Seasonal factors combined with shrinking housing affordability cooled state pending home sales in November 2013, providing an outlook into the coming month of real estate, according to the California Association of Realtors.
The Pending Home Sales Index — based on signed real estate contracts for existing single-family homes, condos and co-ops — dropped 13.6 percent in November to 93.8, down from a revised 108.6 in October, based on statewide signed contracts, the association reported.
“Often it is seasonal. In Nevada County, historically, they tend to drop,” said Christine Foster, a broker who started Foster & Associates and served as 2013 president of the Nevada County Association of Realtors.
Compared to last year, the pending sales were down 9.4 percent from the 103.5 index recorded in November 2012. The November 2013 monthly decline was the first double-digit drop in nearly a year.
Pending home sales are forward-looking indicators of future home sales activity. Because a home goes under contract a month or two before it is sold, pending home sales generally lead existing home sales by a month or two and therefore provide a forecast of the future direction of the market.
“Pending home sales don’t give us a creditable clue of the inventory,” Foster said.
Conversely, the share of equity sales — or nondistressed property sales — grew in November, marking the fifth straight month that equity sales have been more than 80 percent of total sales, according to the state association. The share of equity sales in November increased to 86.4 percent, up from 85.4 percent in October. Equity sales made up 64.6 percent of sales in November 2012.
An equity sale, Foster explained, is “when the property owner has some equity in the house.”
“In other words,” she said, “it’s a good sign of the economy that there are fewer REO (real estate owned) and bank-owned properties and fewer people that are under water.”
The combined share of all distressed property sales shrank in November, dropping from 14.6 percent in October to 13.6 percent in November. Distressed sales were down by nearly two-thirds from a year ago, when the share was 35.4 percent, according to the state association. Twenty-one of the 38 reported counties showed a month-to-month decrease in the share of distressed sales, with Santa Clara County having the lowest share at 4 percent.
Of the distressed properties, the share of short sales was 8.8 percent in November, down from 9.5 percent in October. November’s figure was nearly a third of the 23.3 percent recorded in November 2012 and remains at the lowest levels since January 2009.
“The closings are easier as you aren’t negotiating with a bank,” Foster said of non-REO sales.
The share of REO sales also edged down in November to 4.4 percent from 4.7 percent in October. It was the fourth straight month that REOs made up less than 5 percent of sales. REOs made up 11.8 percent of all sales in November 2012.
And lastly, housing inventory levels improved slightly for the second consecutive month but were still extremely low, according to the state association.
The Unsold Inventory Index for equity sales, which indicates the pace for home sales, inched up from 3.4 months in October to 3.6 months in November. The supply of REOs rose from 2.7 months in October to 3.4 months in November, and the supply of short sales increased from 3.6 months in October to 4.2 months in November.
“Sometimes, it bodes well for people in Nevada County if the weather holds (to sell in winter),” Foster said. “It is a good time to put a house on the market because there is less competition in the market.”
To contact Staff Writer Christopher Rosacker, email firstname.lastname@example.org or call 530-477-4236.