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Double-Digit Monthly Gains in Median Home Prices - Likely a Thing of the Past

California single-family home and condominium sales gained 0.6 percent in June 2014 but were down 12.6 percent from June 2013. Year-to-date sales for the first six months of the year are the lowest since 2008. For the month, non-distressed property sales increased 2.8 percent while sales of distressed properties fell 9.1 percent.

“June marks the sixth consecutive month that sales have been lower on a year-over-year basis,” said Madeline Schnapp, Director of Economic Research for PropertyRadar. “The lack of distressed property inventory and rapid increase in median prices has definitely taken a toll on demand.”

The June 2014 median price of a California home reached its highest level since December 2007, up 5,000 dollars, or 1.3 percent, to 390,000 dollars from 385,000 dollars in May. On a year-ago basis, median home prices gained 10.0 percent. Driving the month-over-month price increase in June was the 2.8 percent increase in the sales volume of higher priced non-distressed properties, which accounted for nearly 83 percent of total sales. The median price of non-distressed homes was up only 0.8 percent over last year. The deceleration in price increases is even more apparent at the county level. In March, double-digit price increases occurred in 16 of the 26 largest California counties but by June that number had fallen to eight.

“The nearly uninterrupted double-digit monthly increases in median home prices from August 2012 through March 2014 has slowed considerably,” said Schnapp. “That’s good news for buyers who were finding themselves rapidly priced out of the market.”

In other California housing news:

  • Cash sales remained elevated in June, accounting for 22.2 percent of total sales. Despite the historically high levels of cash sales, cash sales have been steadily declining, falling 31.6 percent, since reaching an interim peak in May 2013.
  • Flip sales fell 6.6 percent for the month and were down 30.0 percent for the year and are down 40.4 percent from the October 2012 peak.
  • Negative equity remains elevated in California and continues to impart negative headwinds to the real estate market. In June, nearly 1.1 million California homeowners, or 12.9 percent remain underwater.
  • Institutional Investor LLC and LP purchases fell 8.7 percent for the month and are down 31.8 percent from June 2013. Institutional investor demand continues to wane in the face of higher prices and lower return on investments. Institutional Purchases have posted consistent monthly declines and are down 48.0 percent from their December 2012 peak.
  • Foreclosure starts, or Notices of Default (NODs), fell 2.0 percent between May and June, extending a longer-term downward trend. Foreclosure sales fell 5.2 percent for the month and are down 12.6 percent for the year. The June decline decelerated compared to May.

“Affordability and tight credit have slowed or stopped price increases despite lack of inventory,” said Schnapp. “Going forward, we expect low sales volumes and flat prices until increased supply or looser credit forces prices lower.”

Meanwhile, according to the recent VeroFORECAST from Veros Real Estate Solutions, the nation’s home prices are still on the rise, but the rate of growth is slowing considerably. Home prices are expected to rise 2.5% in the nation’s 100 top metro areas between now and June 1, 2015.

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