Is it just me, or has the market felt a bit funky? On one hand demand has felt very aggressive, but actual value appreciation has been fairly modest overall. Let’s take a look at the latest trends in the Sacramento housing market below. If you’re local, I hope the 10 quick trends help give you some talking points with clients. If you’re not local, what are you seeing in your area?
One Paragraph on the Market: More listings came on the market last month, but buyers readily absorbed them. Pendings are still a good 20%+ higher than last year in the Sacramento area, and clean and well-priced properties are getting into contract very quickly. As aggressive as demand has felt though, we haven’t seen the rapid appreciation this Spring that we saw in 2013. Values more or less have experienced a normal seasonal increase, though when compared to sales during the Fall of 2014, prices are clearly MUCH higher since there was a lull in the market last Fall. Overall price levels now generally seem to have recovered back to the height of last Summer (or even a bit higher depending on the area). Well-priced listings are getting into contract VERY quickly, and there have been multiple offers. But at the same time buyers are tending to overlook properties that are overpriced and anything with an adverse location or a lack of upgrades. As housing inventory presumably begins to increase over the next few months, keep an eye out for more price reductions, unrealistic expectations from sellers, and buyers gaining more power from sellers. Remember too the market does not behave the same at every price level or in every neighborhood.
Two ways to read my big monthly market post:
- Scan the talking points and graphs quickly.
- Grab a cup of coffee and spend a few minutes digesting what is here.
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Sacramento County Market Trends for April 2015:
- The median price in Sacramento County is $280,000.
- The median price is 5.6% higher than one year ago (April 2014).
- It took 42 days to sell a house last month.
- Cash sales were only 16.5% of all sales last month.
- FHA sales were 27% of all sales in Sacramento County last month.
- Sales volume was 9.2% higher this April compared to last April.
- There is 1.5 months of housing inventory (1.8 months last April).
- The average price per sq ft is 182 (7% higher than last April).
- The average sales price is $310,000 (5.7% higher than last year).
- It took 3 days longer to sell a house this April compared to last.
Placer County Market Trends for April 2015:
- The median price in Placer County is $391,500.
- The median price is 6.9% higher than one year ago (April 2014).
- It took 41 days to sell a house last month.
- Cash sales were 17% of all sales last month.
- FHA sales were 20% of all sales in Sacramento County last month.
- Sales volume was 27.5% higher this April compared to last April.
- There is 1.9 months of housing inventory (2.5 months last April).
- The average price per sq ft is 200 (3% higher than last April).
- The average sales price is $441,163 (3.8% higher than last year).
- It took 10 days shorter to sell a house this April compared to last.
Regional Market Trends for April 2015 (Sac, Placer, Yolo, El Dorado):
- The median price in the Sacramento Region is $325,000.
- The median price is 9.4% higher than one year ago (April 2014).
- It took 44 days to sell a house last month.
- Cash sales were 16.9% of all sales last month.
- FHA sales were 23.7% of all sales in Sacramento County last month.
- Sales volume was 10.5% higher this April compared to last April.
- There is 1.7 months of housing inventory (2.1 months last April).
- The average price per sq ft is 192 (7.2% higher than last April).
- The average sales price is $360,351 (6.9% higher than last year).
- It took the same amount of time to sell in April 2015 and April 2014.
Questions: How do you think sellers and buyers are feeling about the market right now? What are you seeing out there?
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Great post as always Ryan. The Los Angeles market is similar overall, however, some zip code areas are exploding (highest is 20.3% year over year value increase) and a few are actually experiencing moderate price declines. What’s interesting is there is no clear explanation for this difference. Both the high and low areas are similar with respect to median and predominate values and they are less than 12 miles apart.
Thanks so much Mike. Very interesting to hear about the market in LA. I really appreciate your take. 20.3% is a huge jump. Wow! I’ll be curious to hear more as time unfolds. A clear reason may emerge as to why some markets are increasing and others declining.
I know up here we are seeing nominal seasonal increases in many areas, though some areas have not seen much appreciation at all this Spring. It really depends on inventory. The closer a neighborhood is to having a “1 to 1” ratio of sales over the past 90 days vs. number of current active listings, the closer it is to being balanced (generally speaking of course). The market was definitely overpriced for nearly half the year last year, and I suspect we may see some of that same dynamic begin to unfold in coming time as inventory increases and sellers have a mindset that values are increasing rapidly.
