Real Property Report – California, April 2016

Tug-of-War Between Low Inventory and Affordability Rages On

April Sales Down 8.3 Percent Year-over-Year, Lowest April  Since ’08

Median Home Price Jumps 6.8 Percent Year-over-Year to $432,500

CALIFORNIA, MAY 18, 2016 – California single-family home and condominium sales were 35,978 in April 2016, an increase of 5.8 percent from a revised 34,002 in March 2016. On a year ago basis, sales were down 8.3 percent from 39,219 in April 2015, the lowest April sales volume since 2011.

Year-to-date sales (January through April 2016) totaled 117,235, down 4.5 percent from the same time period in 2015 and was the second lowest January through April sales volume since 2008.

Of the total number of homes sold in April 2016, 20.0 percent were condominiums and 80.0 percent were single-family residences.

“We are well into the spring selling season and sales volumes are still near their lowest levels since 2008,” said Madeline Schnapp, Director of Economic Research for PropertyRadar. “The lack of inventory means the tug-of-war between inventory and price will likely continue for the foreseeable future. While authorized building permits in California are approaching the highest levels since 2007, new inventory of any volume won’t arrive until 2017 or 2018.”

The April 2016 median price of a California home was $432,500, up 5.5 percent from a revised $410,000 in March 2016. On a year-ago basis, median home prices were up 6.8 percent from $405,000 in April 2015. The median price of a condominium was $413,000, up 2.0 percent from $405,000 in March 2016 and up 6.4 percent from $388,000 a year ago.

“Prices jumped this past month as seasonal pent-up demand slammed head-on into an inventory constrained market,” said Schnapp. “Although California is still finding buyers, there’s no question that at some point, and perhaps happening now, buyers are going to put their hands up and sit tight or even consider out-of-state options.”

Within the 26 largest California counties, the highest year-over-year price appreciation occurred in the Northern California counties of Santa Clara (16.3 percent), Merced (13.9 percent), Sonoma (13.7 percent), Monterey (13.4 percent), Alameda (11.6 percent) and Marin (11.1 percent).

Cash sales of single-family homes and condominiums in April 2016 gained 0.3 percent from March 2016 but were down 11.0 percent from April 2015. April cash sales were 21.0 percent of total sales, in line with the average percentage of cash sales over the past 12 months. Within the 26 largest counties in California, the counties with the highest percentage of cash sales were Santa Cruz (29.8 percent), Monterey (26.8 percent), Marin (26.7 percent), San Francisco (26.3 percent), and Fresno (25.1 percent).

“Despite low inventory and high prices, cash sales continue to be an integral part of the market,” said Schnapp. “The lure of a positive return on investment in a yield starved environment has proven attractive to investors looking to deploy cash in real estate.”

In other California housing news:

• Negative Equity – The number of homeowners in a negative equity position fell this past month as prices rose. Currently the number of negative equity households is slightly more than 540,000. Since April 2015, approximately 250,000, or 33 percent of negative equity California homeowners have exited their underwater positions.
• Flip Sales – Flip sales in April 2016 fell 13.9 percent for the month and were down 7.6 percent over the past 12 months. Flip sales accounted for 3.0% of total sales, the lowest since April 2015.
• Institutional Investor Purchases by LLC and LPs fell 1.1 percent in April 2016. It appears that investor purchases are trending about 5 to 10 percent lower this year relative to last year. On a year-ago basis, purchases were down 7.7 percent from April 2015.
• Trustee Sale purchases by LLC and LPs fell 0.9 percent for the month and were down 7.8 from a year ago. Despite recent minor ups and downs, over a longer period of time, Trustee sale purchases have been trending mostly sideways since November 2013.
• Institutional Investor sales by LLC and LPs Institutional Investor sales by LLC and LPs fell 4.4 percent for the month and were down 14.8 percent from April 2015. Despite recent volatility, investor sales have been on a steady downward trend since reaching an interim peak in December 2012.
• Foreclosure Notices and Sales. Foreclosure Notices of Default (NODs) fell 15.2 percent from March 2016. NODs reached an interim low in November 2015 and then from November to March 2016, NODs gained 32.3 percent. In April NODs gave back half of that gain. Over a longer period of time, NODs have been unchanged since May 2015.
• Notices of Trustee Sale fell 7.9 percent from March to April but have trended mostly sideways since June 2015. In general, both Notices of Default and Notices of Trustee Sale are near their lowest levels in our records dating back to January 2007.
• Foreclosure sales retreated 6.2 percent for the month, and are down 34.7 percent in the past 12 months. Foreclosure sales have been drifting steadily lower since May 2013.