Why has sales volume been down? Let me give you a hint. It’s green, sometimes crisp, has presidential branding, swooped in to boost the real estate market for two years, and there has been less of it lately. Bingo. You guessed it. The decline of cash sales so far in 2014 is one of the big factors causing sluggish sales in the Sacramento market as a whole. Take a look below. Any thoughts?
Unpacking the Trends: Total sales volume is down by over 20% this year compared to last year, but let’s unpack a few numbers to really understand what is happening. When looking at all non-cash sales, volume in 2014 is only down by about 4% from where it was at the beginning of 2013. Granted, volume is down very significantly though from years prior to 2013, but let’s focus on these past two years. When looking at all cash sales, there are literally less than half as many during the beginning of 2013 compared to the beginning of 2014 (595 less cash sales to be precise). Having this many fewer cash deals effectively means the rest of the market has been adjusting to such a big change after a very aggressive season of cash buying. Escrows have seemed to take longer, there are more FHA offers, sellers are offering credits to buyers and inventory has naturally seen an uptick because of the lack of cash. In short, the market has been trying to figure out how to cope now that cash has normalized. Cash of course is not the only force driving values, but we are definitely feeling its absence this year. It’s simply a different market, don’t you think?
By the way, some bathroom reading for you:
The Wright Report: This is the most exhaustive quarterly real estate report I know of in Sacramento. The latest edition covers the last half of 2013. I contributed a couple pages to the report and talked about how there was one real estate market last year, but two chapters. You can read the report online or visit Joel Wright’s site (You can DOWNLOAD directly from Slideshare, which is what I recommend).
Question: How is having less cash investors impacting the market?
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