California Housing Market Returns to Normalcy in Late 2014

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According to the California Association of Realtor (C.A.R.), California's regional housing markets ended the year with mixed results as statewide home sales inched up from a year ago for the first time in nearly 18 months.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 366,000 units in December, according to information collected by C.A.R.  Sales in December were down 2.9 percent from a revised 376,890 in November but up a slight 0.6 percent from a revised 363,740 in December 2013.  The negligible year-to-year increase was the first since July 2013.  The statewide sales figure represents what would be the total number of homes sold during 2014 if sales maintained the December pace throughout the year.  It is adjusted to account for seasonal factors that typically influence home sales.

For 2014 as a whole, a preliminary 383,320 single-family homes closed escrow in California, down 7.6 percent from a revised 2013 figure of 414,900.

"Home sales were down on a statewide basis, with pockets of gains in sales activity, especially in Southern California and the Central Valley, where home sales were higher than the prior month and year," said 2015 C.A.R. President Chris Kutzkey.  "Not so for the San Francisco Bay Area, which saw run-ups in sales and prices throughout the year.  This market has tempered from its earlier frenzied pace mostly due to extremely tight inventory."

Reversing a three-month decline, the median price of an existing, single-family detached California home increased 1.7 percent from November's median price of $444,830 to $452,570 in December and was up 3.1 percent from the revised $438,790 recorded in December 2013.  The statewide median home price has been higher on a year-over-year basis for more than two years, but price gains have narrowed over the past few months. 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.

"2014 saw a return to a near normal housing market, with sales moving at a moderate pace and home price appreciation growing at more sustainable levels," said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  "Home prices have stabilized over the past year, which is positive news for buyers who have been putting off their home search until prices leveled off.  And with recent news of an improvement in the job market and the lowest interest rates in a year and a half, buyers may be resuming their home search."

Other key facts from C.A.R.'s December 2014 resale housing report include:

• Housing inventory tightened in December, with the available supply of existing, single-family detached homes for sale dropping from 4.4 months in November to 3.3 months in December. The index was 3 months in December 2013.  The index indicates the number of months needed to sell the supply of homes on the market at the current sales rate.  A six- to seven-month supply is considered typical in a normal market.

• The median number of days it took to sell a single-family home lengthened in December, up from 43.9 days in November to 47.3 days in December and from 40.4 days in December 2013.

• According to C.A.R.'s newest housing market indicator measuring sales-to-list price ratio, multiple bid offers for properties has waned, and properties are again generally selling below the list price.  The statewide measure suggests that homes are selling at 97 percent of the list price, down from a ratio of 98.1 percent at the same time last year. The Bay Area is the only region where homes are selling above list prices and are generally selling about 0.6 percent more than the asking price.

• The average California price per square foot for an existing single-family home was $210 in December 2014, a decrease of 1.3 percent from the previous month, but a 4.9 percent increase from December 2013.  Price per square foot at the state level has been showing an upward trend since early 2012, and has been rising on a year-over-year basis for 35 consecutive months.  It seems to have reached a plateau in recent months and has been leveling off at around $215 for existing single-family homes.  San Mateo County had the highest price per square foot in December with $667/sq. ft., followed by Santa Clara ($500/sq. ft.), and Santa Cruz ($409/sq. ft.).  The three counties with the lowest price per square foot in December were Siskiyou ($93/sq. ft.), Kings ($113/sq. ft.), and Merced ($114/sq. ft.).

• Mortgage rates fell again in December, with the 30-year, fixed-mortgage interest rate averaging 3.86 percent, down from 4 percent in November and down from 4.46 percent in December 2013, according to Freddie Mac.  The December 2014 average 30-year fixed rate was the lowest since May 2013, just before the Federal Reserve announced its intention to taper the bond buying program.  Adjustable-mortgage interest rates also dipped in December, averaging 2.40 percent, down from 2.44 percent in November and down from 2.56 percent in December 2013.