Riverside is the fourth most populous county in California with nearly 2.4 million residents. Much of the region’s population growth took place during the Millennium Boom years, when construction jobs and new home sales skyrocketed.
The recession left the region with deep losses in home sales volume, construction starts and employment. Seven years after the end of the 2008-2009 recession, Riverside’s economy remains in a state of prolonged recovery. Of course, recovery gains momentum as lost jobs are regained. Employment finally exceeded the number of jobs prior to the Great Recession at the end of 2014, though has yet to catch up with the intervening population gain. It will likely take another couple of years to build the jobs sufficient to support the population added since 2007 and generate wage inflation needed for housing.
View the Riverside regional charts below for details on current activity and forecasts for its local housing market.
Updated March 22, 2017. Original copy posted March, 2013.
Home sales volume remains down
|2017 projection*||2016||2005: Peak Year|
|Riverside County home sales volume||40,400||41,400||68,100|
*first tuesday’s projection is based on monthly sales volume trends, as experienced so far this year.
Looking back, sales volume in Riverside County has remained level in the years since 2011. The exception was 2014, when the area was hit particularly hard by the rapid exit of speculators, ending the year 9% below the prior year. Riverside recovered from that exodus in 2015, when sales numbers rebounded to 11% above 2014. The annual homes sales volume count in Riverside during 2013 and 2014 were worse than the statewide average, but 2015’s increase makes up for that. However, a true recovery still has not materialized, as sales volume ended 2016 roughly level with 2015.
Glancing back further, home sales volume fell quickly before and during the recession, then demonstrated a textbook example of an aborted checkmark recovery. Volume bounced back briefly in 2008-2009, initially due to what economists term a dead cat bounce recovery, which was extended another year by the home buying tax credit stimulus. Sales volume remained flat in Riverside until late-2013 when it began to trend down, bottoming in early 2015.
The most optimistic among us will point to the price boost low-tier properties received from late-2012 through 2014 as presaging a broader recovery across Riverside’s housing market. However, this price rise in its initial phase was due entirely to the overactive speculator presence edging out buyer-occupants in what became a level-to-down sales volume market, consistent with the market statewide.
As speculator acquisitions have largely left Riverside’s housing market, end users of property are left to drive the housing recovery. Thus, sales volume won’t fully recover for a few more years, likely around 2019-2021, at which point first-time Generation Y (Gen Y) homebuyers and Baby Boomer (Boomer) retirees will converge to drive up sales volume and prices.
Renter turnover falls; homeowner turnover rises
|Riverside County homeowner turnover rate||9.1%||8.7%||8.0%|
Riverside County renter turnover rate
Without homeowner or renter turnover, homes do not sell. In Riverside, the number of homeowners and renters moving in recent years peaked in 2009 due to the tax stimulus and high level of foreclosures, which temporarily lifted sales volume as tenants became homeowners. In a reversal, turnover has swiftly declined since then as potential end users have chosen more often to remain where they are.
The renter annual turnover rate fell from above 26% in 2013 to just 21% in 2015 (the most recently reported Census year). The homeowner turnover rate rose slightly to just above 9%, still below the level needed for a full recovery in home sales volume.
As slow job growth and wages continue to stagnate, residents lack the confidence (and more importantly, often the financial ability) to move. The turnover rate will rise once employment rates and wages improve sufficiently, as these increases boost confidence in the economy and reduce fears of carrying mortgage debt.
Turnover rates are likely to rise dramatically across the state in the convergent 2019-2021 boomlet period. Then, members of Gen Y will collectively rush from their apartments to buy and Baby Boomers will retire en masse. Boomers generally buy replacement homes after they sell. Further, immigrants will also play a significant role in boosting Riverside County’s suburban resale housing demand. Apartment vacancies will rise as they did in the early 1990s when the boomers took to buying homes.
Homeownership rate bounces back
Chart update 03/22/17
||Q3 2016||Q4 2015|
|Riverside County homeownership||64.4%||62.6%||62.4%|
Riverside County’s homeownership rate fell steeply during the recession. Riverside’s rate of homeownership hovered around 68% from 2000 through the end of the Millennium Boom. As of Q4 2016, the homeownership rate appears to have risen from its bottom and is just above 64%. Further, this is significantly higher than the state average, which is still a low 54%.
