TRID will not threaten CaliforniaÕ housing recovery

But it will cause a small bump in the road

A quick glance at the latest housing data for California doesn’t look too positive.

However, after digging into the numbers, it appears the new TILA-RESPA Integrated Disclosure rule is artificially depressing sales due to the delay in closing, and after a couple months, the market will return to normal.  

According to PropertyRadar’s recent California housing report, California single-family home and condominium sales fell 22.0% in November to 27,105, down from a revised 34,760 in October.  Compared to a year ago, sales were down 3.1% from 27,961 in November 2014.

“November 2015 sales marked the lowest November sales volume since 2007,” said Schnapp.

“It was a surprise to see median prices jump in November considering the low sales volume,” says Schnapp.  “TRID is likely delaying the closing of lower priced homes which artificially changes the mix of homes sold thus pushing median prices higher.”

The November median price of a California home was $415,000 up 2.5% from $404,750 in October. Prices are just shy of the July 2015 peak of $416,000, which was an 8-year high.

But these numbers shouldn’t last too much longer. “The TRID effect will likely impact the real estate market for another month or so,” said Schnapp. “In the meantime, artificially depressed sales and higher median prices may be with us through January 2016.”

Meanwhile, another California housing report from the California Association of Realtors posted similar findings.

California existing home sales decreased in November from both the previous month and year for the first time in nearly, the CAR report said.

Home sales posted below the 400,000 level in November for the first time since March 2015 and were at the lowest level since February 2015. This is down 8.4% from the revised 403,580 level in October and down 1.6% compared with home sales in November 2014 of a revised 375,740.

The year-to-year decrease was the first since January 2015 and was significantly below the six-month average of 8.3% observed between May 2015 and October 2015.

"The Consumer Financial Protection Bureau's Know Before You Owe TILA-RESPA Integrated Disclosure, or TRID, which was implemented in early October, may have affected home sales in the last couple of months," said CAR President Ziggy Zicarelli.

"Some sales may have been either pulled forward into September to beat TRID's effective date or been delayed. The impact, however, should be transitory as the roll-out and implementation process move further along,” said Zicarelli.

TRID is impacting the market in different ways. Here are some examples of how community lenders feel about TRID and the way it is impacting their business.

TRID aside, 2016 will still be a tough year for California. According to another recent CAR report, California’s housing market is expected to improve in 2016, but a shortage of available inventory and continuing high costs are expected to limit the improvement. 

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