Homeowners who lost their homes at unprecedented numbers inadvertently created extraordinary opportunities of home ownership for both investors and owner occupants. Upside down home ownership blazed a grave trail with foreclosures and short sales (distressed sales) paving the way of Sacramento’s “buyers’ market”.
The recovery has been painful and volatile. At the height of the crisis, industry analysts were incredibly optimistic predicting it would last only a year or two at the most. Seven years later forecasting continues to be a challenge. Just as the mainstream media seems to sync with the analysts, Bernake speaks, interest rates bump up overnight, and you and I get to buckle up for another exciting ride in the wonderful world of real estate. However, there is actual evidence that recovery may truly be underway.
AND NOW THE LIGHT AT THE END OF THE TUNNEL
An analysis by RealtyTrac Inc. shows Sacramento as one of the hottest turn-around markets and predicts we are headed for a more normal pattern because of a rapid increase in new-housing permits at the start of this year and a significant drop in foreclosures.
To give you an idea of what that foreclosure drop looks like and some comparisons, the breakdown of sales for May was 115 REOs (6.9%), 371 short sales (22.2%) and 1,186 conventional sales (70.9%). Compared to one year ago, REO (bankowned) sales accounted for 27.8%, short sales 30.1% and conventional sales 42.2%. Since then REOs have dropped 75.1%, short sales dropped 26.2% and conventional sales have increased 68%.
However, low inventory remains a serious issue for buyers, especially would be first time buyers. Compared with May 2012, the sales volume has decreased 7.9% from the 1,816 units sold. Although active listing inventory increased for the month of May, rising 7.7% from 1,381 units to 1,488 units, the months of inventory remained at .9. This number explains the amount of time (in months) that it would take to deplete the current inventory at the current sales rate.
SAR President Chris Little adds his observations: “The number of listings continues to decline and months of inventory remain exceptionally low with supplies lasting less than 3 weeks. Both the median and mean sales prices continue to increase significantly and cash buyers, though significant, are a declining portion of the buyers.”
WHERE’S THAT LIGHT AGAIN?
So when will we begin to see some of this new inventory from the housing permit increase? According to an article in the Sacramento Business journal, “Large homebuilders are snapping up the available lots out there, with plans to build on them as soon as possible, according to Jim Radler of Land Advisors organization in Sacramento… JMC Homes bought 54 finished lots called Sienna in an unincorporated area north of Elk Grove, between Calvine and Robbins roads and east of Elk Grove/Florin Road, near a strip mall.” As soon as this time next year we can begin to see move-in ready new home construction.
SAR President Chris Little continues, “Demand is high, supply is very low and investors are moving away. If interest rates continue to rise and lender practices continue to be stringent, it may flatten the rising demand due to challenges for buyers on the financing side. Therefore, homeowners with equity and a desire to sell should act on it and consult a REALTOR®.”
All these combine to make it a STRONG sellers’ market. With inventory on the rise and interest rates still at record lows, it’s STILL a great time to buy and sell. If you or someone you know is looking to buy or sell, give us a call.
(Market Data – Sacramento Association of REALTOR’s RESIDENTIAL RESALE STATISTICS May 2013)