Hey Ryan, interesting post. The consensus of people I talk to, including agents and mortgage brokers, seem to be a wariness in the rapid appreciation since ’06, ’08. This manifests in different ways in different places. Some think we are in a mini-bubble that will pop when the rates change. Others, sellers, are determined to stick to their guns since selling and taking the cash will only present the conundrum of where to put the money. ‘Moving up’ might just expose them to greater risk. Others think this might be the ‘new normal’ and they have bought. Two factors which might bring change seem to be when some of the older ARMS change rates and , of course, any changes in the Fed. Time will tell.
Thanks Ricardo. I always appreciate your take. Yes, depending on who you talk to, we’re either in Housing Bubble 2.0 or it’s the “new normal”. Values in recent years clearly went where they would not have gone had it not been for outside cash investors and historically low interest rates. In that sense values were inflated, and now the hope is wage growth will catch up to the market so that buyers can continue to afford higher prices when the Fed eventually increases rates. We shall see. Whether it’s a good time to buy right now is really up to the individual. It’s a good time if it makes sense. Nobody can time a market perfectly. But I will say it’s a good time to refinance. I’m telling my friends to get it done while they can.
Sensible advice. I wish salaries would rise, and perhaps in selected sectors, they will. State salaries, however, remain pretty stable in this town. I have heard figures that concern me, ie. that 25% of renters in the US are paying 50% of their income to landlords. That’s not good since I believe paying merely 1/3 of your income for rent is considered high. And on another note, when people do refinance at a lower rate, what happens to the holders of the notes (or packaged derivatives, alas)?
I’m with you on wage growth. I did an interview recently with a local blog, and the number one issue I mentioned facing the Sacramento region is jobs / wage growth. Paying 50% of one’s earnings to rent doesn’t leave much left for the table or anything else. It’s not easy being a young person these days either who has college debt and maybe not a great paying job after graduating. I’d love someone else to answer your last question since that’s not up my alley.
So would you consider the greater Sacramento market to be stable? I have heard different parameters on what is stable. What is your take?
Hi Mark. Thanks for checking in. I have been selecting “stable” or “increasing depending on the neighborhood. I think at the very moment the market is flirting with a seasonal Spring increase and the larger context of a market that will eventually slow down once more listings hit the market. I know some appraisers say the market is stable, and they never check the “increasing” box, but there has been a seasonal increase for sure. I’m not concerned if that box is checked, but if there is no adjustment for Date of Sale, that’s a bigger issue. On the other hand, some appraisers select “increasing” in their reports since the market did increase this Spring. I’ve found in recent months there has been a huge disparity in some areas when it comes to sales that went into contract during the Fall and those that went into contract beyond January. In some cases I gave some fairly substantial Date of Sale adjustments because the market experienced a more definitive lull last Fall and then had aggressive demand at the start of the Spring to fuel some increases. If it’s of any use to any onlookers, I’m glad to share what I have been putting in some recent reports to describe the market, the direction of values, etc… (just sent an email).
Always a tough call on what the transition point is from stable to increasing. If I have the data I do the same as what you have suggested, I generally look for a more than 5% annual increase, before I tend to start looking at adjustments unless I am forced to use older comps. A 0.5% increase/month is what I would consider a marginal increase and can hopefully be managed by recent comps. Recent rise in interest rates may cool off the market, we are starting to see a dip in demand where I am, based on my realtor network. Thanks for the post.
Thanks Mark. I appreciate your insight. I bet there are some real similarities between our markets since AZ and CA were both hit hard when the market crashed, and both had a significant number of cash investors playing the market when values bottomed out. It will be a numbers game here. Buyers have been absorbing the market very quickly, but many more listings should be coming on the market in coming months. I find the market to be very sensitive to increases in inventory.
Always interesting to visually see what is going on in the Sacramento real estate market.
Thanks Gary. It’s always fascinating to take a deeper look. One thing I didn’t mention above is the possibility that current pendings will close at higher levels in coming time to push the numbers up a bit for next month’s data. But we’ll see if that happens.