The median price of an existing single-family home in California in May 2018 eclipsed $600,000 for the first time in more than 10 years as statewide prices continue to approach San Diego County’s $640,000 figure, according to the California Association of REALTORS® (C.A.R.).
C.A.R. said the statewide median home price surpassed its previous peak of $594,530, which was recorded more than 10 years ago during the last housing boom. The May statewide median price was $600,860, up 2.8 percent from a revised $584,460 in April 2018 and up 9.2 percent from a revised $550,230 in May 2017. The year-over-year price growth pace was the highest rate of growth since May 2014.
In San Diego County, the median sales price of an existing single-family home was $640,000 in May 2018, a slight increase from the $635,000 sales price in April 2018 and $605,000 sales price in May 2017.
The median number of days it took to sell a California single-family home remained low at 15 days in May 2018, compared with 15 days in April 2018 and 14 days in May 2017. Meanwhile, in San Diego County, the median number of days a home remained unsold on the market was 13 days in May 2018, compared to 11 days in April 2018 and 11 days in May 2017.
Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 409,270 units in May, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2018 if sales maintained the May pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales. May’s sales figure was down 1.8 percent from the revised 416,750 level in April and down 4.6 percent compared with home sales in May 2017 of 428,870. May marked the first year-over-year sales decline in four months and the lowest sales level in more than a year.
“The softening in May home sales was due in part to the spike in interest rates in mid-April, when the 30-year fixed mortgage rate jumped 20 basis points in just one week to reach the highest level since 2014,” said C.A.R. President Steve White. “Homebuyers may have postponed escrow closings to wait out the effects of the rate surge. Additionally, the specter of rate increases earlier in the year may have pulled sales forward into the first quarter, which resulted in the subpar performance in the last couple of months. Looking ahead, higher mortgage rates and elevated home prices will heighten affordability constraints that will likely temper the housing market in the coming months.”
“As we predicted last month, California’s statewide median home price broke the previous pre-recession peak set in May 2007 and hit another high as tight supply conditions continued to pour fuel on the price appreciation fire,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “With inventory starting to show signs of improvement, however, home price appreciation could decelerate in the second half of the year, especially since further rate increases are expected to hamper homebuyers’ affordability and limit how much they are willing to pay for their new home.”
Other key points from C.A.R.’s May 2018 resale housing report included:
— The bottom end of the market continued to bear the brunt of the housing shortage as the availability of homes priced under $200,000 declined by 28.7 percent on an annual basis, and those priced between $200,000 and $299,999 dropped 13.1 percent. On the other hand, inventory of properties priced $1 million and above increased by more than 18 percent. In general, supply constraints continue to limit sales in market segments priced below $500,000, but higher-priced properties continue to show modest to strong growth in sales in the recent month.
— The number of statewide active listings improved for the second consecutive month, increasing 8.3 percent from the previous year. The year-over-year increase was the largest since January 2015, when active listings jumped 11.0 percent. Perhaps more homeowners are listing their homes for sale in an effort to cash out on recent home price surges. The increase in active listings was also partly due to the sales decline, which led to a boost in inventory.
— As sales declined from a year ago, the unsold inventory index, which is a ratio of inventory over sales, increased on a year-over-year basis as well. The statewide unsold inventory index edged up to 3.0 months in May from 2.9 months in May 2017. The index measures the number of months it would take to sell the supply of homes on the market at the current sales rate.
— Mortgage rates have been on the rise since breaking the 4.0 percent barrier in January. The 30-year, fixed-mortgage interest rates averaged 4.59 percent in May, up from 4.47 percent in April and from 4.01 percent in May 2017, according to Freddie Mac. The five-year, adjustable mortgage interest rate also perked higher in May to an average of 3.79 percent from 3.66 percent in April and from 3.12 percent in May 2017.
