California pending home sales hold pace in May, C.A.R. reports

Housing supply on the rise but low affordability to cut into demand

News provided by

CALIFORNIA ASSOCIATION OF REALTORS (C.A.R.)

Jun 23, 2016, 12:28 ET

LOS ANGELES, June 23, 2016 /PRNewswire-USNewswire/ -- Building on April's gain, California pending home sales continued to rebound on a year-to-year basis, as listings increased, primarily in seven of nine Bay Area counties, the CALIFORNIA ASSOCIATION OF REALTORS^® (C.A.R.) said today.

With an increase in housing supply, C.A.R.'s May Market Pulse Survey** also reflected a closing gap between REALTORS®' concern of low inventory and low housing affordability – fewer REALTORS® were concerned about low inventory, but more REALTORS® were concerned with a decline in housing affordability.

Pending home sales data:

Statewide pending home sales rose in May on an annual basis, with the Pending Home Sales Index (PHSI)* increasing 3.8 percent from 131.4 in May 2015 to 136.5 in May 2016, based on signed contracts. May's increase comes as welcome news since closed transactions declined in May despite low interest rates and high housing demand.
California pending home sales declined 3.6 percent on a monthly basis compared to April, which was almost entirely due to seasonal factors. When adjusting pending sales for typical seasonal patterns, pending sales actually edged up 0.1 percent from April and 3.1 percent from May 2015.
Led by Southern California, pending sales were up last month on an annual basis across the state on a regional level, with the exception of the San Francisco Bay Area, which saw pending sales contract from the previous year.
For the Bay Area as a whole, pending sales were up 4.6 percent from April and down 1.6 percent from May 2015. Perhaps counterintuitively, within the core areas of the Bay Area, San Francisco and Santa Clara counties, pending sales actually saw an increase over last year of 40.5 percent and 0.4 percent, respectively. The surge in San Francisco was exaggerated by the monthly decline in the county pending sales level a year ago, when it hit the bottom in the last 10 years. Pending sales typically increase from April to May.
Pending sales in the more affordable areas of the Bay Area, where inventory is less constrained, have experienced a decrease in pending sales as a disproportionate increase in home prices has eroded housing affordability.
The pending sales in Central Valley posted a gain of 3.8 percent from the previous year and were down 14.5 percent on a month-to-month basis, following a particularly strong April increase.
Pending home sales in Southern California as a whole rose 5.6 percent from May 2015 and 2.4 percent from April, thanks to year-over-year gains of 6.9 percent in Los Angeles County and 6.2 percent in San Diego County. Orange County experienced a 1.8 percent decrease from the previous year.


Year-to-Year Change in Pending Sales by County/Region

County/Region/State	May 2016	May 2015	Yearly % Change
Los Angeles	97.8	91.5	6.9%
Monterey	73.8	67.3	9.6%
Orange	79.6	81.1	-1.8%
Sacramento	83.1	82.1	1.2%
San Diego	157.4	148.2	6.2%
San Francisco	115.4	82.1	40.5%
Santa Clara	107.1	106.7	0.4%
SF Bay Area	177.9	180.4	-1.4%
So. CA	111.3	105.4	5.6%
Central Valley	111.3	107.2	3.8%
California	136.5	131.4	3.8%

May REALTOR® Market Pulse Survey**:

In a separate study, California REALTORS® responding to C.A.R.'s May Market Pulse Survey reported slower growth in floor calls, listing appointments, and open house traffic, reflecting slowing market activity. Despite the lagging indicators, the percentage of properties selling above asking price reached an all-time high and the number of offers per property rose.

The share of homes selling above asking price in May increased to 38 percent, the highest level since the survey began, rising from 32 percent in April. Conversely, the share of properties selling below asking price dropped to 34 percent. The remainder (27 percent) sold at asking price.
For the homes that sold above asking price, the premium paid over asking price declined for the third straight month to an average of 9.4 percent, down from April's 9.6 percent and up from 8 percent in May 2015.
The 34 percent of homes that sold below asking price sold for an average of 10 percent below asking price in May, down from 12 percent in April and up from 7 percent a year ago.
Nearly seven of 10 properties for sale received multiple offers in May, indicating the market remains competitive. Sixty-five percent of properties received multiple offers in May 2015.
The average number of offers per property increased to 3.1 in May, up from 2.9 in April and 2.8 in May 2015. The increase in the number of offers was driven by a greater share of transactions that received three or more offers. Moreover, homes priced between $200,000- $399,000 and $750,000-$999,000 saw the greatest increases in three or more offers compared to a year ago.
About one in four (23 percent) properties had price reductions in May, indicating sellers are pricing their homes more realistically. One-fourth of properties had price reductions in May 2015.
With rising housing supply, fewer REALTORS® were concerned about low inventory (cited by 28 percent), but more REALTORS® were concerned with a decline in housing affordability (cited by 22 percent).
REALTORS®' optimism of market conditions over the next year is waning, with the index decreasing to 54, down from 61 in April and 64 in May 2015.

Graphics (click links to open):

*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 becomes 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 of more than 300 California REALTORS® to measure data about their last closed transaction and sentiment about business activity in their market area for the previous month.

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 185,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

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SOURCE CALIFORNIA ASSOCIATION OF REALTORS (C.A.R.)