Will Spring Bring Balance

This past weekend represented the official start of spring. The sun is bright, the skies are blue, and the temperature is warming slightly. Springtime in Sacramento is a gorgeous time of year and traditionally marks the beginning of the year’s home-buying season.

For the first time in recent memory, our local real estate market did not experience a slow down over the winter. The limited inventory of available homes ensured that prices continued to climb and days on the market remained brief. When comparing home sales prices from the prior winter to this winter, the numbers show that the average price for a home in the Sacramento region are up over 17%. Did you view a home that had some great qualities but also had a few blemishes that you want to think about before putting in an offer? Unfortunately this market does not allow for a whole lot of time to think things over - the average days on market for a home in the Sacramento region are down nearly 50%.

Faster sales at higher prices - in other words, it continues to be a great time to be a seller. The most common question is, do we professionals in the real estate industry see anything on the horizon that may slow this rapidly appreciating sellers market? Over the past 2 weeks, mortgage interest rates have crept up a little bit. This has the potential of thinning out the buyer pool which in turn could slow down the market. And in another recent development, Fannie Mae and Freddie Mac have indicated that buyers for second homes / vacation homes and investment properties may start paying higher fees to obtain financing on those property types. This also has the potential of thinning out the buyer pool.

But do I feel that either of these two recent developments have a significant chance to move the needle? Not really. There is so much pent-up demand on the buyer side that there needs to be an event that either significantly reduces the number of buyers, or that significantly increases the number of sellers. Interest rates adjusting a half percent, or investors having to come out of pocket with a little more for their loans don’t feel like real threats to the current status quo. The coronavirus initially felt like a significant threat to home prices. But that only lasted a few weeks before values took off towards the upside. That has lead us to where we are today in Sacramento - average house prices of half a mil that go pending sale in less than a week.

Fingers crossed that the real estate market becomes a more balanced playing field, because the current environment is not very enjoyable in my opinion.