When it comes to predictions, typically real estate markets are pretty easy to have an opinion. While you can’t always pinpoint the top of the market or the bottom with complete accuracy, you can usually tell what’s around the corner. However, 2023 may go down as the year of volatility and misinformation. To be honest, this year could go either way. Let’s take a deeper dive into what’s happening right now.
Because we’re not seeing a large influx of new listings come on the market, homes that are priced right for the condition and location are seeing a flood of activity. Our last five clients have experienced multiple offers and higher than asking price offers. In April, we saw a pretty significant increase in prices in the four-county region. While one month doesn’t always create a trend, this isn’t what I would have predicted given the current interest rates buyers are paying.
Speaking of interest rates, the Feds just raised rates for the 10th consecutive time; the largest and fastest climb in rates ever. This is done to cool inflation but it also could have a negative effect on the looming threat of a recession. And then there’s the third failing bank which is sending a little chill into the room of the banking industry.
With all of this said, you would think that our real estate market would be on the skids, but actually it’s quite active. Multiple offers are being experienced by over 60% of sellers in today’s local market. I say “local” because you can never read the national headlines and equate that to what we’re dealing with in the Sacramento region. It used to be, 30 years ago, that we could see what was happening in the bay area and know that within six months, our market would be doing the same but that isn’t even true anymore. Our local market is very different from most real estate markets. Our supply vs. demand remains extremely strong and until we get sufficient housing to fill the demand, it will remain so.
Who are the buyers and sellers in today’s market?? We do expect strong demand from first-time homebuyers over the next several years given the large number of millennials hitting peak first-time homebuyer age, but affordability remains a real challenge in this environment. Sellers are those who are taking their equity and moving out of California or downsizing – let’s call it ‘right-sizing’ for their current lifestyle. Perhaps they’re opting to move into a one-story with no pool or maybe into the Del Webb community where you can lock the door and leave for months to travel. It could also be that parents are passing and children are inheriting the homestead that now needs to be sold. Whatever the case, it’s definitely a time that sellers are cashing in on their equity.
What’s on the horizon is anyone’s guess. I never would have predicted that with the interest rates the way they are, buyers would be flocking to homes like they are, but they are betting on the ability to refinance into a lower rate once the nation’s economy does slow down and rates are lower. Not a bad idea since prices seem to be on the rise again. The only downturn we saw in prices was the fall of 2022. This January was actually the lowest we’d seen in awhile but in just 4 short months, they’ve rebounded. Here’s a graph of the last five years of values in the four-county region. As you can see, the secret of how great our Sacramento area is to live in is no longer a secret. While 2022 had a decline in values, we’ve rebounded and are headed back up.
If you or someone you know is in need of a Realtor, I hope you know how much I’d love to be the one you look to for assistance. No matter what the market is or becomes, I’m here to help guide you through. Thanks in advance for thinking of me when the conversation turns to real estate.