California pending home sales retreat again in August; distressed market continues improvement

LOS ANGELES (Sept. 23) – Diminished housing affordability continued to hold back pending home sales for the fifth straight month in August as rising home prices contributed to a further reduction in the share of distressed home sales, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

Pending home sales data:

• California pending home sales fell in August, with the Pending Home Sales Index (PHSI)* dropping 4.5 percent from 104.5 in July to 99.8 in August, based on signed contracts.  The month-to-month drop was inconsistent with the seasonal trend, which typically shows a slight increase from July to August.

• Pending sales were down 8.7 percent from the 109.3 index recorded in August 2013.  The year-over-year decrease was in line with the six-month average of -8.9 percent recorded between February 2014 and July 2014.  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 – improved further in August, increasing from 90.3 percent in July to 91 percent in August.  Equity sales have been rising steadily since the beginning of this year.  Equity sales have made up more than 80 percent of total sales for more than a year and have risen above 90 percent for two straight months. Equity sales made up 84.6 percent of sales in August 2013.

• The combined share of all distressed property sales continued its decline in August, dropping from 9.7 percent in July to 9 percent in August.  Distressed sales continued to be down nearly 50 percent from a year ago, when the share was 15.4 percent.

• Twenty-two of the 41 reporting counties showed a month-to-month decrease in the share of distressed sales, with 19 of the counties recording in the single-digits, including Alameda, Contra Costa, Marin, Napa, Orange, San Mateo, Santa Clara, and Sonoma counties — all of which registered a share of five percent or less.

• Of the distressed properties, the share of short sales fell to its lowest level since February 2008, falling to 4.6 percent in August, down from 5.3 percent in July.  August’s figure was less than half the 10.2 percent recorded in August 2013.

• The share of REO sales fell in August to 4 percent, down from 4.1 percent in July and from 4.8 percent in August 2013.

• August saw an increase in active listings across all property types, especially in short sale properties, which helped to improve housing supply conditions.  The Unsold Inventory Index of equity sales edged up from 3.9 months in July to 4.1 months in August, and from 2.5 months in July to 2.8 months in August for REO sales.  The supply of short sales rose from 5 months in July to 6 months in August.