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.”
Led by Southern California, state’s pending home sales trends in December.
Source: CALIFORNIA ASSOCIATION OF REALTORS®
Led by the Southern California region, California pending home sales registered gains on a month-to-month and year-to-year basis, portending a moderate increase in sales in the near term, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.
The modest sales growth is unlikely to be sustained, however, given the severe shortage of homes for sale and affordability concerns, as indicated in C.A.R.’s December Market Pulse Survey**, which saw fewer listing appointments and less open house traffic.
Based on signed contracts, statewide pending home sales increased in December on a seasonally adjusted basis, with the Pending Home Sales Index (PHSI)* rising 1.9 percent from 115.8 from December 2015 to 118.1 in December 2016 – even with new mortgage rules that pushed sales higher December a year ago.
On a monthly basis, California pending home sales were up 3.3 percent from the November index of 114.4.
Southern California saw the largest increase in pending sales last month, rising 7.8 percent on an annual basis and decreasing 16.1 percent on a monthly basis.
On the flip side, in the San Francisco Bay Area as a whole, tight housing supplies and low
affordability contributed to a fall in pending sales of 14.2 percent compared to December 2015 and 32.5 percent from November.
Overall pending sales in the Central Valley improved 0.9 percent from December 2015 and were down 18.4 percent from November.
The share of homes selling below asking price fell from 57 percent a year ago to 43 percent in December. Conversely, the share of properties selling above asking price increased to 23 percent from 18 percent in December 2015. The remaining 34 percent sold at asking price, up from 25 percent in December 2015.
For homes that sold above asking price, the premium paid over asking price rose to 11 percent, up from 8.4 percent in November and 9.2 percent a year ago.
The 43 percent of homes that sold below asking price sold for an average of 22 percent below asking price in December, double the November figure of 11 percent, and was up from 13 percent from a year ago.
California home sales register nominal annual increase in September
California existing home sales ticked up in September on a year-over-year basis for the first time in seven months as a shortage of homes available for sale continues to hold back the market, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.
Making sense of the story
Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 425,680 units in September, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide sales figure represents what would be the total number of homes sold during 2016 if sales maintained the September pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The September figure was up 1.3 percent from the revised 420,360 level in August and up 0.8 percent compared with home sales in September 2015 of a revised 422,360. Home sales remained above the 400,000 pace for the sixth straight month, and the year-over-year increase was the first since January.
“While higher sales both on a monthly and an annual basis is a glimmer of good news, with most of the home-buying season behind us for 2016, it’s not enough to tip the scales for an increase above 2015’s sales pace,” said C.A.R. President Pat “Ziggy” Zicarelli. “With listings continuing to decline and demand still strong, especially at the lower end of the market, affordability will remain a challenge for would-be buyers.”
The statewide median price remained above the $500,000 mark for the sixth straight month, with minimal signs of cooling down outside of a few select markets. The median price of an existing, single-family detached California home was down 2.3 percent in September to $514,320 from $526,580 in August. September’s median price increased 6.1 percent from the revised $484,670 recorded in September 2015. The median sales price is the point at which half of homes sold for more and half sold for less; it is influenced by the types of homes selling, as well as a general change in values. The monthly price decline is primarily due to seasonal factors.
As the Housing Recovery Strengthens, Affordability and Other
Challenges Remain: Harvard Study
The national housing market has now regained enough momentum to provide an engine of growth for the US economy, according to The State of the Nation’s Housing report released this week by Harvard’s Joint Center for Housing Studies. However, several obstacles continue to hamper the housing recovery—in particular, the lingering pressures on homeownership, the eroding affordability of rental housing, and the growing concentration of poverty.
Making sense of the story
On the renter side, the number of cost-burdened households rose by 3.6 million from 2008 to 2014, to 21.3 million. Even more troubling, the number with severe burdens (paying more than 50 percent of income for housing) jumped by 2.1 million to a record 11.4 million.
The national homeownership rate has been on an unprecedented 10-year downtrend, sliding to just 63.7 percent in 2015. Tight mortgage credit, the decade-long falloff in incomes that is only now ending, and a limited supply of homes for sale are all keeping households—especially first-time buyers—on the sidelines.
The report finds that income inequality increased over the past decade, with households earning under $25,000 accounting for nearly 45 percent of the net growth in US households in 2005–2015.
The report finds that rent burdens are increasingly common among moderate-income households, especially in the nation’s 10 highest-cost housing markets, where three-quarters of renters earning $30,000–45,000 and half of those earning $45,000–75,000 paid at least 30 percent of their incomes for housing in 2014.
Federal assistance reaches only a quarter of those who qualify, leaving nearly 14 million
households to find housing in the private market where low-cost units are increasingly scarce.
Low-income households with cost burdens face higher rates of housing instability, more often settle for poor-quality housing, and have to sacrifice other needs—including basic nutrition, health, and safety—to pay for their housing.
The report notes that a lack of a strong federal response to the affordability crisis has left state and local governments struggling to expand rental assistance and promote construction of affordable housing in areas with access to better educational and employment opportunities.