California’s Home Price Boom Sparked by Tight Inventories

sudden surge in single family home prices in California coupled with flat sales are both attributed by the California Association of Realtors® (C.A.R.) to a scarcity of available homes for sale, especially in the lower price ranges.  The median price is at a five year high after an unprecedented spike in March.

Existing single-family homes sold at a seasonally adjusted annual rate of 417,520 in March, up a scant 0.1 percent from a rate of 417,310 in February but down 4.9 percent from the March 2012 rate of 439,260 units.

Inventories fell to a 2.3 month supply on C.A.R.’s Unsold Inventory Index from 3.6 months in February and 4.2 months in March 2012.  The index indicates the number of months needed to sell the available homes at the current rate of sales.  A six to seven month supply is considered normal.

“While home sales were essentially flat from February, sales declined moderately from last year, as an extreme shortage of available homes continued to dictate the market,” said C.A.R. President Don Faught.  “Statewide inventory dropped 36 percent from last March and was below 3 months for the second time in the past few months.  Supply conditions are particularly tight in the lower-priced segment of the market, as inventory for homes priced below $300k plunged more than 50 percent from the previous year.”

The median price of a single-family detached home rose 13.7 percent from February to March, the highest month-to-month hike since C.A.R. began tracking the number in 1979 and was 28.2 percent higher than one year earlier.  The median price in February was $333,380, in March it was $378,960.  March was the 13th month in which the annual median price increased and the ninth consecutive month the increase was in double digits.  However March’s surge was the first increase after two straight months when prices declined.

“No doubt the dearth of home listings is driving the upsurge in the median price, as is an increase in sales in the higher-priced segments,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.   “Sales of homes priced $500,000 and higher are up more than 34 percent from last year, and have been on a rising trend since early 2012. Sales growth in the coastal regions – Marin, Orange, San Diego, and San Luis Obispo, in particular – helped push the statewide median price up to the highest level in more than four years.”

The median days on the market for a home sold in March was 29.4 days, down from 34.2 days in February and 52.2 days in March 2012. Jann Swanson

 

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