California home sales start 2017 on a strong note
Median sales price drops below $500,000 for first time since March 2016
While winter time usually means a decline in home sales, California just saw its first increase in home sales between December and January since 2012, a sign that the Golden State could be in for a strong housing year.
The data comes courtesy of a new report from the California Association of Realtors, which shows that closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 420,100 units in January.
That’s up 2.1% from the 411,430 level in December 2016, and up 4.4% when compared with home sales in January 2016 of a revised 402,220.
Another positive sign for California is a decrease in median sales price, which might not normally be a harbinger of good things to come in real estate, but in this case, the decline is lower than normal.
According to the CAR report, the median price of an existing, single-family detached California home fell 3.8% from a revised $508,870 in December to $489,580 in January.
That also marked the first time in since March 2016 that California’s median sales price fell below half a million dollars.
But as CAR’s report notes, the decline from December to January is smaller than normal, which indicates health in the market.
“Since 2011, price declines from December to January have usually ranged from -11.7% to as little as -4.6%, but January's 3.8% monthly smaller price decline suggests that price pressure remains relatively robust and could translate into additional price growth as the spring and summer home-buying seasons near,” CAR’s report states.
CAR President Geoff McIntosh suggests that the high prices in markets like San Francisco is driving buyers to seek lower priced options in nearby cities.
“California's housing market continues to be defined by the higher-priced, coastal markets and the less expensive, inland areas that still offer access to major employment centers,” McIntosh said.
“For example, eroding affordability and tight housing inventory are pushing buyers away from the core Bay Area markets of San Francisco, San Mateo, and Santa Clara and into less expensive bedroom communities, such as Contra Costa, Napa, and Solano,” McIntosh continued. “In Southern California, an influx of buyers from coastal employment areas into the Inland Empire drove healthy year-over-year sales in Riverside and San Bernardino.”
While the current market conditions look promising for California, CAR’s senior vice president and chief economist, Leslie Appleton-Young, notes that rising interest rates could hamper the state’s housing economy.
“January's sales increase was likely boosted by rising interest rates, which have risen sharply since the election and have given buyers an incentive to get off the sidelines and close escrow before rates go higher,” Appleton-Young said. “Yet, future anticipated rate hikes will increase the cost of homebuying and could have an adverse effect on affordability and future home sales.”