Home Sales Fall; Experts Discuss Unemployment Rates

BY SCV BUSINESS JOURNAL STAFF

Recent data released by the leading organization for Realtors in Southern California and the Employment Development Department could portend problems ahead for the economic picture.

The Southland Regional Association of Realtors reported sales for December were down about 31% over the same time the previous year, according to officials, which also indicated the number of active listings has surged to the highest point in three years.

“Sellers are slowly coming to grips with the fact that current market realities mean they need to be flexible in their pricing, willing to offer concessions and willing to consider repairs or improvements requested by buyers,” said Anthony Bedgood, 2023 chair of the Santa Clarita Division of the 11,000-member Southland Regional Association of Realtors.

The “market realities” that Bedgood refer to include the increases in the Fed’s key benchmark borrowing rate, which has gone up from 0.25% to 0.50% in March 2022 to 4.25% to 4.5% with the most recent hike on Dec. 14.

Even a small rate hike can have a significant impact on the bottom lines for buyers and sellers in a relatively short period of time, as Realtor Bri WatermanKing explained in a recent interview.

“Well, now that the rates have gone up, my sellers are going, ‘Here’s the comps — my neighbor sold for $1 million.’ And I’m like, ‘I know, but that was four months ago.’

“And we can go back six months for an appraiser,” she said. “But the problem is the rates were 2% less then, which means that your buyer’s payment is $1,500 more today than it was two months ago.”

The SRAR’s data also reported that there were 3,286 escrows closed in the year-end data, which generated an estimated $2.7 billion, not including the dollars generated through home repairs, landscaping and furniture purchased, the release notes.

The good news for potential buyers is that there is more inventory available on the market than there has been in recent months.

The inventory for the Santa Clarita Valley indicates there are 419 active home and condominium listings at the end of December. That was up 43.4% from a year ago, though still below the 483 listings of 2019 and the 761 listings of December 2018.

“At the current pace of sales, the 419 listings represented a 2.4-month supply,” the release notes.

Homes are also staying on the market longer, perhaps as homeowners are dealing with the adjustment of their expectations.

“Buyers are still out there, and sales are still happening, though it takes longer than just a short while ago,” said SRAR CEO Paul Cauchi.

“A year ago, it took about 26 days for a home to receive a purchase offer,” he said. “During December, the days on the market average came in at 43 days.”

The median price of single-family homes that closed escrow during December was $799,000. That was down 1% from a year ago. The median price of condominiums that changed owners in December was $540,000, up 11% over December 2021.

Employment figures

In the job market, data released last month indicated the jobless rate ticked up above 4%, while there were almost 61,000 new and reopened claims filed for the week ending Jan. 7, which amounted to about $125 million in benefit payments.

“The seasonally adjusted unemploy- ment rate in Los Angeles County decreased over the month to 4.7% in December 2022, from a revised 4.8% in November 2022, and was below the rate of 6.8% one year ago,” according to a news release from California’s Employment Development Department.

In Santa Clarita, the rate was 3.9%, according to EDD data, compared to 6.3% in Palmdale and 6.5% in Lancaster.

However, a message from Robert Lee, a labor market consultant for the Employment Development Department, noted the unemployment rate could be much higher depending on what formula one decides to use to measure it.

“The gold standard is the U-3 unemployment rate, which is used throughout the nation at all geographical levels,” Lee noted in a report titled “The Unemployment Rate — There’s More Than One.”

As Lee notes, this is a relatively basic overview that takes the number of unemployed as a percentage of the labor force (employed plus unemployed).

This doesn’t include those who are no longer in the labor force or working parttime involuntarily who are not included in this measure. The U-6 unemployment rate takes these workers into consideration, he writes.

“The unemployed and involuntary parttime workers are still part of the labor force, but the discouraged worker and other marginally attached worker are no longer part of the labor force,” Lee notes. “The ‘part-time for economic reasons’ worker would like to work full time, but his or her employer has cut back work. That worker is involuntarily underemployed and counted as employed in the U-3 rate. Each measure has a different unemployment rate because each level adds workers to the ranks of the unemployed. In essence, the growing pool results in a higher rate.”

As a rule of thumb, the U-6 rate is generally about double the U-3, or traditional, rate.

“Over the last 19 years, the U-3 rate has averaged 7.8% compared to the U-6 annual average of 15%,” Lee writes. “As the only county in the nation to have access to a U-6 unemployment rate, we in Los Angeles County get a unique look at the local economy.” 