July 5, 2017 - LOS ANGELES – Even with a strong performance in May closed escrow sales, California pending home sales fell for the fifth consecutive month, suggesting the state’s housing market may underperform over the next few months, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said last week.
Along with the decline in pending sales, REALTORS® are more cautious due to their growing concern over supply and affordability issues, C.A.R.’s May Market Pulse Survey** found. REALTORS® also saw fewer floor calls, and less open house traffic than in April.
Pending home sales data:
• Based on signed contracts, year-over-year statewide pending home sales fell for the fifth straight month in May on a seasonally adjusted basis, with the Pending Home Sales Index (PHSI)* declining 3.9 percent from 123.0 in May 2016 to 118.1 in May 2017. On a monthly basis, California pending home sales increased 3.9 percent from the April index of 113.7.
• Despite a bounce back in May closed escrow sales, the downward trend in pending sales suggests the housing market may underperform over the next few months. With interest rates expected to rise in the second half of the year, the sales momentum could slow further or even shift in the third and fourth quarters.
• The Southern California Region reversed a three-month decline and posted a 1.3 percent improvement in pending sales from the previous year, aided largely by healthy gains in Orange and Riverside counties, which marked increases of 12.5 percent and 8.4 percent, respectively. Pending sales in San Diego, San Bernardino, and Los Angeles counties declined from last May, but those counties had drops of less than 5 percent.
• The Central Valley also posted a slight gain in May, increasing 2.1 percent. With many counties in the region falling behind last year, pending sales in the region as a whole would have declined year over year if not for solid sales in Fresno, which increased a robust 28.6 percent from last May. Kern County saw pending sales slip by 2.9 percent from May 2016.
• On the flip side of the coin, the San Francisco Bay Area experienced a decline in pending sales in May, falling 5.5 percent on an annual basis. Pending sales in San Francisco County declined the most at 10.8 percent, and San Mateo and Santa Clara counties posted pending sales decreases of 0.7 percent and 2.4 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 – home sales relative to the number of new listings coming on line each month to replenish that sold inventory – continued its upward momentum in May, suggesting that home prices should grow further in the upcoming months. Solid demand motivated by low interest rates, coupled with tight supply, put upward pressure on prices in the last few months as the home buying season remained competitive. The statewide median price should remain near its recent high until late summer or early fall. Market Velocity is strongly correlated with increases/decreases in price growth with a roughly three- to six-month lag time.
Year-to-Year Change in Pending Sales by County/Region
|County/Region/State||May-17||May-16||Yearly % Change|
|SF Bay Area||168.1||177.9||-5.5%|
May REALTOR® Market Pulse Survey**:
Market conditions remained positive, but REALTOR® expectations are beginning to decline. While fewer properties sold above asking price, the market remained competitive as multiple offers inched up from last month and from last year.
• The share of homes selling above asking price was down from 38 percent a year ago to 35 percent in May, while the share of properties selling below asking price was unchanged at 34 percent. The remaining 31 percent sold at asking price, up from 27 percent in May 2016.
• For homes that sold above asking price, the premium paid over asking price rose from 9 percent in May 2016 to 11 percent in May 2017.
• The 34 percent of homes that sold below asking price sold for an average of 18 percent below asking price in May, compared to 10 percent a year ago.
• Seventy percent of properties sold in May received multiple offers, up from 68 percent in May 2016.
• The share of properties receiving three or more offers in May was 44 percent, compared to 46 percent a year ago.
• Homes priced $400,000-$499,000 and $750,000-$999,000 posted the greatest gains in receiving three or more offers compared with last year, rising from 41 percent to 59 percent, and from 50 percent to 60 percent, respectively.
• Listing price reductions fell from 23 percent in May 2016 to 16 percent in May.
• A lack of available inventory continued to be at the top of the list of concerns for REALTORS®, with 41 percent indicating it as their biggest concern. Declining housing affordability/high interest rates concerned 23 percent of REALTORS®, while inflated home prices/housing bubble was cited by 21 percent of REALTORS®. A slowdown in economic growth, lending and financing, and policy and regulations rounded out REALTORS®’ remaining biggest concerns.
• REALTORS®’ expectations of market conditions over the next year remained positive at an index of 58, up from an index of 54 a year ago.
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.
*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.