Tag Archives: real estate stabilizing

Real Estate Market Trends: Placer County

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After a booming 2013, the Placer County real estate market has been somewhat subdued so far this year. While actual sales are down each month this year compared to 2013, the larger impact has been the increase in available homes for sale.

In July 2013 there were 930 homes available for sale in Placer County compared to 1454 in July 2014. Closed home sales were at 583 in July 2013 vs. 528 in July 2014. Perhaps the good news is that pending sales were up with 488 home gone pending in July 2013 vs 586 homes pending in July 2014.  The real estate activity in Rocklin, Roseville and Lincoln is also in line with Placer County.

The pendulum is always swinging and what I believe we are seeing is a somewhat typical transition to a normal market. 2013 was so strong that it is reasonable to see the pendulum swing in the other direction. In fact, it’s probably a good thing when you think of the alternative being a run-away market with prices escalating and pushing us into another bust cycle too early.

Of course, all this data is generalized. Lower priced homes have maintained momentum better than higher priced homes, as is to be expected. In addition, the change on January 1, 2014 in the maximum FHA loan limit (dropping from $580,000 in 2013 to $474,950 in 2014) took a hit on home prices mostly in the $500’s.

To further challenge the market, many home sellers expect to be able to sell their home for more than the neighbor’s home that sold earlier this year. While this may be appropriate in the $250K price range, we have seen little or no price appreciation this year in the $400,000+ market in 2014. So these homes hit the market overpriced and ultimately the prices must be reduced to market level. It doesn’t necessarily mean that home prices are declining, but it does infer that if you want to sell your home in today’s real estate market, you must price it using good comparable properties and not shoot for “pie in the sky dreams.”

The remainder of 2014 will give us a good idea of how the selling season will take off next year. I expect that we will see sales pick up over the next few months and will likely drop off over the holidays. By February 2015 I expect to see inventories start to drop again and that we will see marginal appreciation next year. The one wild card is whether or not interest rates stay low. A 1% increase in interest rate will put pressure on home values since this will push buyers into lower priced homes.

Hope this gives you an idea of where our local real estate market trends are heading.

To see charts for Placer County as well as Roseville, Rocklin, and Lincoln, please click on this link:    Real Estate Market Trends for Placer_Rocklin_Roseville, Lincoln

ANOTHER HOUSING BUBBLE?

New Housing Bubble Coming?

housing bubble
Another Housing Bubble Coming?

Are we entering another real estate market “bubble?” Some folks I talk to believe that prices have risen too quickly and that it will all come crashing down again.  Recent history will tell us that no one knows what the future holds in this regard.  Pricing in the market is one factor for consideration, but the strength of the market is determined by much more.  Not only can our politicians make new  laws with unintended results, but major catastrophic or world economic events can affect the US real estate market.  Here are some facts to help you decide where we are in the real estate cycle.

While prices have risen dramatically over the last year, they are nowhere near the highest prices that were  seen just prior to the downturn.  Many areas have seen 20%+ appreciation over the last year which is driven by demand.  I don’t expect us to see appreciation continue at that rate over the next year because of several factors but it will be a while before we see equilibrium between supply and demand.

ALL loans available today require documentation of a buyer’s ability to repay the loan.  Lenders require much more information from buyers today before approving a loan.  Long gone are the stated income loans (aka: liar loans) that allowed buyers to merely pull numbers out of a hat to qualify for a home loan (of course, that doesn’t mean they won’t come back).  When I was VP of Sales for Lennar’s Northern California Division, I can’t tell you how many times buyers made loan applications with our “in-house” lender and were declined; only to have the buyer return with a stated income loan approval from another lender.  Hmmm, let me see; did their income go up in just few short days? The point is that loans originated today are more sound and more likely to be repaid than in the past.

Most local market areas have  1.5- 2.0 month’s supply of inventory of homes for sale. A market in equilibrium between supply and demand will have 3-6 months of inventory available at any time.  In other words, if there were no additional homes placed on the market for sale, it would take 3-6 months to sell everything that was currently available.  We are seeing a trend toward equilibrium but we are still in a seller’s market and it will likely be several months before supply and demand are equal.

Short sales and foreclosures as a percentage of total sales are way down.  These sales tend to sell at lower prices.  So one reason that median price has increased is merely because there are fewer short and foreclosure sales in the market.  In addition, this demonstrates that the market is building real strength.

