California’s housing market has been performing better than expected for well over six consecutive months and this April, the state saw home prices hit a 7-year high, according to the California Association of Realtors (CAR). Both the median home price and home sales increased month on month.
Closed escrow sales of existing, single-family detached homes totalled 394, 070 in April, the seasonally adjusted annualized rate, said CAR. That’s the figure that represents the total number of homes that would be sold in 2014 if sales throughout the year continue at April’s level, and adjusted to take account of seasonal factors that typically influence home sales.
The picture isn’t as simple as it looks at first.
April’s price was 11.6% higher than April 2013’s and April was the second consecutive month to see both year-on-year and month-on-month house price rises, while the statewide median price has risen year on year for the last 26 months.
Meanwhile, sales have risen month on month – but they’ve fallen hard year-on-year, while prices ride high. April’s sales were up 7.4% from March’s 367, 020, but they’re down 7% from April 2013.
The median number of days it took to sell a single-family home fell to 33.8 days in April, a fall from the 35 days it took in March, but up from 27.9 days in April 2013.
‘With home prices increasing by double digits in 2013, many investors have decided to leave the market which is adversely affecting home sales as a whole,’ said CAR’s president, Kevin Brown. ‘While the number of homes sold continued to decline form a year ago, the better-than-normal surge in sales activities in April is encouraging and could be an indication that we will see further improvements in the housing market in the next few months.’
Statewide, the median price of an existing single-family detached house rose 3.2% to $449, 360 in April compared with March, reaching its highest level since December 2007, pre-crash.
Various factors can affect median sales price – the ‘halfway point’ in the house price continuum, at which half of houses sold for more and half for less. Types of homes can make a difference as well as a general shift in the market. However, an effect as prolonged and large as this is likely to be a real shift in the market.
The effects of housing inventory and mortgage rates should also be factored in. Housing inventory remained relatively tight in April, with an Unsold Inventory (UI) index of 3.5, down from March’s 4 but up from April 2013’s 2.8. The UI measures how many months it would take to sell all the homes on the market at the current rate of sales. April’s mortgage rate remained flat, with minor variation form march but up 0.89% from the previous year, according to Freddie Mac.
‘Looking forward, it is likely that we will see a more moderate level of price increase throughout the rest of the year, and further improvements in sales in the spring home buying season,’ said Leslie Appleton-Young, CAR’s vice president and chief economist. ‘Increasing home prices, relatively higher interest rates, and tight lending standards, however, will continue to present affordability issues. Primary home buyers may no longer have to compete with investors in 2014, but instead they need to worry about increased borrowing costs.’