California Home Sales Stumble in July, Affordability Crunch Dents Market
According to the California Association of Realtors, California statewide home sales stumbled in July 2016 as low inventories and eroding affordability dragged down the housing market. Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 415,840 units in July.
The July figure was down 4.1 percent from the revised 433,600 level in June and down 5.1 percent compared with home sales in July 2015 of a revised 438,230. Home sales remained above the 400,000 pace for the fourth straight month, but sales have declined year over year for the fifth consecutive month.
"Despite the tight housing supply conditions that have persisted over the past few years, home sales have stayed relatively solid," said C.A.R. President Pat "Ziggy" Zicarelli. "Even with a shortage of homes on the market, low rates and strong demand have been the norm. Some regions, such as the Bay Area, are seeing an uptick in inventory as high prices are motivating sellers to list their properties for sale. While this could ease the inventory somewhat, supply remains tight, and low affordability is expected to be an issue in the short term."
The statewide median price remained above the $500,000 mark for the fourth straight month, but there are signs of an expected slowing in price growth. The median price of an existing, single-family detached California home slipped 1.8 percent in July to $509,830 from $519,410 in June. July's median price increased 3.9 percent from the revised $490,780 recorded in July 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. More homes being sold at the high end of the market (over $1 million) and slightly fewer sales at the lower end (under $300,000) contributed to the year-over-year gain in the median price.
"California's median home price rose again in July from last year, but the pace of increase has clearly slowed down in recent months," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. "While fundamentals such as increasing household formation and strong job creation continue to fuel housing demand and support price growth, low housing affordability and reduced buying power of home buyers has put a cap on how fast the statewide median price can grow."Other key points from C.A.R.'s July 2016 resale housing report include:
- C.A.R.'s Unsold Inventory Index, which indicates the number of months needed to sell the supply of homes on the market at the current sales rate, inched up to 3.6 months in July from 3.2 months in June. The index stood at 3.3 months in July2015.
- The Bay Area region continued to see an increase in inventory, with all counties except Solano and Sonoma seeing an increase from the previous year. Active listings in Los Angeles, the Inland Empire, San Diego, and the Central Valley declined compared to July 2015.
- The median number of days it took to sell a single-family home edged up slightly in July to 28 days, compared with 27.1days in June and 29 days in July 2015.
- C.A.R.'s sales-to-list price ratio* dipped in July, with sales prices slightly decreasing to 99.2 percent of listing prices statewide in July from 99.6 percent in June and 99.1 percent in July 2015.
- The average price per square foot** for an existing, single-family home statewide was $247 in July 2016, down from $248 in June but up from $241 in July 2015.
- San Francisco County had the highest price per square foot in July at $824/sq. ft., followed by San Mateo ($788/sq. ft.), and Marin ($606/sq. ft.). Counties with the lowest price per square foot in July include Madera ($127/sq. ft.), Tulare ($128/sq. ft.), and Siskiyou ($131/sq. ft.).
- Mortgage rates are expected to remain low in the foreseeable future due to global economic uncertainty. Mortgage rates declined in July, with the 30-year, fixed-mortgage interest rate averaging 3.44 percent, compared with 3.57 percent in June and 4.05 percent in July 2015, according to Freddie Mac. Adjustable-rate mortgage interest rates slipped in July to an average of 2.75 percent, a decline from 2.78 percent in June and 2.96 percent in July 2015.
Source: California Association of Realtors