Early Evidence of Rates Hitting Home Sales More Than Prices

A perennial frontrunner of housing market trends, California’s data speaks to recent assertions that rising rates will affect sales more than values.  Home salesrnvolume was slightly lower in June, the result of risingrninterest rates as well as the ongoing tight supply of inventory. Homernprices, however continued to climb with another double-digitrnyear-over-year increase. The state’s median price remained abovern$400,000 for the third straight month.</p

(Read More: Rate Increases More Likely to Impact Sales than Home Prices)</p

The CaliforniarnAssociation of Realtors®rn(C.A.R.) reports that sales of existing single-family detached unitsrnwere at a seasonally adjusted annual rate of 414,950 in June, downrn3.8 percent from a revised rate of 431,490 in May and 3.7 percentrnfrom the estimate of 430,960 in June 2012.</p

“ThernJune decline in home sales was attributed partially to the hike inrninterest rates in recent months.  The average 30-year fixed raternhad been stabilizing at around 3.5 percent since the beginning of thernyear, until it jumped more than 50 basis points in June to reachrnabove the 4 percent mark for the first time in more than a year and arnhalf,” said C.A.R. Vice President and Chief Economist LesliernAppleton-Young.  “This rate increase portends a somewhatrnhigher rate environment going forward as the Fed mulls over the startrnof its tapering off program in response to positive signs from therneconomy.”   </p

(Read More: Taper Talk Hurts, But Not Enough to Stall Recovery – Freddie Mac)</p

Thernstatewide median price of an existing single-family detached homernrose 2.7 percent from May’s median price of $417,350 to $428,510. This was 33.5 percent above the median price in June 2012 ofrn$320,990. Last month was the 16^{th</supconsecutive one in which year-over-year prices were up and the 12th</supmonth when those increases were in the double digits. </p}

“Despite a small increase in inventory, the supplyrnof housing remains tight in most parts of the state and continues tornfuel home price increases,” said C.A.R. President Don Faught. rn”The surge in home prices in the past year has given homeownersrnwith previous underwater properties an opportunity to become trade-uprnbuyers.  However, many are finding this difficult because theyrneither lack sufficient cash for a down payment or they are concernedrnthat if they sell, they will have no place to go, given limitedrninventory.  Others may be waiting on the sidelines for values torngain even more before selling, which further contributes to tightrninventory.”</p

The supply of homes for sale inched up to a 2.9 monthrnsupply in June from 2.6 months in May. One year earlier therninventory was 3.5 months. Competition for these homes has drivenrndown the median time a house remains on the market from a median ofrn43.5 days in June 2012 to 27.7 days last month.

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