Affordability constraints, low inventory played roles

California home sales eased slightly in May as a shortage of homes and housing affordability concerns held back would-be home buyers, the California Association of Realtors (C.A.R.) announced on Tuesday. Meanwhile, the median home price posted higher from both the previous month and year for the third consecutive month and remained at its highest level since December 2007.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 391,030 units in May, according to information collected by C.A.R. from more than 90 local Realtor associations and MLSs statewide. 

May marked the seventh straight month that sales were below the 400,000 level and the tenth straight decline on a year-over-year basis. Sales in May dipped 0.6 percent from a revised 393,480 in April and were down 9.5 percent from a revised 432,140 in May 2013. The statewide sales figure represents what would be the total number of homes sold during 2014 if sales maintained the May pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

“Since last summer, the market has been transitioning to a slower pace of sales, somewhat higher inventory and less upward pressure on prices,” said C.A.R. President Kevin Brown. “Generally speaking, buyers are feeling less urgency to buy as affordability has become more of an issue and lending standards continue to remain tight. However, a recent surge in mortgage applications, due partially to declining interest rates, may indicate that higher housing demand can be expected in the coming months. 

For the third straight month, the statewide median price of an existing, single-family detached home rose both month to month and year to year. The median sales price is the point at which half of homes sold for more and half sold for less; it is influenced by the types of homes selling as well as a general change in values.

May’s median price increased 3.7 percent to $465,960 from April’s median price of $449,360. This marks an 11.7 percent increase from the revised $417,140 recorded the same time last year. The statewide median home price has increased year over year for the previous 27 months. This marks more than two full years of consecutive year-over-year price increases and the 23rd straight month of double-digit annual gains.

“While home price increases have tempered over the past few months, prices are still nearly 12 percent higher than a year ago, which is presenting affordability challenges to home buyers,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “And though housing inventory is up from last year, it’s still half of what is considered normal, with some of it being overpriced.”

Other key facts from C.A.R.’s report include:
n Housing inventory was unchanged in May, with the available supply of existing, single-family detached homes for sale holding steady at 3.6 months. The index was 2.6 months in May 2013. The index indicates the number of months needed to sell the supply of homes on the market at the current sales rate. A six- to seven-month supply is considered typical in a normal market.

n The median number of days it took to sell a single-family home fell to 31.6 days in May, down from 33.8 days in April but up from 27.1 days in May 2013. 

n Mortgage rates fell in May, with the 30-year, fixed-mortgage interest rate averaging 4.19 percent, down from 4.34 percent in April but up from 3.54 percent in May 2013, according to Freddie Mac. Adjustable-mortgage interest rates in May averaged 2.43 percent, down from 2.44 in April and down from 2.55 percent in May 2013.

Leading the way in California real estate for more than 100 years, the C.A.R. (www.car.org) is one of the largest state trade organizations in the United States with 165,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.