LOS ANGELES, Aug. 23, 2017 /PRNewswire-USNewswire/ -- The strong sales momentum that occurred during the peak home-buying season gave way in July as shrinking housing inventory and waning affordability stifled pending home sales, which declined both from the previous month and year, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.
Coming out of the summer home-buying months, the housing market is showing signs of slowing as REALTORS® reported fewer floor calls, listing appointments, and less open house traffic than in June, C.A.R.'s July Market Pulse Survey** found.
Pending home sales data:
Based on signed contracts, year-over-year statewide pending home sales fell in July on a seasonally adjusted basis, with the Pending Home Sales Index (PHSI)* declining 2.6 percent from 122.5 in July 2016 to 119.4 in July 2017. California pending home sales also edged down on a monthly basis for the first time since March, decreasing 0.9 percent from the June index of 120.4.
Pending home sales have declined on an annual basis for six of the last seven months so far this year, however, the pace of decline has slowed in recent months. After a solid run-up of pending sales growth in April, May, and June, continued housing inventory issues and affordability constraints may have pushed the market to a tipping point, suggesting the pace of growth will begin to slow in the fall.
The Southern California Region was the only major region to record an increase in pending sales from the previous year – the third straight annual gain. Los Angeles, San Bernardino County and Orange County saw healthy spikes of 4.0 percent, 6.0 percent, and 4.6 percent, respectively. Pending sales in San Diego (-5.8 percent) and Riverside (-4.2 percent) counties declined from last July.
Pending sales in the Central Valley slipped 0.3 percent from the previous year, led by a 17.8 percent annual decrease in Sacramento County. Additionally, Kern County reversed a healthy pending sales gain in June and decreased 2.6 percent from last July.
The San Francisco Bay Area experienced the largest drop in pending sales in July, falling 11.5 percent on an annual basis. San Francisco and San Mateo counties, two of the state's most expensive markets, were both down in double-digits, 11.0 percent and 21.4 percent, respectively. Santa Clara County, where home prices also are at all-time highs, saw pending sales decline 9.8 percent from a year ago.
C.A.R.'s newest market indicator of future price appreciation, Market Velocity Index – home sales relative to the number of new listings coming on line each month to replenish that sold inventory – suggests that there remains upward pressure on home prices through the fall. Home sales continued to outstrip new listings, further depleting the supply of active listings last month.
While the Market Velocity Index fell from 42 to 37, this still implies that there were 37 percent more homes sold than there were new listings. In other words, the supply of homes available for sale continued to drop, which will make the remaining units more competitive as net supply has deteriorated by roughly 34,000 units this year. Thirty-five of 49 counties tracked sold more homes than new listings that came online in those areas, suggesting that price growth will remain broad-based geographically as well.
Year-to-Year Change in Pending Sales by County/Region
San Francisco Bay Area
* Seasonally adjusted
July REALTOR® Market Pulse Survey**:
The share of homes selling above asking price edged up from 34 percent a year ago to 35 percent in July, while the share of properties selling below asking price remained flat at 36 percent. The remaining 29 percent sold at asking price, down from 30 percent in July 2016.
For homes that sold above asking price, the premium paid over asking price rose from 8 percent in July 2016 to 9 percent in July 2017.
The 36 percent of homes that sold below asking price sold for an average of 13 percent below asking price in July, compared to 14 percent a year ago.
About two-thirds (64 percent) of properties sold in July received multiple offers, down from 66 percent in July 2016, and the number of offers received was unchanged at 2.8 offers.
The share of properties receiving three or more offers in July was 40 percent, compared to 44 percent a year ago.
Market competitiveness increased the most in homes priced $750,000-$999,999 and $1 million-$1,999,999, which posted the largest gains in receiving three or more offers compared with last year, rising from 36 percent to 53 percent and from 38 percent to 46 percent, respectively.
Listing price reductions decreased from 26 percent a year ago to 21 percent in July.
While lessening from June, a lack of available inventory remained at the top of the list of concerns for REALTORS®, with 30 percent indicating it as their biggest concern. Declining housing affordability/high interest rates concerned 28 percent of REALTORS®, while inflated home prices/housing bubble was cited by 25 percent of REALTORS®. 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 ticked up from 52 in June to 55 in July and is still in positive territory.
*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 become 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 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. More than 400 REALTORS® responded.
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 more than 190,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.