California Home Sale Contracts Fall but Equity Share Increases

Pending homes sales in California dipped by 1.8 percent on the California Association of Realtors® (C.A.R) Pending Home Sales Index, falling to 106.4 in September from 108.3 a month earlier.  The Index is a leading indicator which tracks homes for which a purchase contract is signed.  Those contracts are expected to result in a home sale in about 60 days.

C.A.R. said pending sales usually slip between August and September and this year that change was slightly smaller than the average downturn over the past five years.  Pending sales were down 8.1 percent from the 115.7 index recorded in September 2012. 

The influence of distressed home sales on the California real estate market continued to fall in September.  Sales of properties in which the owner had positive equity increased slightly to 85.8 percent, the highest share since November 2007, from 84.7 percent in August and 62.7 percent in September 2012.

Aggregate distressed sales - sales of owned real estate or REO and short sales in which the mortgage lender agrees to accept less than the full mortgage payoff - fell to a 14.2 percent share in September from 15.3 percent in August and 37.3 percent in September 2012.  Twenty-six of the 38 counties reporting in California had a month-over-month decrease in the share of distressed homes.

Short sales were at their lowest point since January 2009, a 9.4 percent share.  This was 10.2 percent lower than in August.  In September 2012 short sales had a 24.3 percent market share.  C.A.R. says the continuing decline of short sales shows the more homes are emerging from negative equity as home prices increase.

The share of REO sales was in single digits for the sixth consecutive month.  Previously foreclosed homes represented only 4.3 percent of home sales compared to 4.7 percent in August and 12.5 percent a year earlier.   

Housing inventory levels improved for the fifth straight month but remained low.  The Unsold Inventory Index for equity sales inched up from 3.1 months in August to 3.5 months in September.  REOs edged up from 2.3 months supply in August to 2.7 months in September, and the supply of short sales rose from 2.3 months in August to 3.8 months in September.