Let’s talk about the Sacramento market briefly and then touch on the government shutdown. I know any topic involving Congress right now can be nauseating, but let’s hone in to consider the relevance to real estate.
The local market is definitely slowing down as you can see with average price per square foot trends above and the median sales price below. When considering all the factors involved though, it makes sense. The formula is simple: More houses for sale + less investors + higher interest rates + onset of Fall = Values cooling off. I don’t know about you, but I am seeing many properties being priced more consistently with July and August instead of priced higher than the most recent sales. This is a tell-tale sign of the slowdown. At the same time, there are still properties that are getting multiple offers (when priced right) and I would still say the market favors sellers despite buyers gaining more power lately.
The Government Shutdown and Real Estate: It’s important to remember there are many different factors that help create or impact value in a real estate market. I talked about this recently with the Multi-Layered Real Estate Cake Analogy. The gist of this analogy is that any of a number of “layers” in the market can end up impacting the direction of values or how buyers perceive real estate. Things like the relationship between supply and demand, interest rates, the economy, cash investors, foreclosures, financing, affordability, loan programs, lending guidelines, jobs, consumer confidence and so many other “layers” end up playing a part in influencing the market. When it comes to the government shutdown, here’s my take. This is a bad situation and Congress really needs to bring their A-game to solve the problem. If the economy suffers and people’s perception of the economy changes, that can and will negatively impact the housing market. I don’t know about you, but I find it ironic that real estate saw exponential growth in large part due to The Fed’s manipulation of the market through historically low interest rates, yet here we see government potentially getting in the way of that “recovery” if they cannot get their act together.
Question: Any further thoughts? I’d love to hear your take.
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I think we will continue to see a slowdown in the market as a result of the shutdown and the reasons for the shutdown. A reduction in disposable income due to increases in family healthcare costs will probably have a negative impact on peoples ability to purchase homes.
I hear you Tom. If this persists too long, there will be an increasing lack of confidence in the economy too, which will hurt things further. So many businesses are being affected. The interviews I’ve heard on NPR lately have all pretty much said, “We can handle a slow month right now, but another one next month is really going to hurt.” So many businesses rely on government workers or even government contracts.