Affordability Takes Toll on Sales and Prices in California

Home sales declined in California inrnNovember, suffering from diminishing housing affordability in the face ofrnrising home prices and interest rates.  ThernCalifornia Association of Realtors (C.A.R.) reported it was the fourth straightrnmonth of declining sales.</p

Statewide sales of existing,rnsingle-family detached homes were at a seasonally adjusted annualized rate ofrn387,520 units in November.  This was arn3.4 percent decrease from a revised pace of 401,000 units in October and was 12rnpercent below the November 2012 rate of 440,250 units.  C.A.R. said the recent number was the lowest raternof sales for California since July 2010. rn</p

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The median price for an existingrnsingle-family home in California also slipped, down 1.2 percent from October’srnmedian price of $427,290 to $422,210. rnStill the November price reflects a 22.2 percent run-up in a year.  The increase, from a median of $345,560 inrnNovember 2012 represented the 17^th month California home prices havernincreased by double digits from a year earlier. </p

“Sales reached their highest levelrnin the fourth quarter of 2012, when mortgage rates bottomed out lastrnNovember.  While diminishing housing affordability played a big role inrnthe larger than expected decrease in home sales this November, exceptionallyrnstrong sales last year was another factor for the double-digit year-to-yearrndecline,” said C.A.R. Vice President and Chief Economist LesliernAppleton-Young.  “The demand for housing could remain soft in the upcomingrnmonths as buyers and sellers continue to search for a level playing field inrnthe market.”   </p

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“Improving home prices are arndouble-edged sword for the housing market.  While welcomed news forrnhomeowners and prospective sellers, diminished affordability is squeezing outrnmany buyers and dampening their enthusiasm for home purchasing,” said 2014rnC.A.R. President Kevin Brown. “Buyers are playing the waiting game and puttingrntheir home search on hold until prices stabilize and more inventory becomesrnavailable in the market.”</p

The inventory of available single-familyrnhomes edged up to a 3.6 month supply from 3.4 months in October and 3 monthsrnone year earlier.  A six- to seven-monthrnsupply is considered typical in a normal market.  Marketing time increased slightly in Novemberrnfrom 33.1 days to 36.7 days, one day less than the previous November.  </p

C.A.R. collects sales and price datarnthrough a survey of 90 member associations throughout the state.  Due to the low sales volume in some areas,rnmedian price changes may exhibit unusual fluctuation.  C.A.R. cautions that the change in medianrnprices should not be construed as actual price changes in specific homes.

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