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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

FHA Lowers Maximum Loan Amount

FHAI’ve had several people ask me about the change in FHA loan limits and what impact it may have on home buyers and home sellers. Up until December 31, 2013, the maximum loan amount that a borrower could receive under FHA was $580,000 for Sacramento and Placer counties. Starting in January 2014 the maximum FHA loan amount is now $474,950 for FHA in the same areas. The only exception to the new loan limit is if a home was assigned an FHA case number prior to the end of 2013. FHA gave little notice of this change with a formal announcement occurring in early December 2013.

FHA doesn’t make loans but does insure lenders against defaults that have been funded using FHA. There are many reasons why a buyer may choose to use FHA as a method of financing a home.

• Only 3.5% down payment (with max loan of $474,950)
• Lower FICO score requirement than Conventional Loans
• Higher DTI (debt to income ratios) allowed vs Conventional
• After short sale, able to purchase sooner than Conventional
o FHA has a “back to work” program that allows qualifying buyers to purchase a home 12 months after a short sale.

How will this affect the market is unclear at this point in time. Homes priced under $500,000 should experience little negative impact. However, homes selling in the mid $500,000 range and up could be negatively impacted if FHA is heavily used in the area. Some home buyers who must use FHA may have to reduce the purchase price they have been considering.  This could negatively impact demand for higher priced homes.  If we see strong demand, the change in FHA loan limits may have little impact.

We’ll have to see how the selling season unfolds in the coming weeks to ultimately understand the impact of the change in FHA loan limits. In the bigger picture, the overall real estate market is moving toward equilibrium. Communities with higher priced homes are seeing slower appreciation and some increase in inventory leading to a balanced market. Lower priced homes will likely continue to be in a seller’s market in the short term. Most experts suggest that home prices will continue to increase in 2014, though not at the rate we’ve seen over the last few years. Instead, they are predicting an appreciation rate of around 6%. Interest rates by the end of the year are expected to be somewhere between 5% and 6%. If you would like to find out what the maximum FHA loan limit is for your area, click the link below.
https://entp.hud.gov/idapp/html/hicostlook.cfm (all you need to do is put in the county and hit send).

Contact me if you would like more information. Hope that helps!

Local Real Estate Statistics

Sac chart July 2013

Sacramento County

**2371 homes available for sale in July 2013 vs 2019 in June 2013 (up 17.4%) and 1686 in July 2012 (homes for sale up 40.6% year over year).
**
1559 pending sales closed escrow in July 2013 , vs 1510 from June 2013 (up 3.2%) and 1661 in July 2012 (down 6.1%).  
**Average days on market for July 2013 were 26, vs 23 for June 2013, and 60 for August 2012.
**Months of inventory – 1.5 months of inventory in July 2013 vs 1.3 in June 2013 (up 15.4%) and 1.0 in July 2012 (up 50%).

Placer County

**930 homes available for sale in July 2013 vs 795 in June 2013 (up 17%) and 784 in July 2012 (up 18.6% year over year). 
**565 pending sales closed escrow in July 2013 vs June 2013 of 578 (down 2.2%) and July 2012 of 507 (up 11.4%).
**
Average days on market for July 2013 were 28 vs 30 for June 2013 and 61 for August 2012. 
**Months of Inventory – 1.6 in July 2013 vs 1.4 June 2013 (up 14.3%), and 1.5 in July 2012 (up 6.7%).

WHAT DOES THIS MEAN?  Inventory of available homes is up substantially as more sellers are able to now sell and avoid a short sale or foreclosure.  However, many of these new listings are overpriced in the market which will trend to longer days on market.  Sellers (and some real estate agents for that matter) have not recognized that the market has experienced a shift starting in June of this year.  With prices increasing every month through the first half of the year, it did not take long for the market to catch up to an overpriced listing.  This is no longer the case. 

However, demand still outpaces supply and homes priced correctly in the market and that lack any substantial flaws will sell in a reasonable period of time.  3-6 months of inventory is considered to be a “normal market” where supply and demand are in equilibrium.  Remember that closed escrows in any given month became pending sales (in most cases) 30-60 days prior.  July closing statistics include homes that became pending sales in May and June.  Average days on the market is trending higher as more homes are listed on the market for prices not supported by demand.   The summer months are typically slower sales months as people take vacations and prepare to get their kids back in school.    Some of these statistics are likely attributable to the seasonal summer slowdown.  Activity in September and October of this year will help us understand how much of the market shift will continue and how much was merely affected by seasonal factors. 

 Frequently we see conflicting reports in the news about the real estate market. Part of that may be due to the area being reported on; national, state or local.  I just read a article stating that California home sales were the highest in July since May 2012.  I would expect this given that we have seen increased inventory in the market over the last few months.  The buyers in the market who have not been able to purchase a home until now are finally getting a break with more homes on the market and prices stabilizing. 

To see the detailed charts for this information and more please visit our website.  CLICK HERE!

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916-276-7653

SteveQ@TeamQ-RE.com