2016 California Home Sales Down 2.9 Percent from 2015, Remain Essentially Flat Since 2009
2016 California Median Home Price Up 4.1 Percent Year-over-Year
150,000 California Homeowners Escape Negative Equity Prison in 2016
CALIFORNIA, JANUARY 26, 2017 – 2016 California home sales (single-family home and condominium) were up 0.6 percent in December 2016 to 33,678 from 33,479 in November 2016. For the year, sales were down 10.3 percent from 37,547 in December 2015.
“The TILA-RESPA Integrated Disclosure (TRID) rule that went into effect in November 2015 depressed year-over-year sales comparisons,” said Madeline Schnapp, Director of Economic Research for PropertyRadar. “Accounting for the TRID impact, we estimate California home sales were unchanged compared to a year ago.”
Annual sales totals (January through December) smooth out year-end volatility and provide a longer-term view of California real estate trends. Sales in 2016 were down 2.9 percent from 2015. At the regional level, in the Greater San Francisco Bay Area 2016 sales fell 9.7 percent from 2015, were nearly unchanged in Southern California, down 2.5 percent in the Greater Sacramento region and lower by 1.6 percent in the Central Valley.
“In general, affordability and sales results go hand in hand,” said Schnapp. “The Greater San Francisco Bay Area is the least affordable housing market in the state. It should come as no surprise that this area saw much lower sales volumes this year relative to last. At some point, you reach the limit of what people can pay which in turn limits sales.”
The median price of a California home was $430,000 in December 2016, down 1.1 percent from $435,000 in November but up 4.1 percent from $413,000 a year ago. In the Greater San Francisco Bay Area, median home prices in three counties exceeded one million dollars, Marin ($1.05 million), San Francisco ($1.35 million) and San Mateo County ($1.23 million).
Within the 26 largest counties in California, on a year-ago basis, prices were higher in all but three counties. The counties with the largest annual price gains were San Francisco (+11.3 percent), San Mateo (+8.6 percent), Sonoma (+6.7 percent), Los Angeles (+5.8 percent) and Orange (+5.6 percent).
“Price gains, particularly in the more desirable coastal regions of the state, continue to outstrip both economic and income growth,” said Schnapp. “Lack of supply amidst rising demand has been the dominant theme for several years keeping a lid on sales. New building projects in many counties are coming online and beginning to add inventory. More inventory in 2017 should help alleviate some of the supply problem.”
In 2016, 150,000 homeowners exited their negative equity positions and can now participate in the housing market. In December, the percentage of homeowners in a negative equity position was 4.8 percent down from 6.5 percent a year ago.
“The fact that 150,000 homeowners exited their negative equity prisons last year is big news,” said Schnapp. “These homeowners are now free to refinance their mortgages or actively participate in the housing market. These newly minted positive equity homeowners are a welcome addition to an inventory constrained market.”
Cash sales during the month of December fell 1.2 percent from November and were down 12.1 percent from December 2015. Cash sales in 2016 were down 7.6 percent compared to 2015 and represented 20.2 percent of total sales.
In December 2016, the counties with the highest percentage of cash sales were San Luis Obispo (+25.9 percent), Tulare (+23.1 percent), Fresno (+21.9 percent), Riverside (+21.6 percent) and Orange (+21.5 percent).
“In December, Bay Area counties were notably absent from the top five list of counties with the highest percentage of cash sales,” said Schnapp. “Instead, several lower priced counties made the list suggesting that cash buyers were finding attractive purchase opportunities where buyers get more bang for their housing buck.”
“While the lack of inventory has been a challenge for the housing market for several years now, in 2017 the dominant concern is the unknown trajectory of mortgage interest rates,” said Schnapp. “With a new president at the helm, the tax and spending proposals and their impact on economic growth going forward is uncertain. If mortgage interest rates remain in the 3.8 to 4.3 percent range, we will consider that a tailwind for the market. Mortgage interest rates in the 4.5 to 5.0 percent range a definite headwind.”
Data source: PropertyRadar