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Golden State June Home Sales Strongest Since 2006

Market Edges Closer to Normalcy

Andrew LePage    |    Housing Trends

California’s housing market picked up steam last month, when it logged its highest June home sales in nine years and the largest year-over-year increase in sales for any month in nearly three years.

An estimated 46,095 new and existing houses and condominiums sold in the Golden State during June 2015, up 10.8 percent from May and up 16.8 percent from June 2014. Last month’s sales were the highest for the month of June since June 2006 (Figure 1), when 59,018 homes sold, and the highest for any month since September 2006, when 46,464 homes sold, according to CoreLogic public records data.

The increase in sales between this May and June was roughly double the average gain of about 5 percent between those two months since 1988, when the data for this report begin. Statewide home sales have now increased on a year-over-year basis for four consecutive months, following a yearlong period in which sales fell year over year in 11 out of 12 months. The June 2015 annual sales gain of 16.8 percent was the highest for any month since October 2012 (Figure 2), when sales rose 22.3 percent year over year. Before June the highest year-over-year gain this year was 12.2 percent in March.

California Yr/Yr Change in Sales

California Yr/Yr Change in Sales

Why the bigger sales increase last month? California’s job growth has to be high on the list of reasons. The state’s Employment Development Department reports non-farm jobs rose 3 percent – an increase of nearly 462,000 jobs – between June 2014 and June 2015. In addition, low mortgage interest rates and a growing consumer belief that rates will begin to rise soon may have helped to spur some buyers. Among other potential reasons is a technical one: This June had 22 business days on which transactions could be recorded at county Recorder offices, compared with 20 days in May and 21 days in June last year. Still, even if this June had only had 21 business days it’s likely sales would still have risen about 12 percent year over year, ranking among the higher gains in the past few years.

In recent months California sales have trended closer to a more normal – or at least average – level, with June sales coming in 9.8 percent below the long-term June average of 51,111 transactions. A year earlier, in June 2014, sales were 23.1 percent below average. (Statewide sales haven’t been above average in any month in more than eight years.)

California’s housing market also continued to edge toward normalcy in other ways last month. Absentee buyers – mainly investor and second-home buyers – purchased 20.8 percent of the homes sold in June, the lowest share in five years (since June 2010). The peak absentee share was 32.5 percent in February 2013, while the long-term monthly average is about 18 percent.

Cash purchases represented 22.4 percent of all sales in June, the lowest since the cash share was 22.3 percent in November 2008, but still above the long-term monthly average of about 17 percent. The cash share peaked at 37.3 percent in February 2013. Distressed sales, the combination of real estate-owned (REO) sales and short sales, accounted for 7.2 percent of June sales, which is the lowest since July 2007, when it was 6.7 percent. The distressed sales share peaked at 67.5 percent in January 2009.

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