Interest rates are up 1% or more since the beginning of the summer.  This will tend to push home sales toward equilibrium in a seller’s market.  Rates will likely creep up over the next 12 months, however, it is expected that rates will stay relatively low compared to historic highs.

While short and foreclosures sales are down, traditional sales are up. Why? Because the price increases we have seen in the market allow homeowners to sell their homes without credit impairment and in some cases, actually making a few bucks along the way.  And most of these sellers will be new buyers in the market.

While there are many external factors that can affect the stability and strength of the real estate market, there is no evidence, at this time, that would lead us to believe we are in a “bubble” or even close to being there.  As more inventory comes into the market, the rate of home price appreciation is slowing yet demand is still strong.  Barring unforeseen circumstances, there is every reason to believe that we are headed toward a more stable market with reasonable price appreciation and inventory. In other words, we are heading in the direction of equilibrium, not of another crash.

Steve Quaranta
Better Homes and Gardens Real Estate

Are Home Prices Stabilizing??

Through May, the market has continued at its feverish pace, both in number of sales as well as price increases.  Inventory continues to be very low, prices continued to rise and interest rates remained low.  However, there are some indications that the market may be slowing a bit and heading in the direction of stabilization between supply and demand.


The End of the Spring Selling Season

Typically, the spring selling season peaks in May as the school year nears its close.  Then there is gradual slowing through the summer.  August tends to be one of the slowest months of the year as parents and kids get settled and ready for the school year to begin. Home buyers with children want to have a home selected in early summer so they can lock in the schools their children will attend in the fall. I expect we will see demand taper off a bit through the summer.


Buyers Priced out of Markets

Price increases are forcing buyers out of the market, or at a minimum, to reduce their requirements on a home to keep within a range of affordability.  In some areas, average home prices have increased by 20% to almost 40% (in lower priced areas) over the last year. For example, in the neighborhood I live in at Whitney Ranch, it was possible to buy a home in the $400’s one year ago.  Now, that’s just about impossible with the exception of a smaller home, or homes that have inherent issues or are in poor condition. As buyers are pushed out of areas, it will slow the rate of price increases.


Rising Interest Rates

Interest rates have been creeping up over the last several weeks and are about ¾% -1% higher than a few months ago.  An interest rate of 4% compared to 3%, on a $350,000 mortgage equates to approximately $196 more in monthly payments.  This is squeezing buyers and forcing some out of the market and others to reduce their sales price.  Some areas of Roseville, Rocklin and greater Sacramento are now off the table for buyers due to increases in prices and loan rates.  This will put pressure against rising home prices.


Increasing Inventory Likely

As prices have risen, there are fewer underwater homes.  As a result, more homeowners can sell their homes without the need to resort to a short sale.  This is and will cause more homes to be listed for sale to increase inventory and to trend the market toward stabilization.


Fewer Offers

While lowest priced homes in specific areas are still pulling multiple offers, the number of those offers is declining as well as the amount of offer price over list price.  Frequently only one or two offers are received compared to double digit offers earlier this year.  Through the remainder of the summer I expect to see a trend toward fewer multiple offer situations and longer days on the market to sell a home.


What Does This Mean?

Combine all of this and I believe it is likely we will see a trend toward stabilization which includes a slower pace of price increases, fewer buyers in the market, more homes being listed for sale and longer days on market.  It is unlikely that we will continue to see annualized price appreciation of 20% and more.  Don’t get me wrong here.  I believe we will continue through the remainder of the year in a “seller’s market.”  Market equilibrium between buyers and sellers is when there is 3-6 months worth of available inventory (homes for sale).  It’s difficult to know when this will happen.  But, we’re headed in that direction!

See the charts below for home sale activity through May of 2013 for both Placer and Sacramento Counties.  If you would like more information regarding your specific area of interest, my contact information is at the bottom of this email.

If you are interested in data by specific areas, see this link to our website:  Steve and Linette Market Trends Reports

Have a great Summer!

Steve Quaranta

 

Steve and Linette Quaranta
Realtors
Mobile: (916) 276-7653 /(916) 757-3569
Email: SteveQ@TeamQ-RE.com, LinetteQ@TeamQ-RE.com
Website: http://www.TeamQ-RE.com
DRE #s 01854924, 01153709