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C.A.R.: Housing Sales Up in May, Inventory Still a Concern

The housing market in California looked mostly sunny in May with strong sales and stabilizing home prices, the California Association of Realtors (C.A.R.) reported Friday.

A release from C.A.R. showed that home prices in the state posted gains for the third consecutive month, and home sales finished well above last year’s pace.

“California home sales were strong in May, continuing the gradual recovery of the California housing market,” said C.A.R. president LeFrancis Arnold. “First-time buyers are recognizing that the housing market has hit bottom and are now seeing a sense of urgency to take advantage of ultra-low interest rates and advantageous home prices. Additionally, trade-up buyers are returning to the market after sitting it out for the past few years to get in on favorable home prices.”

Closed escrow sales of existing, single-family detached homes in California rose 3.4 percent to a seasonally adjusted annualized rate of 572,260. This is up from April’s revised rate of 553,670 and is a 21.5 percent increase from 470,910 in May 2011. The sales figure represents an estimate of the total number of homes sold during the year if sales maintained the May pace throughout 2012 and is adjusted for seasonal factors that influence home sales.

May’s sales pace marked the highest year-over-year sales increase since May 2009 and was the highest pace since February 2009, when 598,770 homes were sold at a seasonally adjusted annualized rate.

Home prices also appear to be stabilizing, with the median home price posting month-over-month and year-over-year gains for the third straight month. The statewide median price of an existing, single-family detached home was $312,110 in May, the highest price since September 2010 and an increase of 1 percent from April’s revised $309,050. It was a 6.6 percent year-over-year increase from last May’s $292,850. May marked the second straight month in which the median price posted above the $300,000 level.

C.A.R. attributed the median price increase to a strong sales increase in the higher-priced coastal regions, particularly the San Francisco Bay Area, where the median price was $550,400. Labor and economic growth are both especially strong in that area compared to the rest of the state.

Not all news was good, though. California’s housing inventory sank lower in May, with the Unsold Inventory Index for existing, single-family detached homes dropping to 3.5 months in May, down from 4.2 in April and 5.7 in May 2011. The index indicates the number of months needed to sell the supply of homes on the market at the current sales rate, with a 7-month supply being normal.

“Low housing inventory continues to be the critical issue in the California market,” said Leslie Apple-Young, VP and chief economist for C.A.R. “Inventory levels have not been this low since December 2005, when the supply matched the current level. The Bay Area has the greatest shortage of homes for sale, with inventory levels in the two- to three-month range for Santa Clara, San Mateo, Alameda, and Contra Costa counties.”

The report also showed that homes are moving faster on the market, with the median number of days it takes to sell a single-family home dropping to 46.6 in May, down from 48.9 days in April and 52 days in May 2011.