Monthly Archives: March 2015

California’s pending home sales post biggest growth in 6 years

Andy Dean

Pending home sales in California soared in February, recording the first double-digit annual gain in nearly three years and the third straight year-to-year increase.

Pending home sales in California soared in February, recording the first double-digit annual gain in nearly three years and the third straight year-to-year increase, according to latest figures from the California Associate of Realtors.

The data suggest improved market conditions and more closed transactions in the coming months, Los Angeles-based C.A.R. said in its monthly report.

The California index for pending home sales, based on signed contracts, rose 24.8 percent from a revised 89.9 in January to 112.2 in February, beating the long-run average increase of 17.9 percent over the last seven years.

Compared with a year ago, February’s pending home sales increased 15.6 percent, the largest jump since April 2009 and the first double-digit gain since April 2012.

For Southern California, pending home sales grew 25 percent in February to an index of 98.9 and was up 15.2 percent from 85.8 in February 2014.

Statewide, the share of equity sales – or non-distressed property sales – grew slightly as a share of the market, after declining for three straight months. Equity sales made up more than 89 percent of all home sales in February, up from 88.1 percent in January and 85 percent in February 2014. Equity sales have been more than 80 percent of total sales since July 2013 and have risen to or near 90 percent since mid-2014.

Meanwhile, the combined share of all distressed property sales fell in February, down from 11.9 percent in January to 10.9 percent in February. Distressed sales made up 15 percent of total sales a year ago.

In a separate report, California Realtors responding to C.A.R. survey said they saw fewer multiple offers but an increase in open house traffic from a year ago.

In a sign of a less competitive housing market, about one in five homes (21 percent) sold above asking price, down from its peak of 40 percent in March 2014 and from 34 percent a year ago. The share rose slightly from the lowest point of 16 percent in January. Nearly half of homes (49 percent) closed below asking price, down from 55 percent in January.

Sixty-one percent of properties received multiple offers in February, up from 58 percent in January but down from 71 percent a year ago.

Soft activity, strong pricing

Mixed messages
The housing data at the start of the year have been mixed. Existing home sales
have declined an average 2.2% mom SA over the prior three months. Mortgage
purchase applications have inched higher, but not in a convincing manner. New
home sales have moved sideways while the NAHB homebuilder index softened.
This sluggish tone to the activity data contrasts with the improving economic
backdrop. The labor market has been exceptionally strong with job growth
averaging 284,000 a month for the past six months and the unemployment rate
reaching 5.5%.
The opposite has been true for prices with recent data surprising to the upside. The
CoreLogic home price index jumped 1.1% mom SA in January, pushing the YoY
rate up to 5.7%. Housing inventories have been lean while mortgage rates have
declined, supporting prices. The data are also influenced by poor seasonal
adjustments which seem to bias the figures higher during the winter and lower
during the spring. Given this noise in the data, we are holding to our view that price
appreciation will slow, reaching 4.0% by year-end.
It is hard to make sense of these data – why is home price appreciation accelerating
amid weakening home sales? Perhaps one explanation is that the housing market is
still bifurcated with homeownership limited to the upper income cohort who has
access to credit and wealth gains. The lower income households are likely to be
renters longer. We have already seen a dramatic shift in how households are living
with the homeownership rate back at historic lows. The risk is that the adjustment is
not yet over.

Silver Lake Los Feliz