California Home Sales expected to “Lay Low” until 2021

 In Market Updates

Home Sales Volume is, as a rule, where we first see current market action being reflected, followed by prices. The current low sales and low inventory environment is an indicator we won’t see an increase of sales volume until after home prices bottom out in 2020. Here are housing data, market factors and predictions we compiled to provide a 50,000 view of the market. Of course, real estate is very local. Reach out if you want to know more about any particular market (multi-unit, luxury) or specific community.

First. Where are we now?

2018 ended with 442,000 home sales in California. This is 19,900 fewer sales than took place in 2017, amounting to a decrease of 4.3%. For perspective, 2018’s 442,000 homes sales volume was 41% below peak sales volume experienced in 2005.

And moving forward?

Home sales will continue to decrease in 2019. Rapidly rising prices and interest rates, along with uncertainty brought on by shifting economic policies, have discouraged potential homebuyers and derailed sales. Therefore, home sales volume won’t rise significantly until after home prices bottom with the next recession, expected in 2020.

The forward trend in California home sales is mixed for both buyers and seller. Homebuyer income is going further and doing more than anytime during the past 15 years due to increased borrowing capacity brought on by low interest rates (even though they rose mid-2013 to cut back funding by 10% from one year prior, but dropped to fuel sales in 2015).

Here are the factors:

  • fewer participating first-time homebuyers than normal;
  • lower homeowner turnover to buy an upgrade or relocate due to continued negative equity and delayed retirement;
  • reduced home inventory across the state; and
  • static turnover in rental occupancies.

More great stats and info from First Tuesday.

30,300 new and resale home transactions closed escrow in California during December 2018. The number of homes sold was 20% lower than a year earlier, amounting to 7,400 fewer sales in the single month of December. This continues the trend of falling year-over-year sales volume, leaving total annual sales volume 4% below 2018.

It’s normal for home sales volume to rise in the first half of the year and fall after June, generally speaking. The most homes are regularly sold each year in June. Another small increase takes place in December, as homebuyers seek to wrap up their financial activities before the end of the year.

California Real Estate Timeline of Home Sales Volume

  • Mid-2005 saw sales volume peak for all types of real estate in California, with nearly 754,000 homes sold that year;
  • Nearly 30% fewer sales were recorded in 2006 than in 2005, while sales dropped an additional 30% in 2007;
  • sales bottomed in 2008 and were artificially inflated in 2009 due to subsidy-induced purchases and speculators jumping on the momentum, but remained 40% below 2005;
  • 2010 saw a decline from the year earlier in both sales volume and prices;
  • 2011 increased slightly in sales volume while decreasing in sales prices, a normal price adjustment condition;
  • 2012 saw sales volume increase marginally and home prices jump significantly by year’s end, supported primarily by massive speculation;
  • 2013 home sales volume stagnated, while home prices continued to increase rapidly, not a good sign for the immediate future; and
  • 2014 saw home sales volume decrease throughout the year, ending the year 7% below 2013.
  • 2015 ended 9% higher than 2014 — in other words, just about level with 2013. [See Chart 4]
  • 2016 and 2017 sales volume continued a flat trend in sales which began in 2015; and
  • 2018 saw sales volume decrease rapidly in the fourth quarter, ending the year 4% below 2017.

 

 

Article by Sparkling Marketing, Inc. with content from First Tuesday

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