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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

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

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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SteveQ@TeamQ-RE.com