Big news today is that the growth of the US economy shot to 4.1 percent in the 2nd quarter (ending in June) ahead of the imposed tariffs. So where does housing fit in the bigger picture? Doesn’t sound like housing could suffer any setbacks now, right? We’ve been enjoying steady and consistent price appreciation year over year driven by lack of inventory and the strong migration from the San Francisco Bay area. Smooth sailing for the past four years, but there are some clouds forming on the horizon and we don’t know if they are bringing in a storm or just passing by.
Squeezing the Local Market
Here in the Sacramento area we’ve been seeing price drops in the past couple of months and homes sitting longer on the market. Yes, of course, this does happen every year about this time to a certain extent. It’s also still a seller’s market, but we’re seeing signs that there may be some type of shift coming. Here’s why:
- 16.2% MORE houses went on the market in June 2018 than the previous June, but the number of houses sold went down by 10.2%.
- In line with the above statistics, we also saw a uptick in months of inventory to 1.5 compared to 1.2 months last year at this time. (Right. I get it. This is still LOW).
- Average days on market went up 13% and the ratio of price sold to price listed went down by 1% which aligns with the price reductions we’re seeing.
Home prices fell in two feeder markets to Sacramento: Southern California and the San Francisco Bay Area. June sales were down in the Bay Area by more than 9 percent over a year ago according to CoreLogic. Southern California saw a greater decline of 11.8%. Why?
International Buyer Pullback
One reason is that one segment of buyers pulled back on their appetite for US real estate. The National Association of Realtors reports that the dollar volume of US home sales to international buyers between April 2017 to March 2018 dropped by 21% compared to the previous period. Buyers from China, Canada, India, Mexico, and the UK comprise nearly half of the international sales volume. Of note, sales by Canadian buyers fell by 45%. International buyers make up a large percentage of buyers in the San Francisco Bay Area and in Southern California so when demand drops, so can prices. Median prices of new construction have slid down for a couple of months as well according to a joint report by the US Census Bureau and the US Department of Housing and Urban Development. The Fed is still on track to raise interest rates a couple more times this year which limits the budgets of buyers, too.
Consider an Umbrella
So should we ring the alarm bells? Is the sky falling? No. There’s been a correction expected for some time. Prices can’t keep going up indefinitely. My advice: If you’re contemplating selling, understand that the market is softer right now than it has been because buyers are pickier and the multiple offer situation has died out, at least for now. Be reasonable in your expectations of what buyers will offer for your home. If you hold out for the Pie-in-the-sky value, you could miss getting into contract completely. Contact me for a free professional opinion of value. Buyers: You’re finally getting some leverage in this market, but not all sellers are understanding the shift. Be patient. Contact me and let's find a home for you. ******************************** Back on the Market after a Paint and Staging job as well as a price reduction! Beautiful single story home in quiet neighborhood. Close to Sun City without the HOA! 8052 Robinson Drive, Roseville 3(4) beds/2 baths / 1706 SF $435,000 Open House Saturday 1-4pm