The return of significant numbers of buyer-occupants depends primarily on the creation of more jobs with better pay than the new jobs that have come on line as we go into expansion from this recovery. By the end of 2014, the jobs lost in the Great Recession of 2008 were finally recovered, several months following the statewide jobs recovery. But with the intervening eight years of population increase, the ultimate jobs recovery with the strong wage rises needed to support high sales volume and in turn price increases will wait until 2019. The homeownership rate will remain below pre-recession levels until then, only to rise when members of Gen Y collectively gain enough income to become first-time homebuyers.
Residential construction mixed
|Riverside County single family residential (SFR) starts||8,000||5,200||6,800|
Riverside County multi-family starts
Residential construction starts are recovering marginally in the Riverside Metropolitan area. SFR construction continued to improve in 2016, while multi-family starts fell dramatically.
Here, the focus on multi-family construction is far less pronounced than in regions closest to the coast. Nevertheless, increased demand for rental housing during this recovery translates to stronger growth in this sector than in single family residential (SFR) construction.
Construction increased dramatically during the Millennium Boom as the population moved from the urban centers of Los Angeles, Orange and San Diego Counties into the bedroom communities of Riverside County. Builders kept pace with buyer demand for new housing. Eventually their starts overran the 2006-2007 decline in buyer demand. The excess starts resulted almost exclusively from distortions in mortgage and construction financing with personal guarantee arrangements.
When the housing bubble burst in 2006, the sale and thus the construction of SFRs and multi-family housing plummeted. Small builders went bust in droves. Today, the general trend for SFR starts in Riverside County is displaying signs of stability with no signs of reaching 2004 and 2005 numbers in the foreseeable future.
The next peak in SFR construction starts will likely occur in 2019-2021. Even then, SFR construction starts are very unlikely to return to the mortgage-driven numbers seen during the bacchanalia of the Millennium Boom.
Jobs are picking up
|Jan 2017||Jan 2016||annual change|
|Riverside County jobs||1,426,000||1,381,900||+3.2%|
Before end users can provide sufficient support for the housing recovery, they will need to acquire income — i.e., jobs with wages exceeding the rate of consumer inflation.
The number of individuals employed in Riverside County finally surpassed its December 2007 peak in Q4 2014. As of January 2017, 125,700 more individuals are employed than at the outset of the recession. However, it will likely take another couple years to build the jobs sufficient to support the population added since 2007 and generate wage inflation needed for housing.
Industry employment gives mixed signals
|Jan 2017||Jan 2016||Annual change|
|Trade, Transportation & Utilities||351,700||340,500||+3.2%|
|State & Local Government||
Chart update 03/22/17
|Jan 2017||Jan 2016||annual change|
Many of Riverside’s top employing industries have yet to recover from the recession.
Many of Riverside’s top employing industries have yet to recover from the recession. The top employing industry in Riverside, Trade, Transportation and Utilities, has displayed consistent growth since 2010 and is now above pre-recession levels.
The large Goods Producing sector has shown decent annual growth in Riverside, and Construction has also experienced some growth though it remains far below its peak. However, the second top industry, Local Government, has only recently begun to increase.
The small but good news is that the number of employed real estate professionals have grown marginally this past year in Riverside, which is more than can be said for the state as a whole. The number of real estate and construction professionals employed will see a significant increase when the next confluence of buyers and renters (members of Gen Y and the Boomer generations) enter the market around 2019-2021.
Per capita income points to a continued slow recovery
Chart update 12/19/16
|Riverside County per capita income||$35,589||$33,867||+5.1%|
|California per capita income||$53,741||$50,988||+5.4%|
Per capita income in Riverside is one of the lowest in the state. Low per capita income holds down rents and thus new multi-family starts. Annual income rose beyond 2008 peak year amounts in 2013 — and that’s before accounting for the purchasing power reduction brought on by interim inflation.
The average employed individual in Riverside earned just $36,600, according to the most recent Census reported year of 2014. The statewide average income is over 50% greater than Riverside’s. However, the average resident of Riverside spends less of their income on housing expenses than those living in urban coastal cities.
However, as the recovery heats up, underemployment and unemployment will become less common and per capita income will increase. With more jobs available and incomes higher, homebuyers and renters alike will spend more on their residences each month. Jobs and the pay received by locals is why homebuyer occupants ultimately determine selling prices. Buyers can only pay as much for a home (or rent) as their savings, income and credit score qualify them to pay — nothing more, no matter the price demanded by sellers.
Expect per capita income to increase concurrent with increases in job numbers and the competition that brings employer demand for more employees.