California Home Sales off 24% YoY in August, Prices Up Only 1.4% YoY; August Existing Home Sales Forecast

Here is the press release from the California Association of Realtors® (C.A.R.): August home sales and price notch higher amid temporary rate reprieve, C.A.R. reports

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 313,540 in August, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2022 if sales maintained the August pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales. August’s sales pace was up 6.1 percent on a monthly basis from 295,460 in July and down 24.4 percent from a year ago, when 414,860 homes were sold on an annualized basis. August’s monthly sales increase was higher than the long-run average of 0.4 percent for a July-August period in the past 43 years and marked the first monthly sales increase in five months.

“California’s housing market stabilized briefly as a temporary reprieve on mortgage rates in July and early August brought buyers into the market,” said C.A.R. President Otto Catrina, a Bay Area real estate broker and REALTOR®…

California home prices stabilized in August as the statewide median price increased on both a monthly basis and yearly basis, but at a less-than-2-percent growth pace. The statewide median price edged up 0.7 percent in August to $839,460 from the $833,910 recorded in July and was up 1.4 percent from the $827,940 recorded last August. The year-over-year price gain was the smallest in more than two years. The nominal price increase was attributed partly to a change in the mix of sales in August. With sales in the million-dollar price segment rising 6.8 percent from the prior month, the August statewide median price also pushed up slightly by 0.7 percent from July. …

With both closed sales and pending sales slowing by more than 20 percent, active listings have been staying on the market longer, resulting in a year-over-year surge of 57.1 percent in homes for sale in August.

emphasis added

Early Read on Existing Home Sales in August

From housing economist Tom Lawler:

Based on publicly-available local realtor/MLS reports released across the country through today, I project that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 4.84 million in August, up 0.6% from July’s preliminary pace and down 19.2% from last August’s seasonally adjusted pace. Unadjusted sales should show a smaller YOY % decline, reflecting the higher business day count this compared to last August.  On an unadjusted basis the YOY % decline in sales was largest in the West, and smallest in the Midwest and Northeast.

Local realtor reports, as well as reports from national inventory trackers, suggest that the inventory of existing homes for sale last month was up substantially from a year earlier, though the YOY % increase was smaller than in July. However, the NAR’s estimate may not show the same increase as these reports suggest, as most of these reports exclude listings with pending contracts.  E.g., the Realtor.com report for August showed that listings excluding those with pending contracts were up 26.6% from last August, while listings including pending contracts were up just 1.3% YOY.  The NAR’s inventory estimate has tracked the Realtor.com total inventory measure much more closely than the “ex-pendings” inventory measure.  (Note also that the Realtor.com inventory number reflects average listings during the month, while the NAR inventory number is an end-of-month estimate.)  Just as the NAR inventory numbers understated the decline in “effective” homes for sale during much of last year, they are now significantly understating the increase in effective inventory.

Finally, local realtor/MLS reports suggest that the median existing single-family home sales price last month was up by about 9.0% from last August, a marked YOY deceleration from earlier this year.

On the inventory front, one of the reasons in many parts of the country for the recent slowdown in inventory growth despite sharply lower sales is that there have been significant declines in new listings.  This recent trend could easily be the result of the sharp spike in mortgage from the historic low levels of last year.  Most homeowners with mortgages have a mortgage rate that is hundreds of basis points below current mortgage rates (many through refinancing), and homeowners who might otherwise have been considering moving (and listing their home) would, if they were to do, face losing their current low mortgage rate/low mortgage payment.  This so-called “lock-in” effect has been observed in the past.  It is also worth noting, however, that inventory changes this year vary MASSIVELY by region/state/metro area.

CR Note: The National Association of Realtors (NAR) is scheduled to release August existing home sales on Wednesday, September 21, 2022, at 10:00 AM ET. The consensus is for 4.70 million SAAR.