Home sales volume and price peaks

39,760 new and resale home transactions closed escrow in California during December 2012. Sales are up 5% from one year ago when 37,734 sales closed escrow.

2012 ended with 447,573 total home sales in California. This is up 8% from 2011. Home sales volume rose in the second half of this year. This was due mostly to the massive invasion of speculators and partly to increased end user demand. Speculator influence will wane and stabilize throughout 2013. At the same time, sales volume will begin to gain more support from buyer-occupants, as they cautiously re-enter the market due to rising confidence and slowly returning jobs.

Chart 1

Chart Updated 1/16/13

	December 2012	November 2012	December 2011
Southern CA	20,274	19,285	19,247
Northern CA	19,486	18,196	18,487
CA Total	39,760	37,481	37,734

Chart 2

Chart Last Updated 1/16/13

	2013*	2012	2011	2010	2009	2005
NorCal	235,000	212,454	199,117	192,979	219,460	398,174
SoCal	260,000	235,119	214,362	228,655	245,331	355,698
Total	495,000	447,573	413,479	421,634	465,654	753,876

Data courtesy of Dataquick

All forecasts are made by first tuesday, based on current data, influential factors and market trends.

Wondering how to bolster your real estate practice during the current sales volume slump? This article forecasts when this slump will end and offers suggestions for how to improve your practice in the meantime.

Home sales volume rides the bumpy plateau

The above charts track the home sales volume of single family residences (SFRs) on a month-to-month and annual basis. Sales volume includes all resales and new homes in California, including new homes sold directly by the builder.

Annual real estate sales numbers since the Great Recession suggest the upcoming years through 2016 will be characterized by a bumpy plateau in home sales volume. Volume first, then prices, fluctuated from month to month throughout 2012. Overall, a 9% numerical gain in sales occurred from the previous year. [See Chart 1]

Looking forward, 2013 will likely see a 10% year-over-year increase in sales volume as buyer-occupants gradually return to the market. However, no major change from 2012’s numbers will occur until California employment growth and homebuyer confidence show consistent improvement over an 18-24 month period. For example, in 1994, when the economy began to rise from the recession of 1991, interest rates rose to control the recovery. It then took 24 consecutive months of improved job numbers of around an annual rate of 400,000 for the California housing market to respond with increased sales volume.

Current trends in jobs and consumer confidence do not suggest any equivalent improvement will occur before 2014. As of the second quarter of 2012, 29% of all homeowners were underwater. Thus, these homeowners cannot sell and relocate because their homes are worth significantly less than the debt encumbering them.

The peak sales volume last seen in 2004, inflated by speculator acquisitions, may never return at all.

Relocating Baby Boomers going into retirement later this decade will be the primary propelling force in both selling homes and buying replacements. Their Generation Y(Gen Y) children will add to the sales volume as they become first-time homebuyers whose influence will peak at the end of this decade.