California Home Sales Decline Could Be Early Warning for National Housing

By Stevie Duffin Updated on 3/19/2013

By Daniel Duffield

In California, home prices have grown annually each month for an entire year, according to the California Association of Realtors (CAR). Median home prices for existing single-family properties averaged $333,800 in February, dropping 1% from the January figure of $337,360 but illustrating a 24.2% increase over home prices in February 2012. Along with twelve consecutive months of year over year growth, February constituted the eighth straight month of annual increases that were 10% or more.

For single-family detached homes, February saw a seasonally amended yearly rate of 416,610 units, sliding 0.9% from January and decreasing 5.9% from the 442,660 figure for February 2012.

According to the CAR, home purchases and sales have been negatively impacted by the rapidly diminishing housing inventory. The February Unsold Inventory Index, an indicator of the time required to sell off the remaining homes on the housing market at the current sales rate, presented a 3.6 month period in February, rising from 3.5 months in January but well below the 5.4 months in February of 2012. This data represents a clear lack of inventory, as a six to seven month supply is regarded as the standard.

In February, homes sold more rapidly than in January, with the median number of days for a single-family home sale falling from 36.6 days to 34.2 days, far below the February 2012 revised estimate of 57.4 days.

Don Faught, president of the CAR, stated that while home demand remains fairly strong, a shortage of inventory has hindered housing sales in the current market, particularly among lower-priced homes. Although home sales for those priced above $500,000 remained solid, at a growth rate of 31% above last year, sales of homes priced less than $300,000 declined 27% from February 2012 figures as a result of the decreased availability of homes for sale, said Faught.

With many housing inventories declining across the country, it is likely that national home prices will continue to grow stronger. However, if national trends are consistent with those in states affected by these diminished inventories, home sales could turn sluggish and negatively impact the efforts of the housing recovery, potentially leading to a redistribution of the population or spurring home building to a greater demand.