California pending home sales dip slightly in January; Southern California market continues to outshine other regions
Following relatively strong closed escrow home sales over the past few months, California
pending home sales slipped negligibly from a year ago, which suggests a softening in the
housing market in the upcoming months, the CALIFORNIA ASSOCIATION OF REALTORS®
Making sense of the story
Based on signed contracts, statewide pending home sales decreased in January on a
seasonally adjusted basis, with the Pending Home Sales Index (PHSI)* slipping 0.2
percent from 107.4 from January 2016 to 107.2 in January 2017. On a monthly basis,
California pending home sales were down 9.2 percent from the December index of 118.0.
Only the Southern California region posted a year-over-year improvement in pending sales last month, rising 8.1 percent from January 2016 and increasing 10.5 percent on a
monthly basis. Riverside County led the region in pending sales, posting a 16.2 percent
increase from a year ago. Los Angeles, Orange, and San Diego counties also posted
modest year-over-year increases of 7.1 percent, 8.0, and 4.0 percent, respectively. San
Bernardino County was the only area within Southern California that saw pending sales
lower on an annual basis by 2.8 percent.
For the San Francisco Bay Area as a whole, tight housing supplies and low affordability
contributed to a fall in pending sales of 9.7 percent compared to January 2016. Only San
Mateo County posted an annual increase, rising 5.3 percent from January 2016 after
posting a significant double-digit annual decline (35.3 percent) in December. Pending
home sales decreased 21.2 percent in San Francisco County, 7.1 percent in Santa Clara
County, 24.9 percent in Monterey, and 4.8 percent in Santa Cruz County. A shortage of
homes on the market and poor affordability will likely persist throughout the year, and
impact Bay Area home sales.
Pending sales in the Central Valley fell 7.9 percent from January 2016 and were up 2.2
percent from December. Within Central Valley, pending sales were down 14.6 percent in
Kern County and 11.8 percent in Sacramento compared with a year ago.
Higher wages and seasonal price declines affect California housing affordability.
• “Thirty-one percent of California households could afford to purchase the $511,360 median-priced home in the fourth quarter, unchanged from third-quarter 2016 and up from 30 percent in fourth-quarter 2015.” (“4th Qtr 2016 Housing Affordability”. CAR.org. 9 Feb 2017)
• “A minimum annual income of $100,800 was needed to make monthly payments of $2,520, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 3.91 percent interest rate.”