Forbes published a great article HERE today on the current state and forecast of nationwide real estate….which is very similar to Ca & local trends in my opinion. While some articles you may have seen lately focus on the “sky is falling” view as they note the softening market….I’d argue that we’re finally done digging out of the ‘post-market crash’ prices, returning to what I would argue is a “healthy” market of +/- 3% growth in home prices per year. This 3% rate is a sustainable growth rate that we can continue to grow slowly at…not the +7% to +30% growth we saw in the Sacramento area since 2008. Those years should not be looked at as the “norm”…because they weren’t!

What does that mean to you as a homeowner or potential homeowner? Here’s my thoughts:

1. It’s no longer a seller’s market…there’s more negotiation in our future. Buyers won’t have to settle for as-is sales anymore because sellers won’t have 23 backup offers. Repairs will need to be considered. Price change conversations will need to occur. Seller credits for buyer closing costs will slowly re-enter our lives and be accepted more often.

2. Sellers need to price their home accurately, right from the start. Overpricing homes because someone thinks it’s still a seller’s market won’t work anymore.

3. Higher priced homes will probably move slower than they have been…as a combination of market shifts plus the impact from different tax changes this year.

4. Entry level homes will still be attractive, as they will continue to compete with rents in many areas around Sacramento.

5. Some homes will “cap out” and plateau at certain prices….ie, many 1,000sf homes in Folsom have seen a considerable shift in days on market as buyers no longer perceive value and consider looking elsewhere at that price.

6. The number of FHA and VA loans will begin increasing at big rates. When the market crashed, a majority of loans were cash or conventional loans with large down payments. Now that the market is balancing again, we’ll see more first time buyers and lower down payment loans (ie, 3%, 5%).

7. Homes will need to be in good to great condition to sell. Buyers won’t want to settle for just anything anymore, and the shift to more FHA/VA loans will require better condition homes. Sellers may find themselves doing more repairs or up front work as a result.

So…in the end, I think this is a good thing that we’re back to a healthy place. Yes, the “deals”
may be gone, less homes may sell and lenders may not fund as many loans…all things that may shift the type of jobs that some people have, but in the end, we’re back to a sustainable place that we need to be in the long run. No need to be worried when you read that the market is cooling. It was expected!

Have a great weekend everyone!