Here’s why the California housing outlook is grim despite April good news

High negative equity, high prices, low inventory cripple sales

Home price gains in the Golden State have lifted more underwater homes into positive territory, pushing the share of equity home sales to their highest level since late 2007, the California Association of Realtors says. 

The share of equity sales – or non-distressed property sales – continued to increase in April, rising to 88.4% in April, up from 87.6% in March. 

After a slight decline at the end of 2013, equity sales have been rising steadily again since the beginning of this year.  April marks the 10th straight month that equity sales have been more than 80% of total sales. Equity sales made up 75.4% of sales in April 2013.

Meanwhile, California single-family home and condominium sales in April 2014 were up 20% for the month but were down 13.3% from April 2013, according to PropertyRadar

Despite April gains, year-to-date sales volume was the lowest since 2008.

For the month, both distressed and non-distressed property sales posted gains.  April 2014 distressed property sales gained 13.1% from March, while non-distressed property sales were up 21.8%.

“Despite back-to-back double digit sales gains in both March and April, total sales volume since the January continues to lag sales in 2013,” said Madeline Schnapp, Director of Economic Research for PropertyRadar.   “In fact, what is surprising to me is that year-to-date sales volumes in 2014 are the lowest since 2008.”

Twenty-six of the 41 reported counties showed a month-to-month decrease in the share of distressed sales, with 13 of the counties recording in the single-digits, including Alameda, Marin, San Benito, San Diego, San Luis Obispo, San Mateo, and Santa Clara counties — all of which registered a share of five% or less.

Of the distressed properties, the share of short sales dropped to levels last observed in April 2008 at 5.9%, down from 6.6% in March.  April’s figure was nearly a third of the 14.7% recorded in April 2013.

The share of REO sales only dipped slightly in April to 5.3%, down from 5.4% in March.  REOs sales are now nearly half of what they were a year ago, when REOs made up 9.4% of all sales in April 2013. 

The April 2014 median price of a California home hit its highest level in six years, rising 7,500 dollars, or 2.0%, to 376,500 dollars from 369,000 dollars in March. On a year-ago basis, median home prices jumped 14.1%.   Driving the month-over-month price increase in April was a 21.8% increase in the sales volume of higher priced non-distressed properties.

“Despite lower sales volume, the median price of a California home continues to march higher,” said Schnapp. “The rise in median home prices is being driven by the change in mix between the sales of distressed properties versus sales of non-distressed properties.  Higher priced non-distressed property sales now dominate monthly sales numbers, so it should come as no surprise that median prices are up.”

The bottom line for California? Schnapp is pessimistic about the rest of 2014.

“While most real estate analysts are forecasting a robust real estate recovery for the rest of 2014, our data suggests anemic sales growth,” said Schnapp.  “Elevated negative equity, high prices and low inventory are depressing sales volumes and crowding out potential buyers.”

Latest Articles

New-home sales show housing ready for rescue role

While other sectors of the economy are soft, housing is ready to play its traditional countercyclical role of leading the way out of a recession, said Robert Dietz, NAHB’s chief economist. HW+ Premium Content

Sep 24, 2020 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please