By John Frith VCCAR Editor and PR Consultant: While Ventura County’s economy remains stagnant at best and home sales continue to drop, the extreme scarcity of homes for sale and the strong demand for them likely mean that current market conditions will continue for some time, according to a trio of leading economists. Jordan Levine, senior economist for C.A.R., Mark Schniepp, director of the California Economic Forecast in Santa Barbara, and Matthew Fienup, executive director of the Center for Economic Research and Forecasting at California Lutheran University in Thousand Oaks, agree that even the next recession is unlikely to cause home values in the county to drop much. “I don’t think we’ll see any major declines in home values. The supply constraints can keep prices high in coastal areas in particular,” Fienup said. Schniepp noted that even as prices climb to near-record levels, they are driven by fundamentals. “Maybe prices will drop a little in a recession, but not much,” he said. “This time the market isn’t subject to overbuilding or speculation. It’s due to economic fundamentals, not bubbles. As long as that continues, those are real price increases.” All three economists put the blame for continuing price appreciation squarely on the lack of building that’s occurred for years throughout the state but which is particularly acute in Ventura due to the strict growth control measures approved by voters that are now in effect until at least 2050.
“Prices will continue to rise because we don’t build enough housing anywhere,” Schniepp said, although he said at least rising rents has caused an increase in apartment construction – units approved years ago but unbuilt because of the economy. But Fienup said production is far below what’s needed. In 2017, he said just 2,326 residential permits were issued around the county, down from pre-recession levels of about 4,000 – which were significantly less than the demand for housing. But in the first six months of 2018, just 458 permits were issued, compared to 875 last year. For REALTORS®, one good thing is that listings are finally starting to creep up around the state, even if Ventura County is lagging in that area, Levine noted. “We’re starting to see some signs of a market shift. One of the signs is that for the first time in a long time, listings are starting to creep back up by 8- to 8½ percent in recent months,” Levine said.
“There’s also a change in the price points where that’s happening. Inventory in the top end has been growing for some time, but now we’re seeing a big swing in the $300,000- $750,000 range, which is actually up by 10- to 12 percent, though that’s because the numbers were so abysmal before it exaggerates the growth rate.” Levine said the increased inventory numbers are driven by homeowners who have finally recovered their losses from the Great Recession but are concerned about what rising interest rates could do to the market, people leaving California for less-expensive states, and investors selling homes they bought at low prices during the recession because of fears rent control could be extended to single-family homes if Proposition 10 passes in November. But, Levine said, the odd thing is that these properties have not been snapped up as quickly as one would have expected. Part of the reason is that prices are so high that many people either can’t or won’t get into the market, while others are afraid the market is reaching a peak. “There is a lot of psychological scar tissue from 2005, 06, and 07 for people who were left holding the bag by prices declining by 40 or 50 percent,” he said. Schniepp, who will give an economic forecast to VCCAR members at this year’s Trade Fair on October 4, also sees inventory levels gradually rising in Ventura County, which he said will help ease price appreciation. “If the recent inventory increase can be maintained, there will be increased supply and that will help to offset rising demand and keep prices more stable,” he said. “Stable prices is what all markets in California need right now if the housing market is going to be successful for the remainder of the expansion, which I give at two more years.”
Who are today’s buyers? So who is buying increasingly high-priced homes in Ventura County? The consensus are three main types: retirees from other areas, wealthy county residents, and people willing to endure long commutes. While the Ventura County economy continues to stagnate – Fienup noted it actually has contracted in the past three years, due in large part to a decline in the once-robust biotech sector – the economy is doing much better in other parts of Southern California. “Across the county line, the San Fernando Valley is rocking and rolling,” he said. “The Valley economy is growing more rapidly than L.A. as a whole because it’s highly concentrated in one industry – information and technology, things like the movies and software development. This is a high-paying sector, so these high-salary Valley jobs support Ventura County homeownership.”
Schniepp noted that the 101 Technology Corridor which once supported high-paying jobs from Camarillo to Thousand Oaks is a thing of the past, while similar corridors are still going strong in Marina del Rey, the West Side generally, and Orange County. All three economists said proposals such as Proposition 10 that would overturn the ban on rent control on units built since 1995 and for the first time allow single-family homes to be rent-controlled would be a disaster. Levine said in the short run, repealing the Costa-Hawkins law would probably boost supply as many investors and landlords would sell their rentals, “but the flipside is that a lot of REALTORS® own rentals themselves because of their knowledge of housing and that will hit them in the pocketbooks.” And in the long run, it would only exacerbate the housing shortage by drying up production at a time we need much more new housing to be built.
Building a ‘drop in the bucket’ “We’re building, but it’s a drop in the bucket compared to 30 years of underbuilding,” he said. “We need to be building in urban areas and bedroom communities alike. These long commutes people are willing to endure is a testament to the fact people want to own homes.”
While all three economists agreed that Ventura County cities haven’t rolled out the welcome wagon for the higher infill housing that was an implicit tradeoff in the debate of the Save Open Space and Agricultural Resources (SOAR) campaigns that walled off most undeveloped land in the county, Fienup at least sees some signs of optimism. He noted strongly no-growth Thousand Oaks is in the process of moving development entitlements from the edges of town where no housing will likely ever be approved to the core along Thousand Oaks Boulevard and the 101 Freeway, which he said has the potential of adding hundreds of new units to the housing stock. And even more encouragingly, he said now that SOAR has been extended to 2050, even some leading SOAR advocates are privately telling him that they need to get serious about promoting infill development within the urban limit lines.
“Now that the (2016) vote is behinds us, we can have a real conversation about housing,” he said. “There are bright spots. I’m more optimistic than I was a couple of years ago.” Levine said for REALTORS®, modest increases in inventory will be a good thing – but they will have to work for their business. “More people are listing their homes and a good chunk of them will buy new homes. Even if there’s a correction there will still be a lot of volume out there,” he said. “But it will still largely be a market-share game. You’ll have to work for business but this market provides a good opportunity to make life-long clients by serving them well. “You can also peel off business by being their educator-inchief. The desire for homeownership is still there, and there are a lot of people without full knowledge on how to obtain it. A recent survey found 75 percent of prospective buyers said they would buy if they could do so with a smaller down payment, but a lot of those buyers think you need 20- or 30 percent down payments. They need to be educated about FHA and VA loans.” This market provides a good opportunity to make life-long clients by serving them well.” Jordan Levine