Luxury homes in prestigious areas like the Hollywood Hills are still hotter than hot, but across California home sales cooled in August. A combination of tight supply and extremely low affordability has our city and state’s real estate markets struggling to find a ceiling.
Last month 420,360 single-family detached homes closed escrow in California. This number represents what the total number of homes sold in 2016 would be if the market maintained the August pace throughout the year. It is calculated by the California Assoc of Realtors and based on MLS findings as well as interviews with over 90 realtor across the state. And yes, it is adjusted to account for seasonality and other influencing factors on home sales.
Though August’s homes sales figures were actually up 1.1 percent from the revised 415,840 level in July. It still represents a 2.2 percent drop when compared with August 2015 home sales of a revised 429,900. And while home sales remained above the 400,000 pace for a health fifth straight month, they have declined for the sixth consecutive month on a year-to-year basis.
“We are seeing the market tempering, which is being driven by reduced affordability and not enough homes for sale on the market, particularly in the San Francisco Bay regions, where runaway home prices have constrained home sales,” said C.A.R. President Ziggy Zicarelli.
“Two of the region’s least affordable counties – Marin and Santa Clara – saw sales fall from a year ago, while Contra Costa and Sonoma counties experienced more modest slowdowns. Conversely, in many parts of the Central Valley, where homes are more affordable and demand has been relatively strong, home sales posted healthy increases. Likewise, sales of condominiums statewide were strong, thanks to their relative affordability,” Zicarelli added.
While sales are slightly off from last year, the median price statewide remained at its highest level in almost seven years and marked the fifth straight month it was above the $500,000 mark. But there are potential signs of a coming slowdown in price growth.The median price of an existing, single-family detached California home was up 1.7 percent in August to $526,580 from $517,650 in July. August’s median price increased 5.8 percent from the revised $497,520 recorded in August 2015. 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. The continuing rising home prices despite falling sales suggests that demand continues to outstrip new supply coming online, which is pushing prices higher.
“As jobs and incomes have continued to improve for workers in the state, we’re seeing more demand by primary homebuyers at the lower end of the market where inventory is tightest, which is pushing home prices higher,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.
“With active listings in the lowest price tier dropping more than 27 percent from the previous year, the median home price of the lowest priced segment of the market was pushed up from $185,000 last year to $205,000 this August, while the next price segment of the market has risen from $300,000 to $320,000,” said Appleton-Young
Here are some other highlights from C.A.R’s in depth report:
• C.A.R.’s Unsold Inventory Index, which indicates the number of months needed to sell the supply of homes on the market at the current sales rate deteriorated from both last month and last year, dipping to 3.4 months in August from 3.6 months in July. The index stood at 3.6 months in August 2015.
• With the exception of Ventura, all of Southern California saw its unsold inventory decline as the market got tighter in August. Inventory either was unchanged or up over the past year in all Bay Area counties except Napa and Sonoma as new listings have started to come on the market.
• The median number of days it took to sell a single-family home edged up slightly in August to 28.9 days, compared with 28 days in July and 29.7 days in August 2015.
• C.A.R.’s sales-to-list price ratio* dipped in August, with sales prices slightly decreasing to 98.9 percent of listing prices statewide in August from 99.2 percent in July and essentially flat from 98.8 percent in August 2015.
• The average price per square foot** for an existing, single-family home statewide was $246 in August 2016, down from $247 in July but up from $235 in August 2015.
• San Francisco County had the highest price per square foot in August at $818/sq. ft., followed by San Mateo ($782/sq. ft.), and Marin ($632/sq. ft.). Counties with the lowest price per square foot in August include Del Norte ($106/sq. ft.), Siskiyou ($123/sq. ft.), and Tulare ($127/sq. ft.).
• Mortgage rates are expected to remain low in the foreseeable future as weak global economic growth will likely be the norm in the upcoming months. Mortgage rates declined in August, with the 30-year, fixed-mortgage interest rate averaging 3.44 percent, unchanged from July and down from 3.91 percent in August 2015, according to Freddie Mac. Adjustable-rate mortgage interest rates also were unchanged in August at an average of 2.75 percent, essentially unchanged from 2.74 percent in August 2015.
Earlier in the year, we made two educated guesses about the state of the real estate market going forward in 2016 and beyond. First, some cooling off was inevitable due to the aforementioned affordability squeeze and inventory tightening. Second, market growth would flatten to a predicted 1-3% growth for the foreseeable future. Though it seems we were right on the first front, the good news is that the cooling has been slight and much less than many experts predicted. Overall, the Los Angeles and California real estate markets are healthy and thriving.
If you’re interested in buying or selling a Luxury Home in Los Angeles, please contact us now at 323-829-8811 or email Susan Andrews at susan@luxurylahomes.com.
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