After hyperventilating for months, Sacramento’s housing market is starting to catch its breath.
Prices shot up this year faster than anyone predicted because of a tight supply of homes for sale and heavy competition from investors and traditional homebuyers. Now more houses are on the market, the price spike has abated, and non-cash buyers stand a better chance of getting their offers accepted.
Some worry the mini-boom has suddenly deflated. Others are hopeful the changes are signs of a market that’s normalizing after a wild ride of boom and bust in the past decade, during which prices rose to dizzying heights only to drop so low that big-money investors came swooping in to snap up thousands of homes.
“I think we have stabilized the patient,” said Chris Little, president of the Sacramento Association of Realtors. “I really do.”
Rising prices have prompted more people to put their homes on the market. As of July, more than 2,000 homes were listed for sale in Sacramento County and the city of West Sacramento – 21 percent more than in June and more than twice as many as in January, according to the Realtors group.
It marked the first time since February 2012 that the group’s inventory of active listings topped 2,000, up from a low of fewer than 1,000 at the beginning of this year.
Homes also are taking longer to sell. The Realtors group said the share of homes that sold after spending less than 30 days on the market dropped slightly in July from the average over the four prior months. At the same time, the percentage of homes that took two or three months to sell rose incrementally.
Wild price appreciation, meanwhile, is slowing down since it peaked in spring. For several months this year, the median home price in Sacramento County and West Sacramento rose by around 8 percent a month, a remarkable figure. In June and July it went up by about 2.5 percent each month, the Realtors said.
Some real estate agents worry that prices and sales may slip. Others say a little cooling off isn’t a bad thing.
Only a few months ago, agents and buyers described homes hitting the market and drawing multiple offers, some all-cash, within a matter of days or even hours. Buyers with traditional financing expressed frustration at seeing their offers rejected again and again.
Lately, investors have been falling away as prices rise, according to real estate information service DataQuick. Cash buyers and absentee owners, who once dominated the market, declined as a percentage of all buyers from February through July, the San Diego-based firm said.
The recent changes are “making it easier for buyers so they don’t have to make a snap decision,” Little said.
Even with the recent changes, sellers still have the advantage. The market has just a little more than a month of inventory, meaning it would take about that long to sell all the houses.
At its low point, inventory dropped to less than a month’s supply. Anything less than three months’ supply is considered a seller’s market. Professionals say six months of inventory is a good balance point between sellers and buyers.
‘Thrilled to get it’
While it is no longer nearly impossible to find a home to buy, it is still a challenge. Buyers who have been successful in purchasing homes recently tend to have a clear idea about what they want and are prepared to make a quick and solid offer.
Take Robyn Barnes, a registered nurse who had rented for 20 years and decided it was time to buy. She and her agent Gillian Long, of Intero Real Estate Services’ Folsom Lake office, made it their mission to find her a house in the under-$250,000 range. That’s the part of the market where investors have been most active, shutting out many would-be homeowners.
Barnes, 61, worked overtime to save up money for a down payment. And even though she wasn’t especially computer savvy, she became adept at monitoring listings on the Web.
“I looked at thousands of houses online,” Barnes said. “It took me three months to get ready to buy.”
When she was ready, she saw three houses she liked. One sold before she could view it. Another was pulled off the market. With the third house, she said, “I absolutely loved it. Right away I knew it was mine.”
Barnes made an offer for the asking price of $230,000 and agreed to pay $5,000 in closing costs for the 1,600-square-foot home in northern Sacramento’s River Gardens neighborhood, near the American River Parkway.
She also wrote a letter to the seller, a woman who had moved into assisted living, describing her love of the house with its potting shed and ample storage spaces. Barnes included a photograph of herself with her three Chihuahuas.
An investor put in an all-cash offer at the same time but low-balled it and lost out, she said. Barnes closed on the house in late July and moved in last week with the help of friends.
“I was thrilled to get it,” she said.
Heidi van Beek , a 37-year-old academic adviser at California State University, Sacramento, had been looking at houses under $250,000 for 15 months. She wrote eight offers, but investors outbid her time after time, she said.
Van Beek knew she wanted to live in midtown Sacramento or near the UC Davis Medical Center, but those areas had few homes for sale, she said.
In July, she spotted a 900-square-foot Mediterranean bungalow near the Med Center and put in an offer that was nearly $5,000 above the asking price. She also offered to pay all closing costs, and her agent, Libby Woolford of Coldwell Banker, helped her write a letter about her dedication to being a good homeowner.
Van Beek moved in a week ago.
She said she understands that inventory has increased across the region, but in the leafy grid where she was focused, she said she didn’t think there was more on the market. The difference, she said, was that there were far fewer foreclosures than a year ago.
“Almost everything on the market has a seller living in it,” she said. “It’s not standing there ready to go.”
For sellers, the changing resale market means they may not be able keep pushing prices higher, as they have been doing for much of this year.
Rates for 30-year mortgages have risen from a historic low of less than 3.5 percent earlier this year to more than 4.5 percent, according to mortgage giant Freddie Mac.
That’s flattening prices somewhat because buyers can afford less, and dissuading some buyers who were lured to the market mainly by the ultra-low rates, agents said. Homes that once would have sold in days may now take weeks to sell, and sellers are even dropping prices, they said.
Part of the change is the typical slowdown that happens as children return to school and the spring and summer buying season comes to an end. But agents also feel it may be the beginning of a leveling off that could ultimately benefit the market as a whole.
“We’re all talking about it. The market’s changing. The investors have all pulled back,” said Doug Covill, an agent with Coldwell Banker and past president of the Realtors association.
He said he thinks the market may have hit a plateau after falling so low that investors rushed in to gobble up undervalued properties. Now, after the median price jumped by 40 percent in Sacramento County from July 2012 to last month, the market may be reaching some sort of equilibrium.
“I see it as a good thing,” Covill said. For decades “Sacramento has either been skyrocketing up or plummeting down. I’d just like to have something steady I can count on.”
Source: Sacramento Bee