Signs Indicate Healthy Home-Sale Season

Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market. In an encouraging sign for a healthier spring home-buying market, California pending home sales increased more than usual and rose to the highest level in eight months.

Meanwhile, the share of short sales has fallen to levels last observed in 2008, the California Association of Realtors (C.A.R.) reported on April 23. 

California pending home sales climbed 17.8 percent in March. This sent C.A.R.’s Pending Home Sales Index (PHSI), which is based on signed contracts, up more than 17 points from 97.1 in February to 114.4 in March. The index is at its highest point since July 2013.

However, pending sales fell 9.9 percent from the revised 126.9 index recorded in March 2013. The year-over-year decline in the index has been tapering over the past few months. 

According to the association, the sales of non-distressed properties have been increasing steadily over the past year. The share of equity sales increased to 87.6 percent in March, up from 2.6 percent in February. Sales of non-distressed properties, or equity sales, have stabilized over the past several months but have started rising again as the spring home-buying season takes off. March marks the ninth straight month that equity sales have been more than 80 percent of total sales. Equity sales made up 71.8 percent of sales in March 2013.

The combined share of all distressed property sales continued to drop in March, primarily due to declines in both short sales and bank-owned sales. The share of distressed property sales fell from 15 percent in February to 12.4 percent in March. Distressed sales continued to be down by more than a half from a year ago, when the share was 28.2 percent.

Of the distressed properties, the share of short sales dropped to levels last observed in March 2008 at 6.6 percent, down from 8.2 percent in February. March’s figure was nearly a third of the 17.2 percent recorded in March 2013.

The share of bank-owned sales also fell in March to 5.4 percent, down from 6.3 percent in February. These sales are now about half what they were a year ago, when they made up 10.6 percent of all sales in March 2013. 

Active listings across all property types, especially in equity properties, fell during March. This helped tighten housing supply conditions. 

The Unsold Inventory Index for equity sales dropped from 4.8 months in February to four months in March. The supply of bank-owned properties dipped from three months in February to 2.8 months in March, and the supply of short sales slipped from five months in February to 4.7 months in March.