As someone who likes to be able to give a clear perspective on the real estate market, this year has been a challenge to predict. As we began 2023 with mortgage interest rates in the mid-6% range, buyers seemed stunned by the quick rise from the 3.2% we enjoyed at the beginning of 2022, only to watch them skyrocket to a staggering mid-7% Thankfully over the past weeks we’ve experienced an improvement in rates. Amid these astronomical changes in the cost of money, we also are experiencing a critically low volume of ‘good’ inventory. I say good because many of the homes today are overpriced and will languish on the market until sellers become realistic with pricing or take them off the market, turning it into a rental.
While the normal days on market have increased, some homes are clearly not priced according to what buyer demand would dictate. Buyer demand drives the market and ultimately determines what a home is worth. Again, this is where the challenge comes when we’re floating in uncharted waters with the high cost of money and few good homes to choose from. Buyers are still fighting to be chosen when they see something they want. Hence why prices continue to remain stable. Supply and demand will always be the driving force; that’s the easiest way to describe what’s happening. If you have something that someone wants and it’s priced right, it will sell. That’s real estate 101.
Now, if in the spring we see rates come back down to the 6% range, which they’re predicted to do, I think we’ll see more sellers jump into the market creating more supply for the buyers that are sitting on the fence – but someone has to jump first. Sellers who need to purchase that replacement home are hesitant when they’re not seeing anything they like as a viable option to replace what they have; especially if they’re enjoying a 3% mortgage. The fact that rents have gone up significantly over the past decade also contributes to buyers no longer wanting to make their landlord’s house payment. For those who haven’t paid attention, the average rent for apartments in Sacramento is between $1,650 and $2,100 a month (for an apartment)! You can pay upwards of $4,000 a month to rent a large home in Sacramento County.
If you climbed under a rock for a few years and came back out today, you’d be shocked at what has changed about our real estate market. For years we were the best kept secret but no longer is that the case. From where I sit, it happened very quickly. A lot of things contributed to the increases but I don’t think we’re turning back; at least not in a significant way AND there are promising signs for the 2024 market! This is almost completely dependent on mortgage rates and increased inventory.
Here are some interesting facts about today’s market:
- 22% of home purchases in the Sacramento region are cash
- 49.5% of home sales closed below the original list price
- Approximately 500,000 people have left California since 2020
- The top choices to relocate to were Texas, Arizona and Florida
While people are leaving California, they’re not leaving the Sacramento region; hence why we’re not seeing an increase in our homes for sale. Greater Sacramento has been cited as one of the five "most livable" regions in America and the city was cited by TIME magazine years ago as America's Most Diverse City… all things to be proud of and blessed by.
Nationwide the market is challenging. Regionally we’re down about 25% year over year. There are a variety of predictions that I’m reading about next year’s market but as has been the case most of this year, we just have to see what happens. My suggestion is if you see a home you like and you can afford it, call me. We’ll help you negotiate a sale that works for you. And, if you need to sell your home, we’d love to be your Realtor of Choice! No matter what the market is, people always need to buy and sell real estate.
Whatever the case, my Christmas wish is that you’ll think of us when the discussion turns to Real Estate. Whether you’re just curious, or have an immediate need, we are here to serve YOU and all of your referrals. It’s because of YOU that we continue to enjoy success in our profession and love what we do.
Holiday time brings a multitude of reasons to reflect on just how fortunate we are. May the holiday season find you beginning each day with a grateful heart.
Wishing you a Merry Christmas and a very Happy New Year
Be sure to watch for ‘Coffee with Carol” beginning in January every Thursday morning on Facebook and YouTube for a weekly update on our local market and a look into some beautiful homes for sale.
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