Even with a strong performance in May home sales, California pending home sales fell for the fifth consecutive month in May. Realtor concerns over supply and affordability issues are growing.
Based on signed contracts, year-over-year statewide pending home sales fell for the fifth straight month in May, according to the latest California Association of Realtors report. California pending home sales index declined 3.9 percent from 123 in May 2016 to 118.1 in May 2017. On a monthly basis, pending home sales increased 3.9 percent from the April index of 113.7.
The San Francisco Bay Area saw a decline in pending sales in May, falling 5.5 percent on an annual basis. Pending sales in San Francisco County declined the most at 10.8 percent, and San Mateo and Santa Clara counties posted pending sales decreases of 0.7 percent and 2.4 percent, respectively, as inventories remained extremely low and median prices exceeded $1 million.
Solid demand motivated by low interest rates, coupled with tight supply, put upward pressure on prices in the last few months as the home buying season remained competitive. Realtor officials expect the statewide median price to remain near its recent high until late summer or early fall.
"There is a serious undersupply of homes that homebuyers can afford," said Denise Welsh, president of the Silicon Valley Association of Realtors. "There are homebuyers desperate to find a home. Rents are extremely high in the region and this has caused renters, many of whom are millennials, to consider homeownership. They are up against much competition, especially at the entry price level."
While fewer properties sold above asking price, the market remained competitive as multiple offers inched up from April and from May 2016. Seventy percent of properties sold in May received multiple offers, up from 68 percent in May 2016. The share of properties receiving three or more offers in May was 44 percent, compared to 46 percent a year ago.
Homes priced $400,000-$499,000 and $750,000-$999,000 posted the greatest gains in receiving three or more offers compared with last year, rising from 41 percent to 59 percent, and from 50 percent to 60 percent, respectively. Listing price reductions fell from 23 percent in May 2016 to 16 percent in May.
California's housing market situation is much like the rest of the nation, though more severe because home prices here are at higher levels. According to the National Association of Realtors, the ongoing supply shortages that are propping up home prices in many metro areas caused pending home sales in May to slump for the third consecutive month.
Lawrence Yun, NAR chief economist, says inventory is at critically low levels in much of the country. The persistent housing shortages seen in several markets are most severe in the lower price ranges.
"A much higher share of homeowners compared to a year ago think now is a good time to sell, but until they do, sales will likely stay flat and low inventory will keep price growth moving swiftly," said Yun.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.