California Pending Home Sales Spike in March

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According to the California Association of Realtors (CAR), there are encouraging signs for a healthy California spring home-buying season.

CAR reported today that California's pending home sales increased more than usual and rose to the highest level in eight months.  Meanwhile, the share of short sales has fallen to levels last observed in 2008.

California pending home sales climbed 17.8 percent in March, with the Pending Home Sales Index (PHSI) rising from 97.1 in February to 114.4 in March, based on signed contracts.  The March index was the highest since July 2013.

Pending sales were down 9.9 percent from the revised 126.9 index recorded in March 2013.  The year-over-year decline in the PHSI has been tapering over the past few months.  Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.

The share of equity sales - or non-distressed property sales - has been increasing steadily over the past year.  The share of equity sales increased to 87.6 percent in March, up from 85 percent in February.  Equity sales stabilized over the past several months but have started rising again as the spring home-buying season takes off.  March marks the ninth straight month that equity sales have been more than 80 percent of total sales. Equity sales made up 71.8 percent of sales in March 2013.

The combined share of all distressed property sales continued to drop in March, primarily due to declines in both short sales and REO sales.  The share of distressed property sales fell from 15 percent in February to 12.4 percent in March.  Distressed sales continued to be down by more than a half from a year ago, when the share was 28.2 percent.

Thirty of the 38 reported counties showed a month-to-month decrease in the share of distressed sales, with Alameda, Marin, San Diego, San Mateo, and Santa Clara counties registering the smallest share.  Alameda, Madera, Marin, Monterey, Orange, Riverside, San Luis Obispo, and San Mateo counties experienced the greatest year-to-year improvement in fewer distressed property sales.

Of the distressed properties, the share of short sales dropped to levels last observed in March 2008 at 6.6 percent, down from 8.2 percent in February.  March's figure was nearly a third of the 17.2 percent recorded in March 2013.

The share of REO sales also fell in March to 5.4 percent, down from 6.3 percent in February.  REOs sales are now about half what they were a year ago, when REOs made up 10.6 percent of all sales in March 2013.

Active listings across all property types, especially in equity properties, fell during March, tightening housing supply conditions.  The Unsold Inventory Index for equity sales dropped from 4.8 months in February to 4 months in March.

The supply of REOs dipped from 3 months in February to 2.8 months in March, and the supply of short sales slipped from 5 months in February to 4.7 months in March.