As expected rising mortgage rates dampened pending home sales in August, while distressed home sales fell to levels not seen in nearly six years, the California Association of Realtors reported this week.
“Rising interest rates over the past several months at the specter of a tapering of the Fed’s stimulus program sent buyers to the sidelines in August,” said CAR Vice President and Chief Economist Leslie Appleton-Young. “However, the Fed’s decision last week to postpone the pullback should lead to lower interest rates, which bodes well for prospective buyers.” Let’s look at the latest sales figures to get a clear picture of how well the market is doing:
Pending home sales data
California pending home sales dropped in August, with the Pending Home Sales Index (PHSI)* falling 5 percent in August to 108.3, down from 114 in July, based on signed contracts. Pending sales were down 8.9 percent from the 118.9 index recorded in August 2012. Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.
Distressed housing market data
The share of equity sales – or non-distressed property sales – has risen on a month-to- month basis for 18 of the last 19 months and now makes up more than four in five sales, the highest share since November 2007. The share of equity sales in August increased to 84.7 percent, up from 82.9 percent in July. Equity sales made up 62 percent of sales in August 2012.
The combined share of all distressed property sales continued to decline in August, dropping to 15.3 percent in August, down from 17.1 percent in July and down significantly from 38 percent in August 2012. Twenty-five of the 38 reported counties showed a month-to-month decrease in the share of distressed sales, with Alameda, Contra Costa, Marin, Orange, San Diego, San Mateo, and Santa Clara all recording shares in the single digits.
Of the distressed properties, the share of short sales, at 10.2 percent, fell to the lowest point since February 2009. August’s figure was down from 11.6 percent in July and was less than half of what it was a year ago, when short sales made up 22.9 percent of all sales. The continuing decline in short sales indicates more previously underwater homes are moving into positive equity as home prices are bolstered.
The share of REO sales also continued to fall, dropping to single-digits for the fifth straight month. REOs made up only 4.7 percent of all sales in August, down from 5 percent in July and from 14.7 percent in August 2012. The August 2013 figure was the lowest since August 2007.
Housing inventory levels improved further in August but remained in short supply. The Unsold Inventory Index for equity sales inched up from 3 months in July to 3.1 months in August. The supply of REOs edged up from 2.1 months in July to 2.3 months in August, and the supply of short sales rose from 2.5 months in July to 2.9 months in August.
The market hasn’t cooled yet and doesn’t show signs of stopping. Prices are up, inventory is creeping up, and demand is still very high. While the once in a generation opportunity to purchase a home we saw earlier this year with 3.25% interest rates may be over, as you can see it’s still a great time to purchase and sell your home.
Sheri Aguilar is the president of the Lodi Association of Realtors and can be reached at Sheri@YourLocalAOR.com.