New numbers on home sales released this week might suggest to some the signs of a market approaching its latest peak. Real-estate industry talking heads are scrambling to inject some optimism as summer, which typically brings a much stronger sales market, approaches.
In May, new data reveals, overall housing sales declined for the tenth straight month as compared to the same month a year ago. Sales volume is on track to reach a low last seen in 2007, the first full year of the late-2000s housing meltdown.
A median-priced home is affordable for the median-income resident in only eight of California's largest counties — San Diego is not among them. Indeed, housing prices are approaching and in some cases even surpassing their pre-bubble levels. Suburbs such as El Cajon, Lemon Grove, Poway, and San Marcos have seen price spikes of 20 percent or more in the past year.
"While home price increases have tempered over the past few months, prices are still nearly 12 percent higher than a year ago," said California Association of Realtors economist and vice president Leslie Appleton Young in a release, admitting that the situation "is presenting affordability challenges to home buyers."
Even people who are interested in buying in the face of these numbers are having trouble. New, stricter lending standards introduced at the beginning of the year are resulting in more borrowers being turned away at their banks. Rising private mortgage insurance (PMI) rates paid by borrowers with less than 20 percent of a home's price for a down payment are negating otherwise low interest rates.
"Real estate prices continue to march higher on declining sales volume which is an unhealthy combination," says Madeline Schnapp, a research director for market tracking firm PropertyRadar. "At some point you run out of buyers willing to pay these prices, setting the stage for a decline in sales volume, which we are already seeing, and later for the possibility of a price correction."