California’s housing market backpedaled in July 2018 on an annual basis for the third consecutive month as higher interest rates and rising home prices eroded housing affordability and dampened demand, according to the latest report from the California Association of REALTORS® (C.A.R.).
San Diego was a bright spot, however, with sales increasing 0.7 percent in July 2018 after two months of declines.
In its July home sales and price report, C.A.R. said the statewide median home price decreased to $591,460 in July 2018. The July statewide median price was down 1.9 percent from $602,760 in June and up 7.6 percent from a revised $549,470 in July 2017.
In San Diego County, C.A.R. reported that the median single-family housing price remained unchanged at $650,000 in July, but it was 6 percent higher than a year ago.
Closed escrow sales of existing single-family detached homes in California totaled a seasonally adjusted annualized rate of 406,920 units in July, according to information collected by C.A.R. from more than 90 local REALTOR® associations and multiple leasing services statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2018 if sales maintained the July pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
“In the midst of the peak home-buying season, high home prices and rising interest rates combined to crimp housing affordability, which in turn is subduing home sales,” said C.A.R. President Steve White. “Some of the reluctance by buyers appears to be driven by fears that the market may be peaking. Additionally, the lack of a federal tax incentive for homeownership could be at play given that much of the weakness is in the lower-priced, first-time buyer segment of the market.”
The Southern California Region housing market was essentially flat compared to last year with sales ticking up 0.1 percent. Ventura County led the region with a 9.4 percent sales increase, followed by a modest uptick of 1.3 percent in Riverside. Orange and Los Angeles counties saw sales declines of 0.9 percent and 1.4 percent, respectively, while sales in San Diego inched up 0.7 percent.
“While home sales continued to decline in recent months, the softening of the market is more indicative of a market shift rather than a major market correction,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “Despite the slowdown, there were some silver linings in the market in July. For example, homes priced between $500,000 and $1 million posted modest gains of about 5 percent in July thanks to growing inventory. Additionally, every price segment above $1 million continued to enjoy double-digit sales gains.”
Other key points from C.A.R.’s July 2018 resale housing report included:
- The median number of days it took to sell a California single-family home was 18 days in July 2018, compared to 15 days in June 2018 and 16 days in July 2017. Meanwhile, in San Diego County, the median number of days a home remained unsold on the market was 14 days in July 2018, compared to 13 days in both June 2018 and July 2017.
- Statewide active listings improved for the fourth consecutive month after 33 straight months of declines, increasing 11.9 percent from the previous year. July’s listings increase was the biggest in more than three years, and the number of active listings was the greatest supply of homes on the market in nearly two years.
- Much of the listings increase was attributable to lower-priced properties. With the exception of homes priced under $300,000, every price segment posted a double-digit increase in active listings in July.
- California condominium/townhome median price hit another record high in July 2018 at $486,330.
- The statewide unsold inventory index, which is a ratio of inventory over sales, edged up to 3.3 months in July from 3.2 months in July 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.
- The 30-year, fixed-mortgage interest rates averaged 4.53 percent in July, down from 4.57 percent in June and up from 3.97 percent in July 2017, according to Freddie Mac. The five-year, adjustable mortgage interest rate, however, edged higher in July to an average of 3.84 percent from 3.82 percent in June and from 3.22 percent in July 2017.
In other recent real estate and economic news, according to news reports:
- San Diego County home prices in June 2018 increased 0.6 percent in June 2018 and 6.9 percent over the past year, faster than the nationwide average but slower than other California cities, according to the S&P CoreLogic Case-Shiller Indices. The price increase locally was below the national average of .08 percent in June 2018. Out of all the regions covered in the 20-city index, San Diego prices increased the eighth most in a year, tied with Tampa. Las Vegas had the biggest gain at 13 percent. Nationwide home prices were up 6.2 percent, less than California on the index, including Los Angeles (7.4 percent) and San Francisco (10.7 percent). San Diego had the second-slowest price increase of any city in the West, behind Portland with a 5.8 percent increase in a year.
- CoreLogic also said the median price of a San Diego County home was $575,000 in June 2018, up from $545,000 in June 2017, an increase of 5.5 percent. The median price of a Southern California home was a record $536,250 in June 2018, up 1.2 percent from $530,000 in May and up 7.3 percent from $500,000 in June 2017.
- A decade after the U.S. housing market crashed, half of the country’s homes have regained the value they lost during the recession, according to a new Zillow report. In its survey of San Diego County, Zillow found that 63.4 percent of San Diego County’s homes were worth more in June than at the pre-recession peak in 2007.
- San Diego County experienced a 20 percent year-over-year increase in foreclosure starts in July 2018, but the levels still remain low by historical standards, according to Attom Data Solutions. The real estate data company’s report found foreclosure starts rose 7 percent year-over-year in June and were up 20 percent year-over-year in May. San Diego County recorded 253 foreclosure starts in July 2018, compared with 211 in July 2017. Nationwide, 44 percent of metropolitan areas analyzed in the report posted year-over-year increases in foreclosure starts in July.
- Home escrow closing costs can vary enormously, not only state to state, but from city to city as well, according to a survey by ClosingCorp Inc. The firm, which provides residential closing cost data, examined the period between October 2017 and March 2018. It calculated closing costs on a single-family home, including the lender’s title, owner’s title, appraisals, settlement fees, recording fees, land surveys and transfer taxes, where applicable. ClosingCorp found that San Diego County homebuyers of a $700,000 to $800,000 property had an average closing cost of $7,218, including taxes, and an average closing cost of $5,961 without the taxes included.
- The unemployment rate in the San Diego County dropped to 3.5 percent in July, down from a revised 3.7 percent in June, according to the California Economic Development Dept. The rate has been declining steadily for more than two years, and had recently fallen below 3 percent before ticking up in June. Last year in July the unemployment rate was 4.4 percent, and it was over 5 percent in July 2016. The San Diego figures compare with an unemployment rate of 4.4 percent for California as a whole and 4.1 percent for the nation in July.
- The U.S. economy added 157,000 jobs in July. The unemployment rate came in at 3.9 percent, matching expectations, while wages increased by 0.26 percent. Manufacturing is growing, 37,000 manufacturing jobs were added in July 2018. Wages are increasing. U.S. workers saw the largest increase in wages and benefits since September 2008, according to a report from the Labor Department. Wages alone gained 2.8 percent over the past 12 months, which also reflected a near 10-year high. GDP is at 4.1 percent. Millions of Americans are no longer receiving welfare, with 2.8 million Americans dropping food stamp enrollment since President Trump took office.
- U.S. consumer confidence surged to near an 18-year high in August, as households remained upbeat on the labor market, pointing to strong consumer spending that should help to sustain the economy for the remainder of the year. The Conference Board said its index of U.S. consumer confidence climbed by 5.5 points to 133.4 in August from 127.9 in July, the highest it’s been since October 2000. The August reading well exceeded economists’ expectations. Factors including a buoyant job market and rising incomes are helping Americans feel better about the economy. People’s confidence in the present situation improved by 6.1 points, while expectations for the future increased by 5.2 points.