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California Year-to-Date Sales Down 3.4 Percent, Median Prices Up 4.8 Percent

Property Radar, September 27, 2016 – California single-family home and condominium sales were 39,091 in August, a gain of 4.4 percent for the month but nearly unchanged from 39,062 in August 2015.

Taking a longer-term view, year-to-date sales (January through August 2016) totaled 282,260 properties, down 3.4 percent from the same period in 2015.

“In the same way that July sales were artificially depressed by fewer business days than the prior year, August sales were artificially goosed higher with more business days,” said Madeline Schnapp Director of Economic Research for PropertyRadar. “The best way to make sense of these calendar quirks is to step back and take a year-to-date view. When we do, we see slightly lower sales and higher prices, in perfect alignment with our theme since October 2015 – “Flat is the New Black.”

Regionally, year-to-date sales have been soft throughout California; down 10.4 percent year-over-year in the six San Francisco Bay Area counties, down 3.4 percent in the Sacramento-Central Valley region and down 1.3 percent in Southern California.

The median price of a California home fell 0.9 percent in August to $435,000 from $439,000 in July but gained 4.8 percent from $415,000 a year ago. The median price of a condominium was $416,000, down 1.0 percent from an adjusted $420,000 in July 2016 but up 3.5 percent from $402,000 in August 2015.

At the regional level, prices fell 2.2 percent year-over-year in the San Francisco Bay Area, but gained 7.7 percent in the Sacramento-Central Valley region and 5.7 percent in Southern California.

In 18 of California’s largest 26 counties, median prices were up in excess of five percent year-over-year. The largest median price gains were in the following counties: Santa Barbara (+18.2 percent), Marin (+15.2 percent), Sonoma (+12.5 percent), Merced (+12.2 percent), and Sacramento (+11.2 percent). Prices fell year-over-year in only three California counties this past month: Kern (-4.8 percent), San Francisco (-2.0 percent), and Contra Costa (-1.1 percent).

Year-to-date through August, cash sales were down 7.8 percent. Cash sales were 19.8 percent of total sales this past month, up 1.2 percent from 18.6 percent but nearly unchanged from 19.2 percent in June 2016.

“Cash sales are considerably lower this year due to prices that are now unattractive to investors,” said Schnapp. “Despite the pull-back, cash sales remain nearly 20 percent of sales, much higher than historic norms, and remain an important part of the real estate market.”

At the county level, cash sales were the highest in San Luis Obispo (+28.0 percent), Sonoma (+27.3 percent), Monterey (+27.5 percent), San Francisco (+24.8 percent) and Placer (24.5 percent) counties.

“From this list of counties, the less populous suburban areas appear to be the beneficiaries of cash-rich buyers,” said Schnapp. “We suspect some of these buyers are recent retirees leaving dense urban areas with their one-time $500,000 tax-free capital gain windfall and relocating. In addition, boomer parents are purchasing homes and condos to ‘rent’ to their cash-strapped millennial children and grandchildren in what we have termed, ‘Phantom Millennial Home Ownership.’”

“Peering into our crystal ball, our “Flat is the New Black” market characterization of flat sales and higher prices, remains intact for the foreseeable future,” said Schnapp. “That said, we have our eyes on the San Francisco Bay Area, recent volatility in short-term interest rates and of course the presidential election.”

In other California housing news:

Flip Sales in August 2016 gained 8.1 percent for the month and were down 11.8 percent over the past 12 months. Year-to-date sales through August are down 1.8 percent. Flip sales accounted for 3.0% of total sales, the lowest in three months.

Negative Equity. The number of homeowners in a negative equity position fell to 450,000, or 5.2 percent of homeowners in August. In the past two months, 68,000, homeowners exited their negative equity positions, a decline of 13.1 percent from June 2016. In the current environment of rising prices, negative equity is rapidly disappearing.

Trustee Sale Purchases by LLC and LPs gained 3.5 percent for the month and were up 18.8 percent from a year ago. The outsized year ago increase was off a depressed low so is not significant. Despite the recent uptick, trustee sale purchases have been trending mostly sideways since November 2013.

Institutional Investor Purchases by LLC and LPs gained 18.5 percent from July 2016 and were up 6.6 percent from August 2015. The outsized gain this past month is likely due to the three extra recording days in August relative to July. Despite the gain, investor purchases have trended mostly sideways since 2014.

Institutional Investor Sales by LLC and LPs gained 3.2 percent for the month but were down 18.2 percent from August 2015. August distortions have artificially inflated investor sales this past month. We expect easier comparisons in September. Taking a longer-term look, year-to-date sales are down 9.8 percent. The decline is not surprising given how high prices have risen in recent months.

Foreclosure Notices. Notices of Default (NODs) were up 12.8 percent from July 2016 but down 1.1 percent in the past 12 months. Notices of Trustee Sale (NTS) were up 6.8 percent for the month but were down 6.0 from August 2015. Both NODs and NTS’ were likely inflated 5 to 10 percent due to the extra days in August.

Foreclosure Sales were up 7.7 percent for the month but were down 9.5 percent from August 2015. Foreclosure sales were also inflated by the August calendar distortions.

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