California home sales were weaker than expected in July as economic uncertainty continued to have a negative impact on consumer confidence. Sales of existing detached homes decreased 4.1 percent on a month-to-month basis from 477,910 in June 2011 to 458,440 in July, but increased 4.5 percent year-over-year from 438,850 in July 2010. Pending home sales in California fell 1.7 percent in July from the previous month but increased 4.9 percent from the same month of last year. Pending sales have been ahead of last year’s level for the past three months and should be on track to finish the year even with last year’s pace.
The statewide median home price dipped slightly by 0.3 percent to $294,230 from a revised $295,210 in June, and declined 7.6 percent from last year’s $318,550. The sales-to-list price ratio (SL ratio) - an indicator of the direction of future home prices - inched up to 94.7 percent from 94.6 percent in June, but declined from 97.0 percent in July 2010. The recent month-to-month increase was the fifth in a row since the SL ratio bottomed out at 93.5 percent in February. The continuous upward movement of the ratio in recent months, coupled with the stable price trend observed in the last few months, suggests that the median home price will likely remain at or near the current level in the coming months.
SL ratios vary only slightly among non-distressed sales, short sales and REO sales in July 2011. The ratios, however, have not always been so close. In fact, the SL ratios for short sales and REO sales have shown much more volatility than the ratio of non-distressed sales over the period 2009-2010. With the government subsidizing home purchases through tax credits, home buyers were willing to pay more for their properties in those two years. This pattern was particularly pronounced for distressed properties as reflected by the significant jumps in the SL ratios for REO sales and short sales during 2009-2010, and their rapid declines after the tax credits expired.
While SL ratios of all three categories of sales had experienced swings in 2009 and 2010, they have stabilized in recent months. The 3-month average SL ratio of non-distressed sales rose slightly to 94.4 percent in July, while the same ratios for REO sales and short sales both increased to 94.5 percent. As the housing market gradually recovers, the SL ratios will also slowly converge back to their long-run averages after being diverted off track by the government tax credits.
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