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CAR: Home sales drop in December from a year ago, prices soar higher

CAR: Home sales drop in December from a year ago, prices soar higher

By Ron Trujillo / ron@calhomenews.com

A severe shortage of homes on the market continued to help homeowners — and hurt home shoppers in December.

And the challenge could remain for some time, as affordability, especially with  fast-rising prices and higher interest rates, remains a concern for many families looking to purchase. In addition, the federal tax overhaul, which includes an annual cap on deductions for state taxes, could stop many homeowners from selling.   

Existing home sales dipped to a seasonally adjusted 420,960 units in December, a 4.4% drop from November and a modest increase of 1.4% from December 2016, according to the California Association of Realtors.

The state netted the small increase in sales despite the fewest homes on the market in 13 years. California only had 2.5 months of homes on the market, based on the sales pace in December.

“A severe shortage of homes for sale continues to push up home prices and erode affordability, which in turn is subduing home sales,” says CAR president Steve White. “What’s more, with the passage of the (federal) tax reform bill that makes home buying less attractive, homeownership costs will increase for many, which could reduce the desire and demand for buying a home.”

For the year, home sales inched up 1.4%, with much of the gain during the first quarter. The critical shortage of inventory has greatly affected sales during the past several months.

The median-home price — meaning half the homes sold for more, the other half for less — increased to $549,560 in December, a modest 0.5% gain from November and an impressive 7.6% compared to December 2016. Home prices remained above the $500,000 mark for the 10th-consecutive month. Prices increased 6.9% for the year.

“Looking ahead, the market will remain solid but both sales and prices will be impacted by inventory shortages, impending interest rate hikes, and general economic factors including the effects of tax reform,” says Leslie Appleton-Young, senior vice president and chief economist for CAR.

The statewide association expects home prices to increase 4.2% in 2018, Appleton-Young says.

The Bay Area boasted some of the largest annual gains in home prices, including a 34.7 increase in Santa Clara County. The county, the center of Silicon Valley, continues to create good-paying tech jobs that are powering the record-setting home prices.

Santa Clara had the third-highest median-home price at $1.3 million in December, behind only San Mateo and San Francisco counties at $1.5 million and $1.475 million, respectively. Marin County was the fourth most expensive market in the state at $1.27 million.

The most affordable housing was Lassen County in Northern California at $175,000, even with a 10% increase in prices compared to a year ago.

December prices vs. a year ago

San Francisco

$1.475 million, up 12.1%

Santa Barbara

$730,000, down 0.7%

San Diego

$605,000, up 6.5%

Los Angeles

$577,690, up 10.6%

Sacramento

$350,000, up 11.1%

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