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California October Home Sales Downshift

Sales Dip Month to Month; Inch up Year Over Year

Andrew LePage    |    Housing Trends

After a strong summer, California home sales weakened a bit in October, the likely result of inventory and affordability constraints, mainly.

An estimated 39,191 new and existing houses and condominiums sold statewide in October 2015. That was down 4.1 percent from 40,879 sales in September 2015 and up 2.3 percent from 38,305 sales in October 2014, CoreLogic public records data show. The average change in sales between the months of September and October since 1988 is an increase of 0.7 percent. This October marked the eighth consecutive month in which sales have risen year over year, but October’s 2.3 percent annual gain was the smallest for that period.

Statewide sales were the highest for an October since 2012 (see accompanying chart), when 41,455 homes sold, but were 12.5 percent lower than the October average of 44,801 sales.

Home sales this summer – June through September – rose nearly 14 percent year over year and were the highest for that period since 2006. However, sales were weaker during the first five months of 2015, and through October this year sales are up 8.0 percent year over year and are the highest since 2013.

Sales continue to be restrained by a thin inventory of homes for sale and waning affordability, as well as moderately tight credit.

The share of California homes that sold for less than $300,000 in October slipped to 31.6 percent, down from 31.8 percent in September and 34.8 percent in October 2014. The portion selling for $500,000 or more rose to 37.2 percent in October, up from 36.7 percent in September and up from 34.6 percent in October 2014. The share selling for $1 million or more rose to 10.1 percent, up from 9.8 percent in September and 9.4 percent in October 2014.

Viewed another way, the number of homes that sold statewide below $500,000 in October fell 6.5 percent from September and fell 3.1 percent from October 2014, while sales of $500,000 or more fell 4.4 percent month over month and rose 8.6 percent year over year. October sales of $1 million-plus homes fell 2.2 percent month over month and rose 8.3 percent year over year.

The data suggest that uncertainty caused by the stock market’s gyrations in recent months hasn’t had a large impact on statewide sales. Stock market corrections mainly affect upper-middle and high-end buyers. The steepest stock market declines were in late August, which would have mainly impacted potential home sales recorded in October, or later.

The connection between the stock market and housing might be stronger in specific regions, however. Compared with the overall San Francisco Bay Area, sales fell harder both month to month and year over year in the Silicon Valley, where rising technology company valuations have helped fuel housing demand in one of the nation’s priciest markets. Santa Clara County sales declined about 5 percent month over month (vs. a 2.4 percent drop for the nine-county Bay Area) and fell about 9 percent year over year (vs. a 2.5 percent decline for the region). San Mateo County sales fell about 6 percent month over month and fell about 9 percent year over year.  

In Orange County, which for years has had Southern California’s highest median sale price, sales fell nearly 11 percent between September and October, which was about double the drop for the overall six-county region. Orange County sales dipped less than 1 percent from a year earlier, compared with a 1.3 percent gain for all of Southern California.

If stock market jitters did play a role in weaker October home sales, some of that sidelined demand could begin to show up in future months’ activity, especially if the post-summer stock bounce-back sticks.

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