In a bit of a surprise, the California Association of Realtors reported early this week that pending home sales were up across the state. This news marks the reversal of a three month downward trend in pending home sales that many experts predicted would last until the end of the year.
However, the market pessimism of those experts wasn’t without reason. Inventory remains extremely low throughout most of California and it’s doubtful that enough new listings will make up for the shortfall in time to enjoy the usually bright spring homebuying season.
Let’s take a look at both reports in further detail. In April, California’s pending home sales increased 4.1 percent as measured by the Pending Home Sales Index (PHSI). In April 2015, the PHSI was at 135.9, this year it came in at 141.6. This is the largest increase so far in 2016. The PHSI still remains at near all time highs. You’d have to go as far back as March 2012 to find an even slightly higher mark.
Pending home sales actually increased on a monthly basis more than is average for the month of April. Between 2008 and 2015, the usual rise is 1.3 percent. So the PHSI seeing a 4.5 percent gain is quite healthy. If you adjust even further for seasonality, pending sales were up 9 percent from March. Still, statewide listings are off 4.2 percent from where they were a year ago, which exemplifies the inventory concerns observed by real estate professionals.
Let’s look at a regional breakdown, California is after all the third largest state in the U.S. and one of the largest economies in the world. Pending sales were actually up across all major state regions. The Central Valley Region’s index reached an all-time high, thanks to its increasingly attractive affordability and plethora of inventory. Here in Southern California we also enjoyed a nice rise in pending sales, with double-digit jumps in both Orange County and Riverside.
Despite the tech crazed real estate markets of San Francisco and Santa Clara, taken as a whole, Bay Area pending sales were actually down 5.1 percent from last month and 1.6 from a year ago. Those numbers don’t reflect what’s going on in Silicon Valley and The City, however, where pending sales were up 15.8 and 9.4 percent, respectively.
Let’s finish up with some more hard numbers. Remember how the Central Valley’s huge gains buoyed pending home sales statewide? That’s because they were up a whopping 35.3 percent in one month. At home here in SoCal, pending sales were actually off 5.5 percent from last month, but still up 4.8 percent from a year ago. Los Angeles County showed an annual gain of 3.4 percent and the OC was up a healthy 10.3 percent.
April REALTOR® Market Pulse Survey
In a separate questioning of real estate professionals, C.A.R.’s Market Pulse Survey found activity was down across nearly all measures. Realtors reported less listing appointments, a drop in floor calls and dwindling open house traffic. Again, extremely tight inventory is the likely culprit. Affordability is also a huge drag on the California housing market, with some predicting many buyers have given up on the dream of owning a home, at least temporarily.
Agents had been enjoying three straight months of growth in floor calls and listing appointments until April’s survey. While open house traffic was also down, it has been up overall since the beginning of 2016.
Many prospective buyers may look at listing prices as locked in, on average less than a third, only 28 percent of homes, sold at their asking price. 32 percent of homes sold over asking, while 40 percent sold below.
When homes did sell above their asking price, the premium those buyers had to pay was down for the second consecutive month to 9.6 percent. That’s down slightly from 9.8 percent in March and 10 percent in April of last year. The homes that sold below asking price did so at 12 percent less than their initial listing, that’s down from 9.6 percent in March and 11 percent in April 2015.
Whether homes sell at, above or below asking, perhaps a better reflection on the real estate market’s health is how many offers homes receive. Almost 70 percent of pending sales received at least two offers this month, that’s a very healthy rate of competition and off only slightly from 72 percent in April 2015. On average, homes listed received 2.9 offers, down from 3.3 last month and 3.6 offers last year.
While affordability is near record lows, home prices have leveled off in the last few months. And it seems Realtors and sellers are reacting to that trend by adjusting their listing price to better match buyer expectations. Nearly 25 percent of properties saw price reductions this month, that’s down slightly from 28 percent a year ago.
When Realtors were asked for their specific market concerns, low housing inventory ranked first, with one third of those surveyed worried. 16 percent said that housing affordability was their major concern while a related 14 percent said home prices were overinflated.
Realtors overall confidence in the market is trending downwards. A year ago nearly 73 percent of agents said they were optimistic about overall market conditions. That optimism was down all the way to 61 percent in April.
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.
Contact us anytime if you ever wonder “What’s my home worth”? Or visit HollywoodHillsValue.com for a free no obligation home valuation.