Riverside is the fourth most populous county in California with over 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.

But the 2008 recession left the region with deep losses in home sales volume, construction starts and employment. Riverside’s economy has remained in a state of prolonged recovery during the past decade, slowly gaining momentum as lost jobs are regained. Employment finally exceeded the number of jobs prior to the Great Recession at the end of 2014, barely catching up with the intervening population gain between 2007 and today before the 2020 recession hit and more jobs were lost.

Local sales agents can expect sales volume to decline as we head deeper into the ongoing recession. Historically low interest rates and a shortage of sellers willing to list have thus far inflated home prices. But steep job losses resulting from the global pandemic response and 2020 recession have meant many homeowners – estimated at over 5% of mortgaged homeowners – are now delinquent on their mortgages. When the foreclosure moratorium expires going into 2021, expect to see a jump in distressed sales, saturating the market and bringing down home prices. As with other economic activity, look for the next recovery to ripple out from the coasts, beginning for Riverside around 2024.

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

Updated March 3, 2021. Original copy posted March 2013.

Home sales volume turns up, despite recession

Chart update 03/03/21

2020 2019 2005: Peak Year
Riverside County home sales volume 43,200 41,800 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 has remained mostly level in the years since 2011. The exception was 2014, when the area was hit particularly hard by the rapid exit of speculators, sales volume ending the year 9% below the prior year. Riverside recovered from that exodus in 2015, when sales numbers rebounded to 11% above 2014. Flash forward to 2019 and a true recovery still has not materialized, as annual sales volume continues to plod along. 2019 finished the year with home sales volume a meager 1% above 2018. In 2020, total year-to-date (YTD) sales volume was 3.3% above 2019, despite a steep downturn in the first half of the year.

As the housing market continues to adjust to the ongoing recession and COVID-19 social distancing measures, some are pointing to still-high prices as evidence of a recession-proof market. But today’s prices have thus far been inflated by historically low mortgage interest rates, which have provided a boost to buyer purchasing power. Once buyers and sellers realize interest rates have crept higher, today’s sticky pricing will slide, dragged down further by job losses, reduced incomes and – once the foreclosure moratorium is lifted later in 2021 – distressed sales.

Home sales volume in Riverside will begin to recover from the 2020 recession around 2023-2024, at which point first-time Gen Y and Gen Z homebuyers and Baby Boomer retirees will converge to drive up sales volume and prices. In the meantime, expect home sales volume to taper off and prices to follow in 2021.

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%

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 rates 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 03/03/21

Q4 2020
Q3 2020 Q4 2019
Riverside County homeownership 65.8% 67.6% 66.3%

Riverside County’s homeownership rate fell steeply during the last recession but has since clawed its way back to just below Millennium Boom levels. Riverside’s rate of homeownership hovered around 68% from 2000 through the end of the Millennium Boom. As of Q4 2020, the homeownership rate is just below 66%. This is significantly higher than the state average, which is over 55.6% in Q4 2020.

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 didn’t occur until later in 2019, just in time for the economy to head into its next slump. When the foreclosure moratorium expires and jobless homeowners behind on their payments begin to head toward foreclosure, the homeownership rate will gradually fall back below pre-recession levels in 2022-2023, to rise in the following recovery.

Residential construction mixed

Chart update 03/03/21

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

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 2023-2024 due to 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 are picking up

Chart update 03/03/21

Dec 2020 Dec 2019 annual change
Riverside County jobs 1,459,600 1,571,100 -7.1%

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. As of December 2020, 111,500 fewer individuals are employed than at the December 2019 peak. Further, jobs are 7.1% lower than a year earlier. Expect the chart above to waver in the coming months as the economy continues to react to the novel coronavirus (COVID-19) and the underlying 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 03/03/21

Dec 2020 Dec 2019 annual change
Real estate 20,300 19,400 +4.6%

While many of Riverside’s top employing industries have yet to recover from the 2008 recession, the 2020 recession has thus far been less hard on these industries in Riverside, especially compared to other parts of Southern California.

The number of employed in the construction industry is down 3.2% over the past year in Riverside. However, the number of individuals employed in the real estate industry was 4.6% higher than the previous year.

Expect the number of real estate professionals employed to see a decline in the coming years, the result of decreased sales volume and prices in 2021-2022. 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 points to a continued slow recovery

Chart update 03/03/20

2018 2017 Annual change
Riverside County per capita income $40,600 $39,000 +4.3%
California per capita income $67,000 $63,900 +4.9%

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 $40,600, according to the most recent Census reported year of 2017.  The statewide average income is much higher than Riverside’s. Worse, the annual income rise in Riverside was less than the state average in 2018. However, the average resident of Riverside spends less of their income on housing expenses than those living in urban coastal cities.

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 concurrently with increases in job numbers and the competition that brings employer demand for more employees.