If you've read the Sacramento Bee or watched the news over the past year, you can't help but notice that the media has been hyper focused on real estate. While headlines and stories are written to garner the most views or clicks, their angle isn't always honest and sometimes can be very misleading.
Being a real estate agent in Sacramento, I can tell you that our market has continued to be very robust. With low inventory a key factor, we continue to see multiple offers on homes if they are priced correctly. In this post, I take a more positive view of our current market and in the end, draw a conclusion based on what I see.
In the face of higher interest rates, the local housing market continues to showcase its resilience, offering positive news for prospective home buyers. Recent data for June highlights a remarkable surge in both new and existing home sales, indicating sustained interest in suburbs and new communities. This blog post aims to explore the encouraging trends and shed light on the opportunities that lie ahead for homebuyers in this evolving landscape. I always find their focus on the suburbs interesting because some of the strongest demand I see is in the core urban areas.
According to the North State Building Industry Association, June's home sales were an impressive 149% higher than the previous year when interest rate hikes first began impacting the market. This surge in sales not only demonstrates the market's adaptability but also suggests a strong and continued interest in homeownership in the region. It's a clear indication that buyers are undeterred by higher interest rates, highlighting the enduring appeal of suburban and urban living and emerging communities.
Reports show a sixth consecutive month of rising average sales prices for resale homes. In June, the average price reached $689,000, nearly matching the figures from the previous year. While this information is encouraging, it's important to consider the context: the second quarter of 2023 had significantly less inventory, down by 35% compared to the previous year. With limited housing supply currently available, homebuyers need to adapt to the market conditions and be prepared to act swiftly.
The statistics from North State BIA reveal a shortage of housing in the region. Despite the market's growth, it is unlikely to reach the level of building activity witnessed 20 years ago when annual construction exceeded 10,000 homes. This housing shortage underscores the ongoing demand for new homes, presenting an excellent opportunity for prospective buyers to find their ideal properties. Additionally, an increase in land zoned for housing, reduced fees, and an expanded labor pool could contribute to further developments, meeting the ever-growing housing demand.
Looking ahead to the remainder of 2023, interest rates will be closely monitored in both the new and resale home markets. While potential rate hikes may present a temporary road bump, experts anticipate that inflation will decrease. This may even pave the way for a scenario in early 2024 where interest rates decrease. Such a development would provide relief for current homeowners and potentially encourage them to list their properties. Furthermore, a decrease in interest rates would likely give a significant boost to new construction, addressing the ongoing housing shortage.
Despite the challenges posed by higher interest rates, the local housing market remains in positive territory, with robust sales and resilient buyers. Prospective homebuyers can find encouragement in the sustained interest in suburbs and new communities, as well as the adaptability demonstrated by buyers in navigating changing market conditions. With limited housing supply and increasing demand, it's an opportune time for homebuyers to explore the market and find their perfect home. As we look toward the future, the possibility of decreasing interest rates and additional developments suggests an exciting period ahead for prospective home buyers and the housing market as a whole.
I don't have a crystal ball, but I will say that if you are looking to buy a home, now could be a great time. Although demand is high, it will just increase when interest rates go down. That will also put pressure on prices. Remember, once rates go down, you can refinance, what you can't change is the price you pay for the home. I want to underscore that by saying you should never get in over your head. You have to be comfortable with your house payment from the beginning.
Conversely, it could also be a great time to sell. With inventory so low, the demand from buyers could get you a great price. As I said earlier, if a home is priced correctly, we continue to see multiple offers. Along with multiple offers, buyers are willing to make concessions just to get their offer accepted.
If you find yourself in either situation (buyer or seller) it is important that you have an agent that is familiar with the market and is prepared to help you navigate the process.
Sacramento's real estate market is unique. If you are looking to buy or sell here, please feel free to reach out. We are always happy to help.