California Market Update

    California’s housing marketfalters for fourth straight month as high home prices take toll on demand,C.A.R. reports

- Existing, single-family homesales totaled 399,600 in August on a seasonally adjusted annualized rate, down1.8 percent from July and down 6.6 percent from August 2017.

- August’s statewidemedian home price was $596,410, up 0.8 percent from July and up 5.5 percentfrom August 2017.

- Statewide activelistings rose for the fifth consecutive month, increasing 17.2 percent from theprevious year.

LOS ANGELES (Sept. 17) –California’s housing market dropped below the 400,000-level sales benchmark forthe first time in more than two years as high home prices and erodingaffordability combined to cut into housing demand, the CALIFORNIA ASSOCIATION OF REALTORS^® (C.A.R.)saidtoday.  

Closed escrow sales ofexisting, single-family detached homes in California totaled a seasonallyadjusted annualized rate of 399,600 units in August, according to informationcollected by C.A.R. from more than 90 local REALTOR^® associations and MLSsstatewide. The statewide annualized sales figure represents what would be thetotal number of homes sold during 2018 if sales maintained the August pacethroughout the year. It is adjusted to account for seasonal factors thattypically influence home sales.

August’s sales figure was down1.8 percent from the revised 406,920 level in July and down 6.6 percentcompared with home sales in August 2017 of 427,630.

“Home sales activity remainedon a downward trend for the fourth straight month as uncertainty about thehousing market continues to mount,” said C.A.R. President SteveWhite. “Buyers are being cautious and reluctant to make a commitment asthey are concerned that home prices may have peaked and instead are waitinguntil there’s more clarity in the market.”

The statewide median home priceedged up to $596,410 in August. The August statewide median price was up 0.8percent from $591,460 in July and up 5.5 percent from a revised $565,320 inAugust 2017.

“While home prices continued torise modestly in August, the deceleration in price growth and the surge inhousing supply suggest that a market shift is underway,” said C.A.R. SeniorVice President and Chief Economist Leslie Appleton-Young. “We are seeingactive listings increasing and more price reductions in the market, and assuch, the question remains, ‘How long will it take for the market to close theprice expectation gap between buyers and sellers?’”

Other key points from C.A.R.’sAugust 2018 resale housing report include:

·         On aregionwide, non-seasonally adjusted basis, the Southern California region ledthe state’s sales decline, falling 8.0 percent from a year ago. San Diegoexperienced a double-digit decline of 10.4 percent, while Orange and LosAngeles counties posted smaller declines of 9.7 percent and 8.9 percent,respectively.

·         Salesin the Bay Area inched up 0.3 percent from July and declined 6.5 percent fromAugust 2017. While Marin and Napa counties posted significant gains, they makeup a small percentage of the region’s overall sales. Every other Bay Areacounty experienced a sales decline with San Mateo performing relatively betterthan the others, recording a modest 1.8 percent annual decline. San FranciscoCounty saw a double-digit sales drop, and sales in Santa Clara County decreased8.2 percent. Sales in Contra Costa County were down by more than 10 percent inAugust, while Solano and Sonoma fell by 8.9 percent and 7.7 percent,respectively.

·         Salesin the Inland Empire were down 5.6 percent from a year ago, with Riverside andSan Bernardino counties recording an annual sales decline of 6.6 percent and4.3 percent, respectively.

·         AlthoughKern and Merced counties posted annual sales gains slightly better than 10percent, sales for the Central Valley Region as a whole were down 5.5 percentfrom a year ago. Every other county of the region was flat or down from a yearago.

·         The BayArea continues to see prices climb ever-higher with many markets experiencingdouble-digit growth in closed-sale prices. However, this may be a reflection ofthe fact that most of the growth in transactions has come from the top end ofthe market, which could cause larger swings in the median price. Alameda, Napa,San Francisco, Santa Clara, and Solano counties all recorded double-digit,year-over-year price gains.

·         Home prices in SouthernCalifornia also rose even as sales faltered. That home prices continue to risemodestly suggests that demand has not eroded completely, rather it has eased slightly.Every county in the region recorded price growth from a year ago.

·         Statewideactive listings rose for the fifth consecutive month after 33 straight monthsof declines, increasing 17.2 percent from the previous year. August’s listingsincrease was the biggest in nearly four years.

·         Much of the listings increaseis attributable to lower-priced properties. The number of homes available forsale and priced below $750,000 grew more than twice as much as homes pricedabove that price level.

·         The unsold inventory index, whichis a ratio of inventory over sales, rose again in August from 2.9 months fromAugust 2017 to 3.3 months in August 2018. The index measures the number ofmonths it would take to sell the supply of homes on the market at the currentsales rate.

·         The median number of days ittook to sell a California single-family home ticked up from 18 days in August2017 to 21 days in August 2018.

·         C.A.R.’s statewide salesprice-to-list price ratio* was essentially flat from a year ago at 99.5 days inAugust 2017 compared with 99.0 percent in August 2018. At the other end of thespectrum, the sales price-to-list price ratio in nearly every county of the BayArea exceeded 100 percent, indicating a tight supply of available homes forsale.

·         Theaverage statewide price per square foot** for an existing, single-family homestatewide was $283 in August, up from $268 in August 2017.

·         The30-year, fixed-mortgage interest rates averaged 4.55 percent in August, up from3.88 percent in August 2017, according to Freddie Mac. The five-year,adjustable mortgage interest rate also increased in August to an average of3.87 percent from 3.15 from August 2017.

Note:  The County MLSmedian price and sales data in the tables are generated from a survey of morethan 90 associations of REALTORS® throughout the state and represent statisticsof existing single-family detached homes only. County sales data are notadjusted to account for seasonal factors that can influence home sales. Movements in sales prices should not be interpreted as changes in the cost of astandard home.  The median price is where half sold for more and half soldfor less; medians are more typical than average prices, which are skewed by arelatively small share of transactions at either the lower-end or theupper-end. Median prices can be influenced by changes in cost, as well aschanges in the characteristics and the size of homes sold.  The change inmedian prices should not be construed as actual price changes in specific homes.

*Sales-to-list price ratio isan indicator that reflects the negotiation power of home buyers and homesellers under current market conditions. The ratio is calculated by dividingthe final sales price of a property by its last list price and is expressed asa percentage.  A sales-to-list ratio with 100 percent or above suggeststhat the property sold for more than the list price, and a ratio below 100percent indicates that the price sold below the asking price.

**Price per square foot is a measure commonly used by real estate agents and brokers to determine how much a square foot of space a buyer will pay for a property.  It is calculated as the sale price of the home divided by the number of finished square feet. C.A.R. currently tracks price-per-square foot statistics for 50 counties.