Sacramento's housing market hit bottom in the first quarter of 2012, and home prices will rise here by more than twice the national average in the coming year, real estate tracking firm Zillow said in its quarterly market report, released today. Zillow's latest take on the local housing market is a 180-degree turnaround from April, when the Seattle-based firm forecast a continuing decline in the region's home values with "no sign of a bottom."
Zillow senior economist Svenja Gudell said the housing market evolved so quickly and unexpectedly in the Sacramento region this spring with tight inventory and fewer foreclosures driving up prices that forecasters had to alter their outlook.
"Inventory shortages led to prices having a floor underneath them," Gudell said. "There was a lot of price appreciation."
The rate of foreclosures and sales of bank-owned homes have declined significantly, she said. Banks continue to sell off foreclosures but in a strategic trickle likely meant to boost prices, she said.
"If you don't have as many distressed properties, you have less of a discount in other homes that are competing to some extent," Gudell said.
Investors, many paying cash, are snatching up distressed properties, also helping to firm up prices.
Interest rates, now around 3.5 percent for a 30-year mortgage, are at all-time lows, and affordability combining low prices with low interest rates is historically high.
"It's so cheap to buy a house right now," that traditional buyers are gradually re-entering the market, Gudell said.
"Slowly but surely consumers are coming off the fence," she said. "The selling season got off to a strong and early start. Folks are looking for homes again, and they're reassured that now might be a good time to buy."
Through June 2013, Zillow predicts a 2.5 percent increase in home prices in the Sacramento region.
The median home price fell by 2.1 percent in the second quarter from the same period last year, to $202,900, Zillow said. But home values rose by about 1 percent compared with the first three months of 2012.
Several area cities saw prices rise this spring including Roseville, up 1.7 percent; Sacramento, up 1.1 percent; and Elk Grove, up 0.09 percent, according to Zillow.
The firm forecasts a national increase of 1.1 percent in home values. In California, it predicts an increase of 1.9 percent in San Francisco, 0.05 percent in Los Angeles, and 3.4 percent in San Jose.
The same factors of low inventory, declining foreclosures and investor demand are driving other improving home markets, Gudell said.
Topping the list of recovering markets are Phoenix, which Zillow predicts will see a 9.9 percent leap in home values, and Miami, which it says will jump by 6.1 percent.
Home values also will rise in Dallas-Fort Worth, Washington, D.C., and Portland, Ore., Zillow predicts. But it says prices will continue falling in New York, Chicago, Philadelphia, Atlanta, Boston and Detroit.