California pending home sales drop to lowest level in 6 months
November 27, 2017
California pending home sales shrank for the fourth consecutive month in October to post the lowest level in six months, the California Association of Realtors (CAR) recently announced.
Even with the homebuying season winding down, Realtors reported slight increases in floor calls, open house traffic and listing appointments/client presentations compared with a year ago, CAR's October Market Pulse Survey found.
Pending home sales data
Based on signed contracts, year-over-year statewide pending home sales dropped in October on a seasonally adjusted basis, with the Pending Home Sales Index (PHSI) declining 2.6 percent from 119.1 in October 2016 to 116.0 in October 2017. California pending home sales were also down on a monthly basis, decreasing 3.3 percent from the September index of 120.0.
Pending home sales have declined on an annual basis for nine of the last 10 months so far this year. After a solid run-up of closed sales in May, June and September, a continued scarcity of housing inventory, which drove up home prices, may squeeze the market heading into the closing months of the year.
At the regional level, the Central Valley Region recorded an increase in pending sales from the previous year. Within Central Valley, pending sales dipped 0.8 percent in Kern County and fell 6.6 percent in Sacramento County compared to a year ago.
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The San Francisco Bay Area experienced the largest drop in pending sales, falling 10.5 percent from October 2016. San Mateo, Santa Clara and Monterey counties were all down by 10.9 percent, 21.4 percent, and 3.2 percent, respectively. San Francisco County was the anomaly with pending sales rising 15.1 percent from a year ago.
Pending home sales were down 7.3 percent from October 2016 in Southern California. Los Angeles and Orange counties registered lower annual pending sales of 4.7 percent and 4.9 percent, respectively. Double-digit, annual pending sales drops occurred in Riverside (14.0 percent), San Diego (11.4 percent) and San Bernardino (10.4 percent) counties.
CAR's Market Velocity Index — home sales relative to the number of new listings coming on line each month to replenish that sold inventory, or market indicator of future price appreciation — suggests that there continues to be upward pressure on home prices through the fall. Home sales continue to outstrip new listings coming online to restock sold units.
The Market Velocity Index rose from 40 in October 2016 to 75 in October 2017, implying that there were 75 percent more homes sold than new listings, meaning the supply of homes available for sale continued to drop.
October Realtor Market Pulse Survey
The share of homes selling above asking price fell from 28 percent a year ago to 23 percent in October, while the share of properties selling below asking price inched up from 44 percent to 46 percent. The remaining 30 percent sold at asking price, up from 28 percent in October 2016.
For homes that sold above asking price, the premium paid over asking price dipped from 9 percent in October 2016 to 8 percent in October 2017.
The 28 percent of homes that sold below asking price sold for an average of 12 percent below asking price in October compared to 9 percent a year ago.
Two-thirds (66 percent) of properties sold in October received multiple offers, and the number of offers received was up slightly at 2.6 offers in October 2017 compared to 2.3 offers a year ago.
The share of properties receiving three or more offers in October was 41 percent compared to 30 percent a year ago.
Market competitiveness increased the most in lower- and mid-priced homes compared with last year. Fifty-eight percent of homes priced $200,000-$299,999 received three or more offers, up from 23 percent a year ago, and 59 percent of homes priced $500,00-$749,999 received three or more offers, up from 21 percent in 2017.
Listing price reductions crept up from 31 percent a year ago to 32 percent in October.
Declining housing affordability/inflated home prices/rising interest rates was the top concern of more than 4 in 10 (44 percent) Realtors compared with 45 percent a year ago. More Realtors cited a lack of available homes for sale as their top concern at 30 percent in 2017 compared with 26 percent last October. 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 have largely remained flat over the past few months, hovering in the low 50s but is still in positive territory.
This article was provided by the California Association of Realtors, one of the largest state trade organizations in the U.S. with more than 190,000 members. CAR's pending sales information is generated from a survey of more than 70 associations of Realtors and MLSs throughout the state. CAR'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. Nearly 300 Realtors responded.