Real Property Report – California, May 2015

California Median Home Prices and Sales Retreat in May

Median Home Prices Fall 1.8 Percent to $396,750,

Sales Down 3.5 Percent

CALIFORNIA, JUNE 23, 2015 — California single-family home and condominium sales fell 3.5% to 36,912 in May from 38,249 in April.   What is unusual this month is the decrease in sales was due to a decline in both distressed and non-distressed property sales that fell 8.6 percent and 2.5 percent, respectively.  The monthly decline in non-distressed sales is the first May decline since 2005.

On a year-over-year basis, sales were up slightly, gaining 2.3 percent from 36,096 in May 2014. Regionally, year-over-year sales were down 3.5 percent across the nine Bay Area counties but up 5.6 percent in Southern California and 9.0 percent in Central California.

“While home sales were up statewide, results varied regionally,” said Madeline Schnapp, Director of Economic Research for PropertyRadar. “Year-over-year sales posted solid increases in Southern and Central California, likely due to lower price points and better affordability, but were lower in the Bay Area where many potential home buyers have been priced out of the market.”

Within California’s 26 largest counties, most experienced slight increases in median home prices, edging higher in 21 of California’s largest 26 counties. The counties that saw the biggest median price increases were Santa Barbara (+11.4 percent) and Marin (+6.3 percent).

On a year-over-year basis, the median price of a California home was nearly unchanged, up 0.4 percent from $395,000 dollars in April 2014. While at the county level most of California’s 26 largest counties exhibited slower price increases, four counties continued to post double digit gains.  Those counties were San Francisco (+20.0 percent), Stanislaus (+12.1 percent), Alameda (+10.3 percent) and Sonoma (+10.6 percent).

“With the exception of a few counties, price increases have slowed considerably,” said Schnapp. “You cannot defy gravity.  The environment of rising prices on lower sales volumes was destined not to last.  Higher borrowing costs since the beginning of the year and decreased affordability was bound to impact sales sooner or later. We may also be seeing the fourth year in a row where prices jumped early in the year, only to roll-over and head lower later the rest of the year.”

“One of the factors we keep hearing about that might impact sales is the ongoing drought,” said Schnapp.  “New water regulations are coming down the pike fast and furiously. While we haven’t seen any broad based impact on residential real estate sales yet, grumbling about the new water restrictions is certainly becoming louder.”

In other California housing news:

• After two consecutive months of increases, Notices of Default fell 14.5 percent for the month to its lowest level since November 2014. Notices of Trustee Sale extended its prior month decline falling 19.2 percent to its lowest level since January 2015.  Foreclosure sales erased its April gain, falling 14.8 percent back to March 2014 levels.
• Cash sales totaled 7,984 in May, down 5.0 percent from April and represented 21.6 percent of total sales. Cash sales as a percentage of total sales have been steadily declining since reaching a peak of 40.0 percent of total sales in August 2011. Since then, cash sales are down 43.7 percent.  Cash sales as a percentage of total sales were highest in San Francisco (29.2%) , Marin (25.6%), Sonoma (29.6%), and Santa Cruz (26.2%) counties.
• Flip sales totaled 1,207 in May, up 3.7 percent for the month and up 44.0 percent since January 2015. Flip sales are defined as properties that have been resold within six months. Flip sales comprised 3.3 percent of total sales in May, up 0.2 percent from 3.0 percent of sales in April. Flip sales peaked in July 2013 at 4.7 percent of total sales and have declined 37.9 percent since then.
• May Institutional Investor LLC and LP purchases totaled 1,293, down 3.5 percent for the month but were up 2.6 percent from April 2014. Over the longer term, institutional investor demand has retreated due to the lower return on investment and dwindling supply of distressed properties for sale. Institutional purchases were down 42.4 percent since peaking in December 2012. Similarly, Trustee Sale purchases by LLC and LPs were down 80.1 percent from their October 2012 peak.