Median Prices Fall in 13 of California’s Largest 26 Counties

Year-to-Date Sales Lowest Since 2008

California single-family home and condominium sales gained 3.9 percent in July 2014 but were down 9.2 percent from July 2013. Year-to-date sales for the first seven months of the year are the lowest since 2008.

The overall decline in sales is due to several factors: the decline in affordability due to rapid price increases, the rise in mortgage interest rates, lack of affordable inventory, and the rapid decline in distressed property sales. Whereas in July 2013 25.6 percent of sales were distressed properties, in July 2014 distressed property sales comprised only 17.0 percent of the total.

“Lackluster sales volumes so far this year should come as no surprise given the fact that in many California counties houses have simply become unfordable,” said Madeline Schnapp, Director of Economic Research for PropertyRadar. “The decline in affordability in concert with the rapid decline in lower priced distressed properties for sale has exacted a toll on demand.”

The July 2014 median price of a California home edged up 1,100 dollars, or 0.3 percent, to 390,100 dollars, the slowest monthly increase since January 2014. On a year-ago basis, median home prices gained 7.8 percent. Driving the month-over-month price increase in July was the 4.4 percent increase in the sales volume of higher priced non-distressed properties, which accounted for 83.0 percent of total sales. The median price of non-distressed homes was up only 0.2 percent over last year, indicating the gain in median prices was due mostly to a shift from less expensive to more expensive homes.

As the summer selling season winds down, median price increases have slowed or peaked in many of California’s largest counties. In July 13 of California’s 26 largest counties experienced monthly price declines compared to only six in April.

In other California housing news:

• Cash sales remain a significant percentage of total sales, accounting for 21.6 percent. Despite the historically high levels of cash sales, these sales have been steadily declining, down 15.9 percent, since reaching an interim peak of 36.5 percent in August 2011.

• Flip sales edged up 2.2 percent for the month but were down 36.0 percent for the year and are down 38.1 percent from the October 2012 peak.

• Negative equity continues to decline but remains elevated in California imparting negative headwinds to the real estate market. In July, more than 1.0 million California homeowners, or 12.1 percent remain underwater.

• Institutional Investor LLC and LP purchases were nearly unchanged for the month but are down 29.0 percent from July 2013. As the supply of distressed properties dwindle and prices rise, institutional investor demand has retreated due to the lower return on investment. Institutional Purchases have posted consistent monthly declines and are down 46.0 percent from their December 2012 peak. Trustee sale purchases by LLC and LPs are down nearly 79 percent from their October 2012 peak.

• Foreclosure starts, Notices of Default (NODs), fell 2.9 percent between June and July and are down 22.2 percent from July 2013. The downward trend extends a longer-term downward trend that began in March 2009. Foreclosure sales gained 7.1 percent for the month but are down 18.7 percent for the year.

“Last year’s rise in home prices and interest rates went too far, pushing homes out of reach for some,” said Schnapp. “To see prices increase further from here will require either increases in income, or easing of credit terms.“

Posted on August 19, 2014 by Madeline Schnapp
Property Radar.

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