Have you heard the news? No,
not that Kim and Kanye named their new baby after a point on a compass, or that
the government is looking at all of our emails (can we ask the government to
please delete some of our spam?) but that the Sacramento real estate market is
on the move. Things are heating up like
the temperatures this summer, but there are some aspects to the market that are
truly remarkable. So what 5 questions
might we have about the current Sacramento real estate market? Here they are:
1. Is Sacramento
still plagued by defaults?
The Notice of Default rate continued to increase modestly month over
month and year to date. Important to keep in mind these numbers are well
below 2012 at the same time. We have seen a decline in total notices, depending
on county, of 40% to 50%. The strain of
distressed properties is being alleviated as the market absorbs the inventory
and lenders finish up their modification, short sale, and foreclosure
process.
2. Will rising
interest rates slow our local market?
The last couple of years, we’ve enjoyed historically low interest
rates and a tight supply of properties, which led to increasing home
prices. That’s great news! However, with the recent jump in rates, we’re
left wondering if that will cause a slow down in our local market? Not necessarily. Rates are still amazingly low
in context, and home prices at reasonable levels. Lenders are expected to speed up the process
of handling underwater and distressed properties, which will provide us some
much-needed inventory.
3. Will first time
home buyers get in the game?
Currently, first time home buyers only account for 29% of home
purchases, according to the National Association of Realtors. Normally that would be around 40% of home
purchases, so our first-timers are lagging.
Many would-be buyers are being squeezed out as they try to compete
against investors. Hopefully, as rates
rise, the investor portion of the market will slow down a little, giving us a
more balanced market picture and opportunity for first time buyers to get in
the game.
4. Will the
decline in distressed properties slow down the investors buying frenzy?
The past year, real estate was seen as the ideal investment for
landlords, REITS, and big institutional investors. Prices were low and they had cash to spend,
interest rates were rock bottom, and there were so many defaults and distressed
properties that they could scoop up blocks of homes like they were playing
Monopoly. With a bump in interest rates,
fewer defaults, and rising home prices, I anticipate the investor frenzy on
real estate will cool a little.
5. What other factors
impact our local real estate market?
Employment is still key to long term healthy growth. Builder
confidence is high once again, which will bring much-needed inventory into the
market. There has been chatter about the
Federal Reserve tapering down their support of the mortgage market and our
economy, and we need to see a future where our economy is more normalized
without these supports. But Obama’s
administration is also urging banks to make loans available to borrowers with
less-than perfect credit, opening up home ownership to first-timers, young
people, and those who were hit hard by the recession, but back on their feet. Hopefully, we’ve learned our lesson that
non-qualifying mortgages without equity is a recipe for disaster.
6. Have we weathered
the storm?
Over the past years, the financial and emotional strains of the
recession affected most of us. A healthy real estate market is
fundamental to our local and national economy, and the good news is that I
anticipate a stabilization of the market as interest rates normalize, supply
and demand is balanced, and consumer confidence grows. As we move to a more stable market I hope we
do not forget the mistakes of the past that led us down this path.
***
Do you have questions about our real estate market? We’d love to answer them for you! Touch base with us here.
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