LOS ANGELES — A perfect storm of a shortage of available homes for sale, rising interest rates, and higher home prices kept prospective home buyers on the sidelines in December, pushing California pending home sales lower for the second straight month. Meanwhile, equity sales continue to make up more than four of every five home sales, the California Association of Realtors recently reported.
Pending home sales data
California pending home sales fell in December, with the Pending Home Sales Index dropping 25.2 percent in December to reach 68.8, down from a revised index of 92 in November, based on signed contracts. The monthly decline was the second straight double-digit drop in the PHSI. Pending sales were down 16.8 percent from the revised 82.8 index recorded in December 2012. 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
After reaching a recent high in November, the share of equity sales — or non-distressed property sales — shrank slightly in December, but still marked the sixth straight month that equity sales have been more than 80 percent of total sales. The share of equity sales in December dipped to 84.3 percent, down from 86.4 percent in November. Equity sales made up 63.4 percent of sales in December 2012.
Conversely, the combined share of all distressed property sales rose in December, when lenders tend to push through more distressed properties to get them off their books by year’s end. The share of distressed property sales increased from 13.6 percent in November to 15.7 percent in December. Distressed sales were down by nearly two-thirds from a year ago, when the share was 35.4 percent. Twenty-six of the 38 reported counties showed a month-to-month increase in the share of distressed sales, with San Diego County having the smallest share at 5 percent.
Of the distressed properties, the share of short sales was 10.1 percent in December, up from 8.8 percent in November. December’s figure was nearly half of the 24.8 percent recorded in December 2012 and remains at the lowest levels since January 2009.
The share of REO sales inched up in December to 5 percent from 4.4 percent in November. It was the fifth straight month that REOs made up 5 percent or less of total sales. REOs made up only 11.4 percent of all sales in December 2012.
With extremely low levels of active listings, housing inventory tightened in December and remains extremely constrained. The Unsold Inventory Index for equity sales fell from 3.6 months in November to 3 months in December. The supply of REOs dropped from 3.4 months in November to 2.8 months in December, and the supply of short sales fell from 4.2 months in November to 3.2 months in December.