December Sales Surge 24.7 Percent from a TRID-Depressed November

Median Prices Flat in December, Up 7.1 Percent Y-o-Y

2016 Real Estate Market May Benefit from Stock Market Volatility and Fears

CALIFORNIA, JANUARY 19, 2016 – California single-family home and condominium sales were 33,969 in December 2015, up 24.7 percent, from a revised 27,241 in November. On a year-ago basis, sales were up 3.7 percent from 32,748 in December 2014.

“The new FED disclosure rules (TRID) that went into effect in early October are still impacting sales,” said Madeline Schnapp, Director of Economic Research for PropertyRadar. “The new paperwork requirements slowed the mortgage application process in November pushing sales into December. The artificial TRID disruption to November and December sales data will simply be an economic footnote by end of January.”

The December median price of a California home was $412,500, nearly unchanged from the revised November price of $412,000. Home prices have been trending mostly sideways since June and are just below the July 2015 peak of $415,000.

“Sales around the holidays are typically depressed so flat prices are not a surprise,” said Schnapp. “Affordability has become a significant issue in many coastal counties throughout the state but recent stock market volatility and fear may send investors scampering to the perceived safety of real estate, putting upward pressure on prices.”

In 17 of California’s 26 largest counties, December median prices were flat to lower than November’s. Counties with the largest price decreases were Contra Costa (-6.7 percent), San Francisco (-8.5 percent) and Santa Clara (-9.2 percent). Six of the nine Bay Area counties experienced lower median prices for the month.

“Like we said in our October 2015 report, ‘Flat is the New Black,’ this ho-hum low sales volume market will likely persist into 2016,” remarked Schnapp. “Despite lackluster sales, median prices may continue to grind higher due to low inventory and increased demand from investors looking for some sort of positive yield.”

On an annual basis, the median price was up 7.1 percent from $385,000 in December 2014. Annual price gains were five percent or more in 14 of California’s 26 largest counties. The counties with the largest annual price increases were Marin (+13.7 percent), Monterey (+16.6 percent), San Francisco (+11.1 percent) and San Mateo (+11.6 percent).

“Median prices rose sharply during the first half of the year but slowed in the last half of the year,” said Schnapp. “Sticker shock in the last half of the year combined with fear of a FED interest rate hike may have put a lid on demand.”

The number of homeowners in a negative equity position continued its downward trend in December. Negative equity decreased 0.2 percent, or approximately 14,000 in December. Approximately 6.5 percent of homeowners, or nearly 570,000, owed more than their home was worth. To put the current negative equity level in perspective, in January 2015 there were just under one million California homeowners underwater, or one in nine. Today, one in 15 California homeowners are underwater.

“The rise in prices is good news for underwater homeowners,” said Schnapp. “The sharp rise in median prices in early 2015 means half-million fewer California homeowners were underwater than in December 2014.”

December 2015 cash sales were up 1.1 percent from November. On a year-ago basis, cash sales were down 14.2 percent from December 2014.

“Cash sales as a percentage of total sales returned to normal in December after spiking in November,” said Schnapp. “The new FED TRID rules impacted the November data by delaying the recording of non-cash sales.”

Cash sales were 20.2 percent of total sales in line with the average of 20.7 percent over the past six months. Of the 26 largest counties in California, the counties with the highest percentage of cash sales were Merced (24.7 percent), Monterey (24.3 percent), Riverside (24.5 percent), San Luis Obispo (24.3 percent), and Santa Cruz (26 percent).

“Cash sales as a percentage of total sales remain historically high,” said Schnapp. “Despite high prices, real estate investing remains an attractive alternative in an interest rate constrained environment where other asset classes are losing favor.”

In other California housing news:

• Flip sales jumped 26.0 percent during the month of December and are up 19.2 percent over the past 12 months. Flip sales peaked in July, coincident with a peak in median prices. Flip sales typically jump in December as sellers push to close and record sales before the end of the year.
• Institutional Investor (LLC and LP entities) December purchases gained 13.4 percent to 1,256 for the month and were up 5.8 percent from December 2014. Despite December gains, institutional investor purchases are down 46.0 percent from their peak in December 2012.
• Trustee Sale purchases by LLC and LPs jumped 18.5 percent to 128 for the month and were up 33.3 percent from December 2014. Trustee sales were down 87.9 percent from their October 2012 peak but have trended mostly sideways since May 2014.
• Institutional Investor sales were up 28.9 percent for the month but were down 21.5 percent from December 2014. Investor sales have been on a downward trend since December 2012.
• Foreclosure Notices of Default and Notices of Trustee Sale reversed November losses and were up 11.8 percent and 14.8, respectively for the month. Both Notices of Default and Notices of Trustee Sale are near their lowest levels in our records dating back to January 2007.