Riverside is the fourth most populous county in California with nearly 2.5 million residents. Much of the region’s population growth took place during the Millennium Boom years when construction jobs and new home sales skyrocketed.

But the 2008 recession left the region with deep losses in home sales volume, construction starts and employment. Riverside’s economy remained in a state of prolonged recovery for a full decade, slowly gaining momentum as lost jobs were painstakingly regained. Employment finally exceeded the number of jobs held prior to the Great Recession at the end of 2014, though it barely caught up with post-2007 population gain before the 2020 recession hit and more jobs were lost. The good news is Riverside’s economy has caught up with 2020 job losses much more quickly, with jobs exceeding the pre-2020 peak as of Q2 2022.

Local sales agents can expect Riverside’s low inventory to continue to rise heading into 2023 as the market rapidly cools. Historically low interest rates and a shortage of sellers willing to list inflated home prices in 2021. But with 2022’s ongoing rise in interest rates, homebuyers are quickly seeing their options limited, placing downward pressure on home prices. As we head deeper into 2022’s undeclared recession, expect home sales to slide through 2024, with home prices declining in 2023-2025. Home sales volume will pick up with the return of real estate speculators around 2025, with a full recovery apparent beginning in 2027.

View the Riverside regional charts below for details on current activity and forecasts for its local housing market.

Updated August 22, 2022. Original copy posted March 2013.

Home sales volume turns up, despite recession

Chart update 08/22/22

2021 2020 2005: Peak Year
Riverside County home sales volume 51,700 43,200 68,100

*first tuesday’s projection is based on monthly sales volume trends, as experienced so far this year.

Home sales volume in Riverside County remained mostly level in the years of 2011-2010. Starting in 2020, sales volume took on a more volatile path, matching much of the rest of the state in terms of Pandemic Economics. After peaking in 2021, as of Q2 2022, home sales volume is 10% below a year earlier, presaging a slower year for home sales in 2022. However, year-to-date (YTD) sales volume remains above 2019, the last “normal” year for California’s housing market.

As the housing market continues to adjust to the recession hangover and pandemic response, some are pointing to still-high prices as evidence of a recession-proof market. But today’s prices were inflated by historically low mortgage interest rates, which provided a boost to buyer purchasing power, and buyer fear of missing out (FOMO). As buyers and sellers realize interest rates have now jumped, limiting their access to mortgage principal, today’s sticky pricing will slide, dragged down further by job losses, reduced incomes and – eventually – forced sales.

Home sales volume in Riverside will begin to stabilize from the 2020 recession around 2025, at which point ender users will return to drive up sales volume and prices. In the meantime, expect home prices to decline heading into 2023 following today’s falling sales volume.

Inventory climbs out of the hole

Chart update 08/22/22

Jul 2022 Jul 2021 Annual change
Riverside County for-sale inventory 15,300 12,700 +20%

Multiple listing service (MLS) inventory has risen from the historic low reached at the end of 2021. After two years of steep decline, for-sale inventory in Riverside averaged a significant 20% above a year earlier as of July 2022. The winter months typically see the lowest inventory of homes for sale, peaking around mid-year.

Looking forward, expect inventory to continue to climb in 2023-2024. The significant interest rate increases of 2022 have slashed buyer purchasing power, making it nigh on impossible for mortgaged homebuyers to compete. Along with high inflation, the signs are pointing to a rapidly approaching downturn in the housing market — of which homebuyers and sellers are well aware. Today’s seller’s market has fully tipped, with prices to follow heading into 2023 as inventory grows and homebuyers increasingly take a wait-and-see approach to buying.

Turnover falls


Chart update 09/08/20

2018 2017 2016
Riverside County homeowner turnover rate 8.3% 9.5% 6.7%

Riverside County renter turnover rate

17.3% 18.8%
20.3%

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 has fallen dramatically, from above 26% in 2013 to just 17.3% in 2018 (the most recently reported Census year). On the other hand, the homeowner turnover rate rose significantly in 2017 to 9.5%, its highest level since 2009. It has since fallen back slightly, to 8.3% as of 2018. Homeowner turnover is still below the level needed for a full recovery in home sales volume.

When slow job growth and wages stagnate, residents lack the confidence (and more importantly, often the financial ability) to move. When significant job losses occur, such as during the 2020 recession, turnover plummets. The turnover rate will rise when employment begins to recover consistently and wages improve sufficiently, as these increases boost confidence in the economy and reduce fears of carrying mortgage debt.

