Real Property Report – California, August 2016

Peak or Plateau? 

California Year-to-Date Sales Down 3.4 Percent, Median Prices Up 4.8 Percent

San Francisco Bay Area Year-to-Date Sales Fall 10.4 Percent, Prices Subside 2.2 Percent

“In the same way that July sales were artificially depressed by fewer business days than the prior year, August sales were artificially goosed higher with more business days,” said Madeline Schnapp Director of Economic Research for PropertyRadar. “The best way to make sense of these calendar quirks is to step back and take a year-to-date view. When we do, we see slightly lower sales and higher prices, in perfect alignment with our theme since October 2015 – “Flat is the New Black.”

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Sep

27

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An increase in pending sales across all major regions buoyed statewide California pending home sales in August from a year ago, the CALIFORNIA ASSOCIATION OF REALTORS® said.

Uncertainty about market conditions was reflected in C.A.R.’s August Market Pulse Survey, with most leading indicators showing a decline in growth and REALTORS® becoming less optimistic about market expectations and more concerned with reduced affordability.

Source: C.A.R.

Making sense of the story

 

  • Statewide pending home sales rose in August on a seasonally adjusted annualized basis, with the Pending Home Sales Index (PHSI)* increasing 6.4 percent from 113.9 in August 2015 to 121.3 in August 2016, based on signed contracts. The year-over-year increase was the fifth consecutive positive annual improvement and the largest in 2016. Despite the improvement, overall market conditions appear to be slowing down and closed transactions plateauing.
  • On a month-to-month basis, California pending home sales slipped 1.0 percent from July’s index of 122.5 – the fourth consecutive decline, which was largely due to seasonality. The monthly decrease was the smallest July-to-August decline in four years, suggesting that sales may remain at similar current levels.
  • Pending home sales in Southern California as a whole rose 9.7 percent from August 2015, thanks primarily to year-over-year pending sales increases of 15.5 percent in San Diego, 7.4 percent in Los Angeles County, and 3.0 percent in Orange County. Compared to July 2016, pending home sales were down 7.2 percent.
  • For the Bay Area as a whole, pending sales rose 8.5 percent from August 2015 and 4.1 percent from July. A strong 14.8 percent increase in pending sales in Santa Clara County drove the improvement in the Bay Area, as well as double-digit pending sales gains in San Francisco (10.4 percent) and San Mateo (11.9 percent) counties.
  • Overall pending sales in the Central Valley also performed well, posting a 7.1 percent annual increase and a 2.3 percent month-over-month gain. One exception for the region was Kern County, where pending sales have been dropping significantly due to a decline in oil prices and the economy’s reliance on the energy sector.

 

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Talking Points

  • Nearly half a million U.S. homeowners regained equity in Q2 2016 compared with the previous quarter, increasing the percentage of homes with positive equity to 92.9 percent of all mortgaged properties, or approximately 47.2 million homes.
  • Nationwide, home equity grew year over year by $646 billion, representing an increase of 9.9 percent in Q2 2016 compared with Q2 2015.
  • In Q2 2016, the total number of mortgaged residential properties with negative equity stood at 3.6 million, or 7.1 percent of all homes with a mortgage. This is a decrease of 13.2 percent quarter over quarter from 4.2 million homes, or 8.2 percent, in Q1 2016 and a decrease of 19 percent year over year from 4.5 million homes, or 8.9 percent, compared with Q2 2015.
  • Negative equity, often referred to as “underwater” or “upside down,” applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in home value, an increase in mortgage debt or a combination of both.

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Dave Thurman ~ Real Estate Broker ~ REALTOR®

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Freddie Mac recently released its monthly Outlook for September showing that housing remains a bright spot for the U.S. economy. Mortgage originations are expected to surge in the third quarter, and our forecast for the best year in home sales since 2006 looks increasingly on the mark.

Highlights from the Outlook include:

  • Expecting the 30-year fixed rate mortgage to average 3.6 percent in 2016, the lowest annual average in over 40 years. The current record low annual average occurred in 2012 at 3.66 percent.
  • Showing that falling mortgage rates from 4 percent at the end of 2015 to about 3.5 percent in the third quarter of 2016 have more than offset the rise in house prices in most markets, helping to preserve homebuyer affordability.
  • Revising up the forecast of home price appreciation to 5.6 percent and 4.7 percent in 2016 and 2017, respectively. This is up from last month’s forecast of 5.3 percent for 2016 and 4 percent for 2017.
  • Showing cash-out refinance activity on the rise in the second quarter, with an estimated $13.3 billion net dollars of home equity converted to cash during refinancing. This is up from $11.4 billion in the first quarter of 2016 but substantially less than the peak cash-out refinance volume of $84.0 billion during the second quarter of 2006.
  • Remaining on track for mortgage originations to reach $2 trillion in 2016, the highest total since 2012.

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Fast Facts

Calif. median home price: August 2016:

  • California: $526,580
  • Calif. highest median home price by region/county: San Francisco, $1,257,500
  • Calif. lowest median home price by region/county: Del Norte, $174,500

Calif. Pending Home Sales Index:
The Pending Home Sales Index (PHSI) increased 3.5 percent from 118.4 in July 2015 to 122.5 in July 2016

Calif. Traditional Housing Affordability Index:
Second Quarter 2016: 31 percent

Mortgage rates: Week ending 9/15/2016
(Source: Freddie Mac)

  • 30-yr. fixed: 3.50% fees/points: 0.5%
  • 15-yr. fixed: 2.77% fees/points: 0.5%

From C.A.R. Newsline ~  CALIFORNIA ASSOCIATION OF REALTORS®

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Real Estate in Stockton, Lodi and San Joaquin County

Dave Thurman ~ Real Estate Broker ~ REALTOR®

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Sep

20

Boomers on the Hunt

Posted by Dave Thurman under Real Estate

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Real Estate in Stockton, Lodi and San Joaquin County

Dave Thurman ~ Real Estate Broker ~ REALTOR®

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