California Homes Return to Positive Equity Territory as Pending Sales Slip

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According to the California Association of Realtors (C.A.R.), equity-positive home sales posted their highest level since the housing crisis began, reaching more than 90 percent of all home sales. Meanwhile, seasonal factors, combined with shrinking affordability cooled pending home sales in June.

C.A.R. reports the share of equity sales - or non-distressed property sales - continued in an upward trend, rising in June to 90.3 percent, up from 89.2 percent in May.  Equity sales have been rising steadily again since the beginning of this year.  June marks a full year that equity sales have been more than 80 percent of total sales and the first time they have risen above 90 percent. Equity sales made up 79.7 percent of sales in June 2013.

The combined share of all distressed property sales declined further in June, dropping from 10.8 percent in May to 9.7 percent in June.  Distressed sales continued to be down by more than 50 percent from a year ago, when the share was 20.3 percent.

Twenty-three of the 41 reported counties showed a month-to-month decrease in the share of distressed sales, with 17 of the counties recording in the single-digits, including Alameda, Butte, Contra Costa, Marin, San Diego, San Luis Obispo, San Mateo, and Santa Clara counties -- all of which registered a share of five percent or less.

C.A.R. also states that of all the distressed properties, the share of short sales fell to its lowest level since February 2008, falling to 5 percent in June, down from 5.6 percent in May.  June's figure was more than half the 12.9 percent recorded in June 2013.

The share of REO sales fell in June to 4.4 percent, down from 4.7 percent in May and from 6.8 percent in June 2013.

The supply of inventory inched up across all sales types in June.  The Unsold Inventory Index for equity sales edged up from 3.7 months in May to 3.8 months in June, and from 2.3 months in May to 2.4 months in June for REO sales.

The supply of short sales rose from 4.3 months in May to 4.8 months in June.

Pending home sales data:

• California pending home sales fell in June, with the Pending Home Sales Index (PHSI) dropping 2.8 percent from 110.1 in May to 107 in June, based on signed contracts.

• Pending sales were down 5.9 percent from the revised 113.8 index recorded in June 2013.  Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.