California Home Sales Slowest for an October in Seven Years

California home sales fell year over year for the third consecutive month, hitting a seven-year low for an October, as affordability constraints and a more cautious stance by many would-be buyers continued to weigh on the market.

An estimated 38,159 new and existing houses and condos sold statewide in October 2018 (Figure 1), up 12.5 percent from September 2018 and down 6.7 percent from October 2017, CoreLogic public records data show. The average change in sales between September and October since 2000 is an increase of 1.5 percent. Sales have fallen year-over-year in five out of the last six months, including annual declines of 9.3 percent this June, 7.1 percent in August and 17.1 percent in September.

October sales below $500,000 fell 13.1 percent year over year, while sales of $500,000 or more inched up 0.4 percent and $1 million-plus deals rose 5 percent compared with October last year. Undermining sub-$500,000 sales is waning affordability as mortgage interest rates rise as well as relatively low inventory, especially for lower-cost homes targeted by many first-time buyers. Also, in recent months some buyers have simply opted to hold out in hopes of a better deal in the future.

The median price paid for all new and existing houses and condos sold statewide in October 2018 was $487,000 (Figure 2), up 0.4 percent from September and up 5.9 percent from October 2017. In nominal terms the median hit an all-time high of $500,000 this June. Adjusted for inflation, however, the median has not returned to its pre-housing-bust peak in March 2007, and this October’s median was 16.1 percent below that peak.

The 5.9 percent annual gain in October’s median sale price (Figure 3) understates the affordability challenge many would-be buyers face. In October, the monthly principal-and-interest mortgage payment on the state’s median-priced home was up about three times as much – 18.2 percent – because of a nearly one-percentage-point gain in mortgage rates over the prior year.

Other October 2018 highlights:

Statewide in October, adjustable-rate mortgages (ARMs) accounted for 12.7 percent of the number of purchase loans used to buy homes, the highest for any month in four years and up from 10.9 percent a year earlier. Some higher-cost counties have posted larger annual gains. For example, in Santa Clara County, where the median sale price is more than double the statewide median, the October ARM share was 42.1 percent, up from 36.5 percent a year earlier.
Absentee buyers – including investors and second-home buyers – accounted for 22 percent of the state’s home purchase transactions in October, up from 21.5 percent a year earlier.
In the six-county Southern California region, 19,193 new and existing houses and condos sold in October, down 7.5 percent year over year. October’s median sale price was $525,000, up 6.1 percent year over year.
In the nine-county San Francisco Bay Area, 7,158 new and existing houses and condos sold in October 2018, down 6.5 percent year over year. October’s median sale price was $845,500, up 9.3 percent year over year.