hand, with much lower average price points in the resale market ($662,000 in October) versus the new home market ($900,000), resale activity has been rising the last few months, with resales in Octo- ber up 8.4 percent year-over-year. COACHELLA VALLEY (SUBMARKET OF THE INLAND EMPIRE REGION) There are three main market segments in the Coachella Valley: primary home buyers (driven by local employment growth), second-home or vacation home buyers (driven by the health of the Southern California housing market and equity in existing homes) and retirees or age-qualified community buyers. The only segment showing any sign of strength as year-end approached was the retiree segment, which is expected to be a growth market over the next decade. The second-home market likely needs Southern California home prices to rise at least another 10 percent to 15 percent before equity levels start to reach the point where owners feel comfortable pulling out equity toward a second-home purchase. The primary market was fed in the 2000s by construction and the open- ing of several Native American casinos, something not happening today. New home sales have been flat at right around 850 to 900 sales per year for the last three years, but the number of active proj- ects has increased from about 35 in 2013 to about 45 in 2014 and about 55 as of this writing, resulting in slower project-by-proj- ect sales rates and pricing weakness. •

percent year-over-year) and have been increasing at a growing rate since: Sep- tember at +3.8 percent year-over-year and October at +4.1 percent year-over-year. At the same time, the supply of resale listings has dropped 8.2 percent year-over-year. Partly thanks to an increase in the supply of active new home projects compared to a year ago, total new home sales activity has been rising for the last six straight months and is on pace to hit the highest level of sales since 2009 (although still substantially below peak levels). Note: Improving condi- tions exclude the Coachella Valley. HOLDING ITS OWN: TRENDING SIMILARLY LOS ANGELES Lack of new home supply is holding back overall sales in both the new home and resale markets (the number of resale listings was down 10 percent year-over- year in November). This lack of supply is in turn putting upward pressure on prices and is resulting in the lowest housing affordability ranking of all Southern California counties.

San Diego and the Inland Empire, resales are rising at an increasing rate and were up 4.8 percent year-over-year in October. New home sales are flat, partly due to a lack of supply, but they also have been impacted somewhat by affordability. The denial of the Newhall Ranch environmen- tal impact report will further exacerbate new home supply issues in the short term. ORANGE The rate of job growth is down (currently +41,000 year-over-year versus +47,000 a year ago), the number of building permits issued is up slightly (+1 percent year-over- year), and new home project counts are up substantially over the past two years (currently 111 active projects versus just 69 in 2013, although still below the long-term average of 136 active projects). At the same time, new-home builders have had to push prices to cover high land costs, and the median new-home price in November was up 12.7 percent year-over-year ($900,000). High prices have im- pacted affordability levels, and issues in China have SLOWING: FUNDAMENTALS NOTAS STRONG

However, strong job growth continues to fuel the demand for housing. As of this writ- ing, job growth stands at +85,000 year-over-year compared to +93,000 at the same time last year. In comparison, only about 22,000 building permits had been pulled for 2015 as year-end approached, for a job-growth-to-new-hous-

caused Chi- nese buyers to pull back

on new home purchases. As a result, despite an increase in the supply of new

home projects, new home sales were down almost 21 percent

ing ratio of 3.9. With continued strong demand but low supply, resale prices are up 6.8 percent year- over-year (BHVI), following a 6.9 percent increase at the same time a year ago. Resale volume is up the last four months after having trended downward for the prior 17 straight months. As in


year-over-year as of October, the latest month available. Slower total sales are resulting in slower project-by-project sales rates and pricing weakness. Some OC projects are reportedly of-

John Burns Real Estate Consulting tracks housing market trends in over 60 market areas throughout the nation. To talk further about what is happening in Southern Cali- fornia, please contact Pete Reeb, principal, at 858-281-7216 or

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