Housing Bubble 2 Gets Complicated: Pending Home Sales Plunge in San Francisco Bay Area, Drop in all California

by Wolf Richter, Wolf Street:

But upward pressure on already crazy home prices persists.

Pending home sales in California fell 6% in September compared to a year ago, the third month in a row of year-over-year declines, after having dropped 3.5% in August and 2.6% in July.

“Entering the fall home-buying season, the housing market momentum waned,” the California Association of Realtors said in its report. Brokers “reported slower open house traffic, and listing appointments and client presentations fell below positive territory in September.”

The report cited “continued housing inventory issues and affordability constraints,” as home prices have moved out of reach for many people, despite historically low mortgage rates. This “may have pushed the market to a tipping point.”

Pending home sales are an indication of what actual sales might look like over the next few months. They’re notoriously volatile. But in the San Francisco Bay Area, pending homes sales have been plunging in the double digits for months. And now Southern California is catching the cold.

In the San Francisco Bay Area, pending home sales plunged 10.8% year-over-year, after having plunged 11.6% in August, and 11.5% in July. It was the 12th month in a row of year-over-year declines. In the two counties that make up Silicon Valley, San Mateo and Santa Clara, pending sales plummeted respectively 22.4% and 23.5%!

In Southern California, pending home sales fell 7.1% year-over-year, after having fallen 3.8% in August. In July, they’d still inched up 1.4%. The counties with the sharpest declines were Los Angeles (-8%), San Diego (-11.5%), Riverside (-13.4%), and San Bernardino (-11.6%).

In the Central Valley region, pending home sales edged down 0.6% year-over-year, driven by the 16.8% plunge in Sacramento County.

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Of the homes put under contract, 26% had had their listing price reduced before buyers got interested. And after that:

  • 29% sold above asking price – at an average premium of 13%
  • 28% sold below asking price – at an average discount of 15%
  • 43% sold at asking price

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