Real Property Report – California, July 2016

California’s Underwater Homeowners Fall Below 500,000, Down 50 Percent from July 2014

July Sales Dive 12.8 Percent Y-o-Y, or Did They?

California Median Price Edges Lower in July, but still Up 5.0 Percent Y-o-Y

CALIFORNIA, AUGUST 18, 2016 – California single-family home and condominium sales were 37,823 in July, falling 10.4 percent for the month and down 12.8 percent from July 2015. Taking a longer-term view, year-to-date sales (January through July 2016) totaled 244,035 properties, down 2.0 percent from the same time period in 2015.

“At first glance, it looked like July sales fell off a cliff,” said Madeline Schnapp Director of Economic Research for PropertyRadar. “Looking closer at the data, we noted that July 2016 had two fewer business days than July 2015. That calendar quirk was enough depress July sales. When the missing days were taken into account, the sales decline was approximately 3.0 percent for the month and 5.0 percent for the year, in line with expectations.”

“With or without July’s calendar distortions, sales were tepid this past month,” said Schnapp. “June sales will likely represent the peak of the 2016 season and are expected to retreat from here on out.”

The number of homeowners in a negative equity position fell to 472,000, or 5.4 percent of all California homeowners. Since July 2014, the number of negative equity homeowners has fallen more than 50 percent. Currently, one in 18 homeowners are underwater, down from one in eight 24 months ago.

“The silver lining to rising prices is in the past two years 575,000 California homeowners have escaped their negative equity prisons,” said Schnapp. “Now armed with positive equity, these homeowners can take advantage of near record low mortgage interest rates to refinance, sell an existing home and buy a new one.”

The July 2016 median price of a California home was $438,000, down 0.7 percent, from a revised $441,000 in June. On a year-ago basis, median home prices were up 5.0 percent from $417,000. The median price of a condominium was $417,000, down 0.2 percent from an adjusted $418,000 in June 2016 and up 4.3 percent from $400,000 in July 2015.

At the county level, July median home prices in 17 of California’s 26 largest counties were flat to lower from the previous month.

“The good news for California home buyers is that median prices fell in more than half of California’s largest counties,” said Schnapp. “Despite July’s pullback, we forecast prices are more likely to trend sideways rather than materially decline.”

Cash sales of single-family homes and condominiums fell in July 2016, retreating 8.2 percent for the month and down 12.7 percent from July 2015. Cash sales were 18.1 percent of total sales, down nearly 2.0 percent from 19.9 percent in June 2016.

“Cash sales retreated this past month as the overall market pulled back from June highs,” said Schnapp. “Some of the pull-back is likely related to the July calendar quirks, but the highs for this year’s selling season are likely behind us.”

In other California housing news:

• Flip Sales fell 2.4 percent from June2016 and were down 14.6 percent over the past 12 months. Flip sales accounted for 2.8% of total sales, the lowest since May 2011. July flip sales are likely under-represented due to this month’s calendar quirk.
• Trustee Sale Purchases by LLC and LPs gained 3.0 percent for the month and were up 19.9 percent from a year ago. The outsized year-ago increase is off a depressed low so not really significant. Despite the recent uptick, trustee sale purchases have been trending mostly sideways since November 2013.
• Institutional Investor Purchases by LLC and LPs fell 5.9 percent from June 2016 and were down 7.1 percent from July 2015. Despite the pull-back, investor purchases have trended mostly sideways since 2014.
• Institutional Investor Sales by LLC and LPs fell 6.6 percent for the month and were down 11.2 percent from July 2015. July calendar quirks have artificially depressed investor sales this past month. We expect easier comparisons in August.
• Foreclosure Notices. Notices of Default (NODs) fell 15.1 percent from June 2016 and were down 7.0 percent in the past 12 months. Notices of Trustee Sale (NTS) were down 17.3 percent for the month and fell 20.3 from July 2015. Both NODs and NTS’ were artificially depressed 5-10 percent due to the July calendar quirk.
• Foreclosure Sales fell 7.0 percent for the month and were down 15.3 percent from July 2015 and were also impacted by the July calendar distortions