Since spring of this year, the Sacramento Real Estate market has started seeing trends that makes me wonder what the next year will bring. Last year and the first few months of 2013 were for lack of words, frantic. There were dozens of offers on each listing, prices were increasing by the hour, and buyers needing financing found it tough to get into escrow on a home.
Then Spring and early summer came along and interest rates increased a point in reaction to fiscal news of an improving economy and possible decrease in stimulus funds. The interest rate increase just about killed profits for investors putting 20% down on properties and financing the rest. Other cash investors moved on to markets outside of Sacramento where prices hadn’t increased 30+ percent over the last year. I read not long ago that Stockton is now the new hot spot realizing high increases…just a few months delay behind Sacramento and they will be right where we are now.
In my opinion, the once frenzied real estate market has somewhat normalized over the past few months. Listings that go on the market at atrocious prices aren’t getting showings….or offers. Open house agents are reporting crickets when their sellers want to start out at too high of a price. Not too long ago, listing your home at a high price was “normal”…and you would even get offers above list price, with buyers removing their appraisal contingencies and willing to pay the difference between appraised value and offered price! Today, the days on market counts on MLS are increasing, sellers are finding themselves reducing their list prices to compete with nearby listings, and buyers have once again started asking for home warranties and pest clearances…those “extras” that we never asked for before when there were 12 offers on the table.
I personally think this is good for the local real estate market in Sacramento. If we had continued to increase at 30+ percent appreciation in values per year over a long period of time, I think there would have been the possibility of another dreaded bubble. Today, I think we hopefully flushed the frenzied activity out of our system and have plateaued at a normal growth level that we can hopefully sustain over time. Local trend graphs are showing changes in the market over the past few months, with a large increase in inventory of homes coming on the market, sellers reacting to competition coming on the market around the corner, and buyers having more power in their pockets. I for one look forward to normalcy when two hours on the market doesn’t mean the home is already sold to a cash buyer. The buyers that need to sustain our market and our economy are not those that have cash…they are those that need financing.
I’ll continue to keep you posted as more changes happen in the local market. Send me any questions/thoughts!