Despite robust closed escrow sales in June, California pending home sales slipped for the sixth consecutive month, suggesting an impending slowdown in the state’s housing market as the peak homebuying season winds down, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.
With increasing concerns over shrinking housing inventory and suppressed housing affordability, REALTORS® remained cautious in June, C.A.R.’s latest Market Pulse Survey** found. REALTORS® reported fewer floor calls and listing appointments but higher open house traffic than in May.
Pending home sales data:
Based on signed contracts, year-over-year statewide pending home sales fell for the sixth straight month in June on a seasonally adjusted basis, with the Pending Home Sales Index (PHSI)* declining 0.9 percent from 119.0 in June 2016 to 117.9 in June 2017. California pending home sales also slipped on a monthly basis, decreasing 0.6 percent from the May index of 118.7.
Pending home sales have declined every month so far this year, however, the pace of decline has slowed in recent months. But with additional headwinds of housing inventory that declined further last month as closed sales rose, and a double-digit drop in active listings, the state’s housing market could be negatively impacted in the coming months.
Pending sales in the Southern California Region continued their upward trend in June and posted a 2.5 percent improvement from the previous year, as San Bernardino County and Orange County saw healthy bumps of 10.3 percent and 8.3 percent, respectively. Pending sales in San Diego (-3.6 percent), Riverside (-6.9 percent), and Los Angeles (-1.7 percent) counties declined from last June.
The Central Valley also posted a healthy pending sales gain in June, rising 5.2 percent from a year ago. Kern County saw its first significant increase (5.7 percent) in pending sales for the year after battling with the after-effects of precipitous declines in the energy markets. The San Francisco Bay Area experienced a dip in pending sales in June, nudging down 0.6 percent on an annual basis. San Francisco County reversed last month’s double-digit pending sales decline and rose 22.2 percent, while San Mateo and Santa Clara counties posted pending sales decreases of 10.1 percent and 0.4 percent, respectively as inventories remained extremely low and median prices exceeded $1 million.
In C.A.R.’s newest market indicator of future price appreciation, Market Velocity Index – home sales relative to the number of new listings coming on line each month to replenish that sold inventory – indicates that price growth will continue to accelerate, potentially back into double-digit territory, as it reached its highest level since 2013. At an index of 71.0, there were far more home sales than new listings to restock statewide inventory, leading to a deterioration in the number of active listings. With demand still running high, the elevated pace of home sales will likely persist through the fall.
Year-to-Year Change in Pending Sales by County/Region
June REALTOR® Market Pulse Survey**:
Entering the summer months, the housing market is showing signs of slowing as REALTORS® begin to grow cautious about dwindling inventory and curbed affordability.
The share of homes selling above asking price rose from 35 percent a year ago to 39 percent in June, while the share of properties selling below asking price fell from 28 percent to 25 percent. The remaining 36 percent sold at asking price, down from 37 percent in June 2016.
For homes that sold above asking price, the premium paid over asking price fell from 11 percent in June 2016 to 7 percent in June 2017, the lowest since February 2014.
The 36 percent of homes that sold below asking price sold for an average of 10 percent below asking price in June, compared to 11 percent a year ago.
Nearly three-quarters (74 percent) of properties sold in June received multiple offers, up from 72 percent in June 2016, and the number of offers received inched up from 3 offers in June 2016 to 3.5 offers this June.
The share of properties receiving three or more offers in June was 55 percent, compared to 47 percent a year ago.
Homes priced under $200,000, $400,000-$499,000, and $2 million and higher posted the greatest gains in receiving three or more offers compared with last year, rising from 23 percent to 39 percent, from 46 percent to 61 percent, and from 29 percent to 83 percent, respectively.
Listing price reductions rose from 22 percent a year ago to 24 percent in June.
A lack of available inventory remained at the top of the list of concerns for REALTORS®, with 38 percent indicating it as their biggest concern. Declining housing affordability/high interest rates concerned 29 percent of REALTORS®, while inflated home prices/housing bubble was cited by 23 percent of REALTORS®. A slowdown in economic growth, lending and financing, and policy and regulations rounded out REALTORS®’ remaining biggest concerns.
While still in positive territory at an index of 52, REALTORS®’ expectations of market conditions over the next year has been on the decline since the beginning of this year.
Graphics (click links to open):
YTY change in pending home sales by region.
Pending sales vs. closed escrow sales.
Fewer properties selling over asking price.
Multiple offers increase.
Price range of homes receiving 3+ offers.
Market Velocity – indicator of future price appreciation.
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* Note: C.A.R.’s pending sales information is generated from a survey of more than 70 associations of REALTORS® and MLSs throughout the state. Pending home sales are forward-looking indicators of future home sales activity, offering solid information on future changes in the direction of the market. A sale is listed as pending after a seller has accepted a sales contract on a property. The majority of pending home sales usually become closed sales transactions one to two months later. The year 2008 was used as the benchmark for the Pending Homes Sales Index. An index of 100 is equal to the average level of contract activity during 2008.
** C.A.R.’s Market Pulse Survey is a monthly online survey sent to more than 10,000 California REALTORS® to measure data about their last closed transaction and sentiment about business activity in their market area for the previous month. More than 400 REALTORS® responded.
Leading the way…® in California real estate for more than 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than 190,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
SOURCE CALIFORNIA ASSOCIATION OF REALTORS