What California's Real Estate Slowdown Means For Home Prices

LOS ANGELES, CA — Home sales are down in California for the for the sixth consecutive month, suggesting an impending slowdown even as prices are setting new records.

Despite robust closed escrow sales in June, California pending home sales slipped and they aren't expected to tick back up as the peak home buying season winds down, the California Association of Realtors said this week. Even as sales are slowing, prices continue to climb, reaching new record highs. Experts predict the limited supply will continue to drive prices up beyond the affordability of the average California family.

A lack of inventory appears to be slowing sales while driving up prices, and that's not likely to change anytime soon.

Chris Thornberg, founding partner of Beacon Economics told the Los Angeles Times only an unlikely recession could reverse the trend.

“Candidly, the only thing that could upset the apple cart in California is if we build a whole bunch of housing and that’s as likely as an alien attack,” he told the newspaper.

Based on signed contracts, year-over-year statewide pending home sales fell for the sixth straight month in June on a seasonally adjusted basis, with the Pending Home Sales Index declining 0.9 percent from 119.0 in June 2016 to 117.9 in June 2017, according to a CAR statement. California pending home sales also slipped on a monthly basis, decreasing 0.6 percent from the May index of 118.7. Pending home sales have declined every month so far this year, but the pace of decline has slowed in recent months.

Across the state, the pattern was mixed.

The Central Valley posted a healthy pending sales gain in June, rising 5.2 percent from a year ago. Kern County saw its first significant increase (5.7 percent) in pending sales for the year after battling with the after-effects of precipitous declines in the energy markets. The San Francisco Bay Area experienced a dip in pending sales in June, nudging down 0.6 percent on an annual basis. San Francisco County reversed last month's double-digit pending sales decline and rose 22.2 percent, while San Mateo and Santa Clara counties posted pending sales decreases of 10.1 percent and 0.4 percent, respectively, as inventories remained extremely low and median prices exceeded $1 million.

But prices are still climbing at a record breaking clip, according to real estate tracking firm CoreLogic.
The median price of a home in Los Angeles County in June climbed 7.4 percent from last year to $569,000. Similarly, it climbed in Orange County by 6.1 percent from 2016 to $695,000, by 12.3 percent in San Bernardino County and 7.5 percent in Riverside County to $357,000

Pending sales in parts of the Southern California Region were mixed. Some continued their upward trend in June and posted a 2.5 percent improvement from the previous year, as San Bernardino County and Orange County saw healthy bumps of 10.3 percent and 8.3 percent, respectively, the statement said. Pending sales in San Diego (-3.6 percent), Riverside (-6.9 percent), and Los Angeles (-1.7 percent) counties declined from last June.

City News Service contributed to this report. Photo: Shutterstock