In other recent real estate and economic news according to news reports:
— According to CoreLogic, an Orange County-based real estate information service, the median price of a home in San Diego County rose by 7.6 percent in May, compared with the same month a year earlier. The median price of a San Diego County home was $570,000 in May 2018, up from $529,750 in May 2017. A total of 4,004 homes were sold in May in the county, down 3.6 percent from 4,155 during the same month the previous year. The trend in Southern California, says the real estate tracker company, is declining sales as prices reach new records. “With inventory tight and affordability worsening, the number of Southern California homes sold has fallen on a year-over-year basis during three of the last five months,” said Andrew LePage, research analyst with CoreLogic. “Total sales during the first five months of this year fell about 2 percent from the same period last year, reflecting limited inventory particularly in more affordable price ranges.”
— A recent report by the S&P CoreLogic Case-Shiller Indices said San Diego County home prices in March increased 7.7 percent from a year ago, outpacing most of the country. Nationally, home prices had increased 6.5 percent over 12 months. Seattle had the biggest increase of 13 percent in the 20-city index. Prices were up across California. San Francisco prices went up 11.3 percent in the same time period and Los Angeles prices increased 8.1 percent. For April, the report said that San Diego home prices were 7.8 percent higher over the past year.
— San Diego County’s unemployment rate is the lowest since January 2000. It was 2.9 percent in May, unchanged from a revised 2.9 percent in April 2018, and below the year-ago estimate of 3.7 percent, the California Employment Development Department (EDD) recently reported. This compares with an unadjusted unemployment rate of 3.7 percent for California and 3.6 percent for the nation during the same period.
— Americans’ household income is the highest ever. An average American home has never seen better income as the economy continues to break records. The median household income reached $61,483 in April, according to an estimate by Sentier Research based on monthly Census Bureau survey data. It’s the highest estimate by Sentier since it started providing monthly data in 2000, and also higher than any of the yearly Census Bureau estimates that reach back to 1967. American household incomes were decimated following the 2008 recession and continued to sink until 2011. Only then did wages start to recover. In recent months, however, the numbers have started to break new grounds. The economy has broken several records over the past months, such as the most job openings in one month, 6.55 million in March. That means there were almost as many job openings as the number of people unemployed. Unemployment fell to 3.9 percent in April. The only time it has ever dropped so low since the 1969 recession was in April 2000, and only for one month. Black and Hispanic unemployment rates have also fallen to the lowest levels in recorded history, and among women, the unemployment rate has decreased to the lowest since the 1950s.
— Less than 10 percent of homeowners are underwater on their mortgages. More than a decade after the housing market collapsed, the recovery has passed another milestone. The share of homeowners who owe more than the value of their home is 9.1 percent, falling below 10 percent for the first time since the housing market fell, according to Zillow’s 2017 Q4 Negative Equity Report. The typical U.S. home lost more than a quarter of its value when the market crashed, sending millions of homeowners into negative equity, when their homes’ values were lower than the balances on their mortgages. Now, though, national home values are higher than ever.
— Household wealth topped $100 trillion for first time in the first quarter, according to the Federal Research. Thanks to rising house prices, the net worth of households and nonprofits rose to $100.77 trillion from $99.74 trillion, offsetting the impact of a decline in the stock market. Household debt rose at an annual rate of 3.3 percent staying in the range it’s been for the last few years. Business debt grew by 4.4 percent for the second straight quarter. Corporate cash holdings rose to $2.66 trillion from $2.59 trillion.The gains in the housing market, at a time of an improving jobs market, have put households in a better financial position than they have been for some time. Their net worth to disposable income at 682.6 percent is near the highest level in history, while debt service payments as a percentage of household income are way below bubble-era levels.
— Employment and payrolls will continue to grow in California over the next three years, according to the UCLA Anderson Forecast. The forecast calls for employment growth of 1.7 percent, 1.8 percent and 0.8 percent, respectively, in 2018, 2019 and 2020, with payrolls growing at about the same rate. Homebuilding is estimated to accelerate to 140,000 units per year by the end of 2020.
— The San Diego Association of Governments (SANDAG) has revised its number to 116,000 for the number of new housing units to be built in San Diego County over the next decade. The revision was due to the state’s Regional Housing Needs Assessment, which regional planning agencies such as SANDAG use to plan transportation and other infrastructure investments. The California Dept. of Housing and Community Development estimate that 171,000 units need to be built locally from 2021 to 2029.