As we continue our turbulent countdown to November 8th, it’s difficult not to be battered by the rhetorical hurricane sweeping the country. Take a deep breath and look out the window. The weather is gorgeous. The Autumn colors are blushing and radiant in the crisp afternoon sun. We got some much needed rain. I for one, am grateful for the simpler things and I’m focusing on the things I can control like writing something less controversial than we’ve been reading.
Two houses go on the market on the same day in mid-October (in fact, this time last week), the Sellers are at different price points and are selling for different reasons. House #1 was a rental in a gated community with a price point under $300k and the Seller decided that when the renter moved out, that it was an opportune time to cash out and to stop being a landlord. House #2 is a custom home with a view of the greenbelt in an established neighborhood with a price point above $500k. Both homes are in top-notch condition with updates and desirable features for the price range they are selling in. Open houses and marketing brought interested buyers to both homes, but House #1 got a full priced offer within the week. Why?
It’s all about Supply and Demand! You knew I was going to say that, right? Of course. But did you know that a full 2/3 of the Active listings in the Sacramento region are under $500,000 right now? There’s been a slight market shift above $500k which you can see in the graph below. The dark blue represents Active listings and the light blue are Solds (since Sept 1, 2016) in Sacramento County. You can see with the first two pairs (under $500k) that the homes sell pretty fast with Solds outnumbering the current Actives, but above the $500k mark the trend shifts to greater inventory compared to Sold percentages and the gap widens with the days on market (aka DOM) increasing in the higher price range.
We’ve had some steady job growth with Millennials striking out on their own as their career prospects expand. Job growth has improved in the Sacramento region overall. Interest rates are still historically low even with the Fed intimating that they will start raising the rates and we’ve been told that the increase will be gradual. There is still a shortage of homes in the lower price points as rents shoot up because more renters are becoming first-time home buyers which is creating more competition. While the California Association of Realtors (CAR) states in their recent market forecast that Baby Boomers aren’t moving, I’m going to challenge that assumption because I’m already seeing some downsizing and talk of downsizing and that’s going to become a major trend as it starts to manifest itself.
The next logical step is for the move-up buyers to start displacing the Boomers as their families and incomes expand.
Bottom line though is that even homes priced above $500,000 are selling, but buyers have more choices so factors like functional and external obsolescencedrive buyer’s decisions. I will discuss what those are next week in more detail.
In the meantime, enjoy the weather! Carve a pumpkin and don’t eat too much candy! 🙂
On the personal front, I just got back from Buffalo, New York visiting my oldest son, Ian, for a long weekend. I saw the Erie Canal which was the first civil engineering project in the US and we in Sacramento have a little in common there. The canal was a transportation first and was completed in 1825, but the Golden Spike driven in 1869 marked the completion of the Transcontinental Railroad and that started in Sacramento and San Francisco! Ian and I also went to see Niagara Falls. That was truly amazing – the power of that water was tremendous! Listen to the water roar in this short video clip.
Postcard from the Edge (overcoming my fear of heights or trying to…)