March marked the third time in as many months that pending sales by California homeowners continued its downward trend.
According to the California Association of Realtors, the poor sales performance is largely due to limited availability and high cost. Even with closed escrow sales strengthening in recent months, the shortage of houses on the market, combined with continually increasing prices, has clearly impacted the market’s growth.
Responses to the March Market Pulse Survey showed that many realtors have noticed a slight uptick in general business, which is expected this time of year. There were more presentations and open house visits in March, marking the third straight month of this type of activity increase.
The following data relates specifically to pending sales:
- The sales numbers, adjusted for the season and examining signed contracts, show the Pending Home Sales Index (PHSI) in March dropped 4.5 percent from the previous year, falling from 112.5 in 2016 to 107.4 in 2017. That’s compared to a 2.9 percent decrease from February 2016 to February 2017.
- This most recent decline is the largest of year and it comes at the outset of what is usually the busiest time of year for homebuying. This indicates that spring and summer sales will continue to be stifled by a dearth of listings, as availability has dropped more than 10 percent since March of 2016.
- Going region by region, Southern California is currently the state’s leading area for sales, with both the highest numbers in closed escrow sales and lowest percentage drop in pending sales (non-seasonally adjusted). Two counties, Los Angeles and Riverside, actually experienced modest growth in pending sales with increases of 1.6 percent in LA County and 3.1 percent in Riverside. Meanwhile, other southern regions such as Orange County, San Diego County, and San Bernardino County saw decreases in pending sales that ranged from 3.6 to 8 percent.
- Still holding the top spot in areas most affected by the sales decrease is the Bay Area. San Francisco suffers from a profound housing shortage and ever-falling affordability, and March marked the sixth month in a row that pending sales have gone down from the previous year. These statistics apply to every regional county, and the overall plunge from March of 2016 to March of 2017 was 10.1 percent. The two counties hit hardest were Monterey, with a pending sales reduction of 17.3 percent, and Santa Cruz at 16.4 percent. Other counties of note were San Francisco, Santa Clara and San Mateo, which saw sales fall 15.9 percent, 14.9 percent, and 8.6 percent, respectively.
- Even the Central Valley couldn’t escape the pending sales drop, as the index went from 96.3 in 2016 to 91.0 in March of this year. Kern County managed a slight increase with pending sales ticking up 0.4 percent, compared to a 3.7 percent dip in Sacramento County.
- Market Velocity, which shows sales in relation to monthly replacement listings that go online as properties are purchased, doesn’t offer any immediate hope. This pricing indicator implies that high costs are driven by low supply, meaning that prices should continue to rise in the coming months.
Even with this data, CA realtors responding to the Market Pulse Survey have expressed optimism regarding the upcoming season. The increase in general market activity and multiple offers since February has sellers confident that things might not be as bleak as some of the numbers indicate.
- Homes that sold for a price above the initial asking increased by 5 percent, up to 39 from 34 percent in March of 2016. At the same time, real estate selling below asking price went down from 33 to 32 percent. Properties that actually went at asking price was down to 29 percent, five points lower than it had been in March of last year.
- The percentage paid above asking price stayed the same between 2016 and 2017, remaining at a premium of 9.2 percent.
- Homes coming in under asking price saw improved numbers as well, selling at 8 percent below as opposed to 10 percent in March of 2016.
- March was the third straight month in which the percentage of multiple offers on properties rose, reaching its highest level in over a year. Almost 75 percent of for-sale properties elicited multiple offers, a substantial increase from the 50 percent mark set in March of 2016.
- Properties which received more than two offers dropped only slightly, coming down from 49 percent in March of 2016 to 45 percent this year.
- Homes receiving the most attention in March were those priced under $200,000. This section of the market showed the largest increase in multiple offers, especially in homes receiving three or more bids, where the share rose 16 percent since March of 2016.
- With prices adjusting to the market, only 19 percent of properties reduced their prices in March of this year, compared to 21 percent in 2016.
- According to this survey, 37 percent of realtors cite limited property as their main concern going forward. That number slightly edges out the 34 percent who are most concerned with the continued downtrend in affordability and high interest rates. The other issues causing the most worries are the housing bubble, regulations, slowing growth in the economy and financing difficulties.
- Overall, 64 percent of realtors have high expectations for future market conditions, which is up 4 percent from 2016.
Even with strong data suggesting that pending sales won’t be increasing over the summer, California realtors have found a number of reasons to be optimistic about the coming year. However, with affordability and availability varying so much from one region to the next, it’s not surprising to see differing opinions about future sales.
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