Turnover rate reports are likely to slow across the state in 2020-2022, much like they did following the 2008 recession. After this dip in economic activity, members of Gen Y who have remained employed will be more eager to rush from their apartments to buy and Baby Boomers will begin to retire in larger numbers, generally buying smaller, more convenient replacement homes after they sell. 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 08/22/22

Q2 2022
Q1 2022 Q2 2021
Riverside County homeownership 64.3% 68.8% 63.6%

Riverside County’s homeownership rate fell steeply during the last recession but has since achieved the rare status of clawing its way back to Millennium Boom levels. Riverside’s rate of homeownership hovered around 68% from 2000 through the end of the Millennium Boom. As of Q2 2022, the homeownership rate is 64.3%, down from nearly 69% in the prior quarter. This is significantly higher than the state average, which is 54.6% in Q2 2022.

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 didn’t occur until later in 2019, just in time for the economy to head into its next slump in 20202.

With the foreclosure moratorium expired in 2021 and jobless homeowners behind on their payments and headed toward a forced sale, expect the homeownership rate too gradually fall back below pre-recession levels in 2023-2024, to rise again in the following recovery.

Related article:

The Fed bumps up rates again — the undeclared recession is here

Residential construction mixed

Chart update 08/22/22

2020 2019 2018
Riverside County single family residential (SFR) starts 12,300 10,400 10,800

Riverside County multi-family starts

2,100 3,600
2,300

Residential construction starts are recovering marginally in the Riverside Metropolitan area. During the current housing cycle, multi-family starts recently peaked in 2015. Since then, multi-family starts have fluctuated each year, declining significantly in 2020.

Here, the focus on multi-family construction is far less pronounced than in regions closer to the coast, as the lower cost of land keeps SFRs within reach of more households. Meanwhile, single family residential (SFR) starts are rising gradually.

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 begin in 2024-2025, spurred by legislative efforts to increase California’s housing stock. Even then, SFR construction starts are very unlikely to return to the mortgage-driven numbers seen during the bacchanalia of the Millennium Boom.

Jobs surpass pre-recession peak

Chart update 08/22/22

Jun 2022 Jun 2021 annual change
Riverside County jobs 1,653,000 1,531,200 +8.0%

Before end users can provide sufficient support for the housing market, they need to acquire sustainable 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 at the end of 2014, barely catching up when counting population gain at the end of 2019. But the recovery from the 2020 recession has been much swifter, with Riverside one of the first major metros to achieve a jobs recovery. While the state as a whole has yet to return to pre-recession levels, as of June 2022, 46,400 more individuals are employed in Riverside compared to the December 2019 pre-recession peak.

However, watch for the chart above to waver in the coming months as the economy heads deeper into 2022’s undeclared recession. It will take another one-to-two years before a more consistent jobs recovery begins to adequately support further home price increases.

Real estate, construction slowly add workers

Chart update 08/22/22

Jun 2022 Jun 2021 annual change
Real estate 22,800 19,000 +20.0%
Construction
111,000
110,500
+1.4%

While many of Riverside’s top employing industries have yet to recover from the 2020 recession, the 2020 recession has thus far been less hard on the real estate industry in Riverside, especially compared to other parts of Southern California.

The number of employed in the construction industry is up a slight 1.4% over the past year in Riverside. At the same time, the number of individuals employed in the real estate industry was up a significant 20.0% from the previous year.

Expect the number of real estate professionals employed to see a decline in the coming years, the result of less stable sales volume and prices in 2023-2025. Construction workers will be somewhat shielded from today’s recessionary impacts, as, unlike during the lead-up to the 2008 recession, overbuilding has not been a problem in recent years. In fact, Riverside is in need of much more residential construction to keep up with demand from its rising population. State-initiated legislation will likely continue to propel construction even during the lean years ahead.

Per capita income recovers

 

Chart update 05/09/22

2020 2019 Annual change
Riverside County per capita income $45,800 $41,400 +10.6%
California per capita income $70,700 $65,300 +8.3%

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 earns just $45,800, according to the most recent Census reported year of 2020.  The statewide average income is much higher than Riverside’s. But, the annual income rise in Riverside was a significant 10.6% compared to the state average of 8.3% in 2020. However, the average resident of Riverside spends less of their income on housing expenses than those living in urban coastal cities. In fact, some of this steep income rise may be attributed to high income-earners moving to the bedroom community of Riverside in search of cheaper housing.

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. This amount is influenced by interest rates, which provided buyers a boost in 2020-2021. But as interest rates are on the rise for the foreseeable future, expect prices to feel downward pressure.

Expect per capita income to increase concurrently with increases in job numbers and the competition that brings employer demand for more employees.