The California Association of Realtors (CAR) has released data showing that the majority of sales in California are by voluntary, rather than distressed, vendors. The organisation said higher home values had continued to fuel more equity sales, which have stayed above 80% of closings for the past 11 months. However, pending home sales fell in May as investors pulled out of a market characterised by rising prices.
While the market in California has been getting healthier for a long time, the rise in May to 89% of closings saw equity sales up 12% on May 2013 after 22 straight months of increase.
At the same time, though, home sales as a whole actually fell slightly, according to the CAR. It’s probable that the reduction in results from investors reducing exposure to a market with rising prices. The median house price was up in May 2014 both month-on-month and year-on-year for the third consecutive month, and is higher now than it was in 2007. The picture is complicated by the fact that while sales as a whole fell, sales of already-existing homes rose, by 4.9% month-on-month. That’s a jump to 4.89 million sales, beating out experts’ predictions of a rise to 4.75 million and hitting the highest number since August 2011.
The figures seem to be revealing a market rich in vendors but relatively poor in developers, where housing building has slowed and a supply squeeze has begun to nip sales growth. As a result, there are buyers, but few investors. Steve Brown, of the National Association of Realtors, said, ‘the temporary pause in rising interest rates and more homes for sale is good news, especially for first-time buyers.’
This rising price trend has put pressure on sales. The statewide price has risen year-on-year for the last 27 months and there have been 23 straight months of double-digit annual gains; ‘prices are still nearly 12% higher than a year ago, which is presenting affordability challenges to homebuyers,’ explains Lesley Appleton-Young, CAR Vice President and Chief Economist.
The other squeeze on California’s housing sales is undersupply. Great news for vendors and a sweet sound to the ears of owners who have struggled with negative equity prior to being pushed back above water by a contracting market, it’s not great news for the market as a whole. As Ms. Appleton-Young says, ‘though housing inventory is up from last year, it’s still half of what is considered normal, with some of it being overprices. A tempering in home prices and the recent drop in mortgage rates, however, should help spark the market in the upcoming months.’
The LA times reported that economists predicted that the slowdown in price growth, coupled with cooling sales in some areas, ‘doesn’t foreshadow a decline in values, but signals more sustainable growth.’