The Southern California region led the way as the entire state of California trended higher for pending home sales in December 2016. However, the California Association of Realtors believes the modest sales growth won’t be sustained due to the shortage of homes for sale, according to the December Market Pulse Survey.
Pending Home Sales Information
On a seasonally adjusted basis and based on signed contracts, pending home sales increased across the state in December. The Pending Home Sales Index (PHSI) rose by 1.95 compared to December 2015, even after the new mortgage rules caused higher sales numbers a year ago. Compared to November 2016, pending home sales were up 3.3% in December 2016.
The Southern California area experienced even higher sales increases last month up 7.8% compared to December 2015 and up 16.1% compared to November 2016. This was in part due to the highest number of available homes for sales and better affordability. The San Bernardino region led the way in pending sales with a 9.5% increase compared to a year ago. San Diego and Los Angeles counties were right behind with modest gains compared to a year ago. The only area in Southern California with lower pending sales compared to 2015 was Orange County.
Compared to December 2015, pending sales fell by 14.2% in the San Francisco Bay Area. They also fell 32.5% compared to November 2016. The low affordability and tight housing inventory were contributing factors to this decline.
San Mateo County experienced the largest decline at 35.3%, while San Francisco County was next at 23.3%. The decline in the Bay Area was mainly caused by the prevalence of higher-priced properties affected by the new mortgage rules, which came out in the fall of 2015.
Results from the December REALTOR Market Pulse Survey
REALTORS responded to the C.A.R. December Market Pulse Survey in December and reported a decline in open house traffic, floor calls and listing appointments. Some of the results of the survey include:
- A fall in the share of homes selling below asking price to 57% from 43% the previous year.
- An increase in the share of properties selling above the asking price to 23% from 18%.
- An increase in the share of properties selling at the asking price from 25%to 34%
- About 43% of the homes selling for lower than the asking price sold for about 22% less than the asking price in December 2016. This was about double compared to November, which was about 11%.
- About 64% of the properties for sale did receive multiple offers in December, which is just slight down from 66% in November and 65% in December 2015.
Out of the properties receiving multiple offers, those receiving three or more offers did increase to 40% in December from 36% in November.
- About 26% of properties were listed with price reductions in December, which is down from 31% in November 2016 and from 30% in December 2015.
REALTORS were most concerned with housing affordability and the high home prices with 38% stating this as their main concern.
Other major concerns were the lack of inventory with 29% concerned, inflated home prices with 18% concerned and lending and financing as a big concern.
The expectations of the market conditions for the past year were met with an index of 65, which was up from 58 in November, but remained unchanged compared to December 2015.
While December was a good month for most of Southern California and a solid much for the state as a whole, REALTORS still have plenty of concerns moving forward, but remain optimistic.