CAR Market Minute

REALTORS® Closing On The Homes That Went Pending in July: Although the percentage of REALTORS® who closed a deal last week dipped 7% from the previous week, the past two weeks have seen the largest percentage of respondents with a closed transaction during the week since we began asking the question nearly 4 months ago. Thus, C.A.R. is expecting strong closed sales numbers in our August press release.

REALTORS® Remain Optimistic About Recovery: The California REALTORS® we spoke to over the weekend were slightly more optimistic than last week: expectations for listings to increase next week was up 3%, expectations for sales to improve was flat, and expectations for higher prices increased 10%. In addition, REALTORS® are markedly more optimistic about these indicators than they were a month prior.

Several Macro Indicators Show Improvement: Last week, we received further evidence of slow improvement in the broader economy as income and spending increased in July with more than government transfer payments responsible for the boost. In addition, industrial production increased last month, the decline in Q2 GDP was revised lower, and durable goods and capital goods orders both increased.

Rates Decline and Demand Remains Robust: After increasing slightly the previous week, the average contract rate for a 30-year, fixed-rate mortgage dipped to 2.91% last week. This is slightly higher than the previous all-time low but represents an incredible opportunity for borrowers looking to get into the housing market. This is likely behind the ongoing strength in mortgage applications for new purchases, which remained ahead of 2019 levels by more than 30% last week.

Sales Down Alongside Forward-Looking Measures: Despite the increase in the number of REALTORS® who reported closing deals, the number of closed sales reported on the MLS last week declined by 3.4% last week statewide. Each region except the Bay Area experienced a single-digit decline. By price, everything fell last week excepting $800K-$1M and $5M +. Looking forward, pending sales were at their lowest levels in more than a month and they are following new listings, which were at their lowest level in nearly two months last week.

Summer Prices Finally Cooling Down: Although coronavirus has had little impact on prices thus far, the summer peak does appear to be behind us after extending well into August. On a per square foot basis, median list prices have come down in each major region of the state in the past 5 weeks excepting the Far North and Central Coast. Closed prices on deals negotiated a month or more ago remain high, and discounting has decreased in recent weeks, so this is largely due to typical seasonal cooling. 

Forward looking indicators suggest that we will see slowing after a strong August and September. New unemployment claims in California actually increased last week even as other economic indicators improved so the state is far from out of the woods. Rates remain low and demand remains robust, but the state needs new listings badly in order to fuel the recovery that we have enjoyed up to this point.