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July brings ‘market shift’ as sales drop for third month

July brings ‘market shift’ as sales drop for third month

By Ron Trujillo/ron@calhomenews.com

California home sales declined for the third-consecutive month, as record-high home prices and rising interest rates are causing more home-shoppers to tap on the brakes and send the market sputtering.

July home sales declined to a seasonally adjusted annual rate of 406,920 units, a 0.9% drop from June and off 3.4% compared to July 2017, according to the California Association of Realtors. Entry-level and lower-priced homes took it on the chin in July, while million-dollar home sales remained solid.

“In the midst of the peak of home-buying season, high home prices and rising interest rates combined to crimp housing affordability, which in turn is subduing home sales,” says CAR president Steve White. “Some of the reluctance by buyers appears to be driven by fears that the market may be peaking. Additionally, the lack of a federal tax incentive for homeownership could be at play given that much of the weakness is in the lower-price, first-time buyer segment of the market.”

Only 26% of households could afford the median-priced home in the state during the second quarter, according to a CAR report. Fast-rising home prices, already at a record statewide and in many regions, and higher interest rates are the primary reasons the one-time red-hot market is cooling off, industry leaders say.

July’s median-home price dipped 1.9% to $602,760 compared to June, but up 7.6% from a year ago. Higher-priced homes had the largest price gains and strongest sales during the past month.

Leslie Appleton-Young

“While home sales continued to decline in recent months, the softening of the market is more indicative of a market shift rather than a major market correction,” says Leslie Appleton-Young, senior vice president and chief economist for CAR. “Despite the slowdown, there were some silver linings in the market in July. For example, homes priced between $500,000 and $1 million posted modest gains of about 5% in July thanks to growing inventory. Additionally, every price segment above $1 million continued to enjoy double-digit sales gains.”

Well, sort of. San Francisco — the highest-priced market at $1.65 million — had home sales drop 17.2% from June and 6.9% from a year ago. San Mateo, the second most-expensive market at $1.61 million, had home sales drop in June but up 10.9% from a year ago. Marin and Santa Clara counties, the third- and fourth-priciest markets, reported monthly and year-over-year sales drops, according to CAR.

Lassen County continues as the most-affordable county at $185,000 — about $405,000 less than the statewide median-home price.

A couple of other figures to watch:

  • July’s sales price-to-list price ratio dropped to 99.6%, compared to 100% in June. Basically, if you were asking for $500,000 your home, it would sell for $498,000.
  • The unsold inventory index inched up to 3.3 months in July vs. 3.2 months in June. The index calculates how long all of the homes on the market would sell at the current pace.
  • The median number of days on the market increased to 18 days in July, compared to 16 days a year ago. It’s still a fast-moving market, but has definitely slowed.

Home prices, sales compared to a year ago

San Francisco

$1.65 million, up 15.5%
Sales down 6.9%

San Diego

$650,000, up 6.0%
Sales up 0.7%

Los Angeles

$597,520, up 5.5%
Sales down 0.9%

Sacramento

$370,000, up 4.8%
Sales down 1.6%

Fresno

$280,000, up 7.7%
Sales down 3.1%

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