It was the year the housing market turned around.
Figures released this week show that in 2012, new home sales jumped and resale home prices surged across the Sacramento region after reaching low points the year before.
New home sales increased by 67 percent in the greater Sacramento region last year compared with 2011, according to a report issued today by the Gregory Group, a Folsom-based firm that advises the new home industry. Sales increased from 1,668 in 2011 to 2,782 in 2012, it said.
The dramatic turnaround reflects just how far Sacramento slid. At the low point of the housing collapse, new home construction in Sacramento fell to a 50-year low, and prices were cut in half in many neighborhoods. Now that momentum has shifted, experts say, it shows no sign of slowing.
That's not to say the market has returned to boom status, or even normal. The number of new homes sold last year remains a fraction of the 17,000 houses bought in 2004, near the height of the housing boom. It's also small compared with the 8,765 in average annual new home sales in the past 15 years in the greater Sacramento region.
But the percentage increase is unprecedented, said Greg Paquin, who heads the Gregory Group. "I don't recall such a large increase year over year," Paquin said.
The demand was fueled by historically low interest rates, low prices and a shortage of resale homes on the market.
Kevin Carson, president of the New Home Company, said the firm sold 20 houses at its Lincoln Crossing project in 2012 after selling only two homes there in 2011.
Its projects in Lincoln and Granite Bay will soon sell out, he said, and the company plans to open three new communities in Folsom and Granite Bay later this year. The New Home Company has 26 homes under construction at its Trails development in Folsom. All are sold.
Buyers continued showing up over the holidays typically the slowest time of year with five homes sold between Christmas and New Year's, Carson said.
"They're not investors," he said. "They're people who are concerned they're going to miss something that now's the right time."
Along with demand, prices of new homes bumped up last year, with builders offering fewer incentives to entice buyers. Prices in the fourth quarter of 2012 rose by nearly 13 percent from the same period a year before, the Gregory Group said in its report.
It is likely the trend will continue this year as builders seek to keep up with demand and supply remains low, Paquin said.
Most home builders stopped or scaled back construction during the housing bust, and now are scrambling to find buildable lots and hire qualified workers, Paquin said.
"The only thing that's going to constrain new units sold is available product," Paquin said. "I don't see the market slowing. If inventory remains restricted, you're going to see prices go up. Hopefully (home builders) will be able to bring on new product by the middle of the year."
A shortage of resale homes on the market also helped push existing home prices up by nearly 28 percent in 2012, said Pat Shea, president of Lyon Real Estate. The median price for resale homes listed on the open market in the Sacramento region increased from $180,000 last January to $230,000 in December, he said.
At the same time, the supply of resale homes listed across the region fell to a decadelong low of 1.2 months' worth, said Lyon and its Sacramento-based data partner, TrendGraphix. A healthy market has a four- to six-month supply of homes for sale meaning it would take about that long to sell all the homes.
Shea said the region is seeing a bounce-back from an undervalued market in 2011. Early in 2012, some experts were predicting that Sacramento's housing market would continue to decline or rise by only small margins.
But investors already were buying in 2011 and amped up their activity in 2012, just as average buyers began to understand that prices had bottomed out and interest rates had hit historic lows, he said.
"A lot of people on the macro level didn't understand that Sacramento was shifting and shifting quickly," Shea said. "They underestimated how much we would bounce back when we did."