Expert Opinion: Sacramento Housing market is Red Hot Right Now!, by Robert Langston.

By Robert Langston

EXPERT OPINION:

Sacramento Housing Market is Red Hot Right Now

Sacramento offers a cheaper alternative to buying a home other than settling in the more expensive San Jose. Its housing market in recent months has been very hot and competitive. Millennials and firsttime homebuyers are entering the market as home affordability has dramatically improved since the reduction of interest rates. The demand has been high, but the ever-diminishing inventory has made it difficult for homebuyers to find homes. The little inventory that has made it into the market has had multiple offers made, resulting in heated bidding wars. If you are entering the market, be patient, and know this;

PRICE APPRECIATION

The home price in Sacramento in the last month has grown from 18% to 25% year-over-year. However, the median prices are not increasing at the same rate. The current median sale price of homes in Sacramento is $427K, a 26.5% increase from last year’s $365K. The median sale price/sq. Ft is now at $315, a whopping 26.0% increase. The sale-to-price ratio for homes in Sacramento was at 104.62%. That means that people were paying 5% over the listing price. Depending on which side of the fence you are on, brought on by the supply and demand dynamics in Sacramento.

SUPPLY AND DEMAND

The current supply of existing homes in Sacramento is currently not enough. The supply chain challenges experienced in the building community are not working in favor of the shortage. Low labor supply, high lumber expenses, and material shortages have made it impossible to build a home first enough to keep up with the demand.

The supply shortage has made it that homes listed only stay for about seven days. The very hot homes are waiting for a shorter time and are having people pay 10% over the listing price.

Single-family homes are the fastest moving inventory in Sacramento. Sales of these homes went up by 49.2% compared to last year. However, active listing in the market has dropped by 28.6% as of May 2020. The inventory is set to decrease even further as fewer and fewer homes come onto the market. The months of inventory supply in May rose to 0.8 months but reduced even further in June to 0.5 months.

INTEREST RATE AND AFFORDABILITY

Mortgage rates are still low, making homeownership relatively affordable. Interest rates are still averaging at 3.0% and are unlikely to rise past that average as the federal reserve wishes to wait until the economy recovers. It is important to note that even though the debt is currently cheap, high home prices may make you leave the market. They are leaving the question, how sustainable is this housing market if people are being priced out. According to Greg Aguirre, the president, and CEO of Capital Rivers, people priced out in the current housing market may become long-time renters, unable to afford their dream homes.

The housing market can’t remain hot forever, but now that it is, sellers should take advantage of this sellers’ market. As for homebuyers, the housing market is still safe. The millennials and first-time homebuyers entering the homeownership journey will fuel the housing market for the next twelve months. Something that could see prices grow even higher. It, therefore, might be a good idea to invest now.

Sources: https://www.bizjournals.com/sacramento/news/2021/06/30/whysacramento-s-housing-market-is-red-hot.html#:~:text=Sacramento’s%20 hot%20housing%20market%20is,many%20U.S.%20cities%20this%20 year.&text=%E2%80%9CHome%20prices%20have%20increased%20from,is%20 crazy%2C%E2%80%9D%20says%20Aguirre. https://www.noradarealestate.com/blog/sacramento-real-estate-market/ https://www.redfin.com/city/16409/CA/Sacramento/housing-market