As the year is winding down, so is the housing market, both locally and statewide, according to industry analysts and the California Association of REALTORS® (C.A.R.). Among the major reasons for the slowdown include scarcity of housing inventory resulting in higher home prices, C.A.R. said. The number of homes for sale keeps decreasing, but demand is not slowing down.
C.A.R. reports that pending home sales shrank for the fourth consecutive month in October, the most recent month for available numbers. Based on signed contracts, year-over-year statewide pending home sales dropped in October on a seasonally adjusted basis, with the Pending Home Sales Index (PHSI) declining 2.6 percent from 119.1 in October 2016 to 116.0 in October 2017. In San Diego, the PHSI was 123.6 in October 2016 and 109.5 in October 2017, a decline of 11.4 percent, one of the highest percentage changes in the state behind Santa Clara (-21.4 percent) and Riverside (-14 percent). Pending home sales declined on an annual basis for nine of the last 10 months in 2017, C.A.R. said.
Results from C.A.R.’s Market Pulse Survey for October also reflected disappointing market conditions. C.A.R. said the share of homes selling above asking price fell from 28 percent a year ago to 23 percent in October, while the share of properties selling below asking price inched up from 44 percent to 46 percent. The remaining 30 percent sold at asking price, up from 28 percent in October 2016. For homes that sold above asking price, the premium paid over asking price dipped from 9 percent in October 2016 to 8 percent in October 2017. The 28 percent of homes that sold below asking price sold for an average of 12 percent below asking price in October compared to 9 percent a year ago.
Three industry factors, including increasing declining housing affordability, inflated home prices and rising interest rates, represented the top concern for 4 out of 10 (44 percent) REALTORS®. In addition, 30 percent of REALTORS® cited a lack of available homes for sale as their top concern. The remaining 26 percent representing REALTORS’® biggest concerns in October included a slowdown in economic growth, lending and financing, and policy and regulations. C.A.R.’s Market Pulse Survey is a monthly online survey sent to more than 10,000 California REALTORS® to measure data about their last closed transaction and sentiment about business activity in their market area for the previous month. Nearly 300 REALTORS® responded in October.
Meanwhile, among other housing statistics from October:
— The median price of a single-family home in San Diego County rose 6.2 percent year-over-year in October to $555,800, according to the latest Zillow report. Zillow also said lower inventories are driving up home prices.San Diego County’s inventory dropped by 31 percent fewer homes in October 2017 compared to October 2016. Adding to the shortfall is the fact fewer homes are being constructed today than prior to the recession.
— CoreLogic says the San Diego County median home price was $529,750 in October, a steady decrease from its peak this summer. The median home price has increased 4.4 percent in a year as of October. It is the lowest yearly gain since June 2016. Andrew LePage, CoreLogic research analyst, said low home inventory and strong job growth should continue to push prices up, making it difficult for potential first-time buyers. Looking ahead, the CoreLogic Home Price Index Forecast indicates that prices will increase by 4.2 percent nationwide by October 2018.
— In 2018, C.A.R. predicts the California median home price will increase 4.2 percent to $561,000, following a projected 7.2 percent increase in 2017 to $538,500. With the economy expected to continue growing, housing demand should remain strong and incrementally boost California’s housing market in 2018, C.A.R. said. However, C.A.R. said a shortage of available homes for sale and affordability constraints will continue to challenge homebuyers. C.A.R. also said the average for 30-year, fixed mortgage interest rates will increase slightly to 4.3 percent in 2018, up from 4.0 percent in 2017 and 3.6 percent in 2016, but will still remain low by historical standards.