December home sales drop to 4-year low in ‘murky’ market
Higher interest rates, rising prices ‘erode housing affordability and hamper home sales’
Holiday cheer has given way to housing fears as home sales tumbled in December, sending a chilling reminder that the housing market struggles with uncertainty.
Affordability, higher interest rates and falling home sales are causing more would-be buyers to embrace a wait-and-see approach before purchasing. And the federal shutdown, which is affecting tens of thousands of federal employees in the state and blocking income verification for mortgage applicants, has created another hurdle for an already-stumbling housing market.
December home sales declined 2.4% compared to November, but plummeted 11.6% from December 2017, according to the California Association of Realtors. Home sales dropped to an annualized rate of 372,260 units in December, the fifth consecutive month below the always-important 400,000 mark — and the lowest level of sales since January 2015.
“The housing market continued to shift in December and drift downward as sales have fallen double-digits for the past three of four months,” says CAR president Jared Martin. “This trend is expected to continue as buyers remain cautious about the murky housing market outlook due primarily to the volatility in the financial markets and uncertainty in the economic and political arenas.”
Murky, indeed. CAR reports sales declines in 39 of the 51 counties surveyed, with double-digit drops in the Bay Area, Southern California, Central Valley and the Central Coast, which had the largest drop at almost 25%. The Los Angeles and San Francisco regions each fell more than 17%.
Despite the double-digit declines statewide, the median-home price inched up to $557,600, a 0.5% increase compared to November and up a modest 1.5% from December 2017.
Statewide home price reaches a record
The Bay Area remains the most expensive region, with four counties topping the $1 million mark, again. San Francisco is the priciest county at $1.5 million, followed close behind by San Mateo at $1.48 million. Santa Clara County was the fourth most expensive market in the state at $1.15 million, but that was off 11.5% from a year ago.
The statewide median-home price reached a record $570,010 for the year, a 6.0% increase compared to 2017. Affordability remains a major concern for consumers, with only 27% able to buy a home in the third quarter, according to CAR.
“California’s housing market in 2018 was hindered by endlessly rising home prices and interest rate hikes, which combined to erode housing affordability and hamper home sales,” says Leslie Appleton-Young, senior vice president and chief economist for CAR. “In the coming months, we expect a brief hiccup in sales as the government shutdown temporarily delays closings due to interruptions in IRS income verification or the processing of HUD, VA and USDA loans.”
Home prices, sales compared to a year ago
$1.5 million, up 1.7%; sales up 11.3%
$618,500, up 2.%; sales down 14.7%
$590,000, down 3.9%; sales down 31%
$588,140, up 1.8%; sales down 16.3%
$364,500, up 4.1%; sales down 22.4%
$266,500, up 2.6%; sales down 4.7%
Active listings jumped 30.6% in December compared to a year ago, and have now increased nine straight months.
Those listings would take about 3.5 months to sell, compared to 2.5 months in December 2017.
Time on the market
The average home on the market sold in 32 days in December vs. 25 days a year ago.