The Sacramento market in 2012 and a crystal ball for 2013

I don’t know about you, but I tend to not make predictions since I don’t own a crystal ball. After all, how many real estate predictions last year really nailed the market by predicting the story of shrinking inventory and incredible investor dominance? Let’s take a look at some stats and graphs for 2012, and then humbly wonder about some possibilities for 2013.

Graph of Cash Sales under 200K in Sacramento Placer and Yolo County - by Sacramento Appraisal Blog

All Sales vs Cash Sales in Sacramento Placer and Yolo County - by Sacramento Appraisal Blog

Cash FHA Conventional Sales in Sacramento County under 200K - by Sacramento Appraisal Blog

Blackstone purchases in Sacramento County in 2012- by Sacramento Appraisal Blog

months of inventory in Sacramento Region counties - graph by Trendgraphix

Unemployment rate in Sacramento County United States and California from 1990-2012 - by Sacramento Appraisal Blog

The 2012 market story: As you can see, the story of the market has been a decline in inventory as well as the unemployment rate, and an increase in cash and conventional loans. FHA loans also declined over the course of the year. Through all of this the median sales price level did see an increase over time too. Most notably, hedge funds and investors became a very dominant force in the market this year. It’s incredible to see that one hedge fund (Blackstone / THR California LLC) purchased 4.43% of the entire market on MLS in Sacramento County since August 1, 2012. Since the bulk of their purchases on MLS were under $200,000 though, they effectively purchased 6.87% of the sub-$200K segment in Sacramento County. Does that shock you?

Things that wouldn’t surprise me in 2013: These aren’t predictions, but things I wouldn’t be surprised to see pan out. Of course, anything can happen though (as we saw last year), so only time will tell. Nonetheless, here goes.

Increase of Investors: I would not be surprised to see more investors enter the market. Many industry leaders think the real estate market hit bottom over the past year, so everyone wants a piece of the pie now.

The Hedge Fund Factor: Anyone casually following real estate knows the name “Blackstone” by now, but I wouldn’t be shocked to see other hedge funds become well-known in 2013. Honestly, since Blackstone has been very aggressive in Sacramento County, what they decide to do will definitely impact the market – whether they pull back, move forward at the same pace, increase their purchases or expand into other counties. Think about it this way. If they stopped buying right now, there would be an instant boost to inventory since they purchased 4.43% of all sales on MLS over the past few months. How does that strike you?

FHA Struggles: I wouldn’t be surprised to see FHA buyers continue to struggle to get into contract as conventional loans and cash have been more preferable to sellers. Keep in mind FHA is still a factor in the market though.

Higher Property Taxes: I would not be surprised to see property taxes increase for a very large percentage of home owners in 2013 (new assessed values will be posted in July 2013 – I’ll keep you informed).

Low Inventory: I would not be surprised to see inventory continue to be very low.

Real Estate Industry: I would not be surprised to see some real estate professionals struggle or leave the business in light of less deals (particularly if their book of business is focused below the $200,000 price level). At the same time, I would expect other RE pros to make more money this year and many to enter the business too in light of an increase of home equity and other positive factors. There really is opportunity to thrive in real estate, but lower inventory and increased investor activity means it’s critical to diversify, add new tools to the utility belt, provide excellent service and work hard. Basically, it’s time to crush it in 2013.

Questions: What do you think 2013 has in store for the real estate market? What do you think the 2012 market would have been like without increased investor activity and historically low rates?

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