With a neatly pruned lawn, a classic brick facade and fresh white carpet, the three-bedroom home on a quiet Carmichael street had everything Paul Anderson wanted.
That is, everything except the right price.
The single-story abode on Linda Lou Drive was offered at $299,000, which Anderson’s realtor Becky Lund called “well-priced,” in a real estate market where inventory has essentially dried up.
To have any chance of getting to the closing table, he would have to offer at least $320,000, Lund told him.
Median home sale prices have steadily risen in recent months, with the resale price for a single-family home in Sacramento County hovering at $310,000 for June and July, reported CoreLogic.
“At this point, he’d have to go in at a price that he wasn’t comfortable with in order to be competitive,” Lund said. “So we didn’t even write an offer.”
This isn’t the first time Anderson, 37, has walked away from a deal because of high prices after over a month of searching. The magic price point for him is around $300,000, a figure that is shared with many other Sacramento area house hunters, say local real estate experts.
“The lower the price point, the hotter that competition is,” said Pat Shea, president of Lyon Real Estate. “Below $350,000, there’s only 1.3 months of inventory. A typical seller’s market is below four months.”
As the economy strengthens, demand for homes has surged, driven by people who lost homes during the recession who are looking again to buy. At the same time, these “boomerang buyers,” as Shea calls them, are also competing with millennials – those in their 20s – who sometimes get financial help from family.
Both types of buyers are drawn by historically low interest rates, improved wages and job security. And they are turned off by rising rents.
Once you get into bidding wars, there’s a certain point that I’m out because I don’t have the cash to make up for it.
Valerie Tosti, who is looking for a home to purchase in Fair Oaks for about $350,000
Anderson, a retail district manager, currently rents a two-bedroom Folsom apartment with his 8-year-old daughter for $1,495 a month.
A mortgage would have a similar monthly payment, but owning means he could rent or resell the property in the future, Anderson said. As his finances have strengthened since moving to the region in 2012, the Bay Area native felt this summer was a good time to buy.
The Carmichael home had no shortage of interest and ended up selling for “substantially over” the asking price, according to listing agent Cheryle Ackerman Griffin. She said the property garnered nine offers after three days on the market. Eight of them were above the asking price.
“It’s a coveted home,” said Ackerman Griffin, who declined to disclose the final contract price because the sale has yet to close. “It’s in a first-time homebuyer price range, in a nice residential neighborhood. That’s harder to find.”
In August, Sacramento was listed 10th among the nation’s hottest residential real estate markets, according to the official website for the Chicago-based National Association of Realtors. Median home sale prices have steadily risen in recent months, with the resale price for a single-family home in Sacramento County hovering at $310,000 for the months of June and July, reported CoreLogic, an Irvine-based real estate market tracker.
Rising prices in large part are triggered by low inventory because fewer people are selling. Jeffrey Michael, an economist at the University of Pacific, attributes this phenomenon to a “decline in mobility” since the end of the recession.
“You may have your nose above water, but you’re still not in that position to move up into another home,” Michael said, referring to the homeowners who saw their home prices plummet as the real estate market crashed in the late 2000s. “That’s why people are cautious. This might prevent people from listing their home.”
Valerie Tosti of Fair Oaks is looking almost every day for a “forever home” that her two daughters, 8 and 11, can create memories in. Tosti lost a home to short sale a few years ago and isn’t ready to “get caught up in the frenzy” again, she said.
“I really try to remain patient. I don’t want to make that mistake again,” she said.
Tosti’s house hunt has been challenging. She is intent on staying in Fair Oaks because that’s where her daughters have grown up. While she has 30 percent cash for a down payment on a home costing roughly $350,000, Tosti said she’s been outbid on offers at least five times this year alone.
“Once you get into bidding wars, there’s a certain point that I’m out because I don’t have the cash to make up for it,” said Tosti, an executive assistant for a health insurance company.
Two weeks after sitting out the Carmichael home transaction, Anderson won a five-way bidding war for a property in Rosemont. The home was listed for $259,000, and Anderson will pay over the asking price, said Lund, who declined to disclose the actual purchase price because the transaction has not closed.
Despite the stereotypes about living with their parents or renting perpetually, millennials are beginning to settle into home ownership – with a loan or down payment assistance from the bank of mom and dad. Parents understand the urgency of buying while prices and interest rates are low, said Meg Heede, a realtor with ReMax Gold in midtown.
The lower the price point, the hotter that competition is. Below $350,000, there’s only 1.3 months of inventory. A typical seller’s market is below four months.
Pat Shea, president of Lyon Real Estate
“Prices are not going to stay low,” said Heede, whose grandson purchased a house in Oak Park for $205,000 six months ago with his father’s help.
As a result, the competition for the few homes on the market has been fierce. Shea of Lyon Real Estate said his agents have witnessed a rise in sellers overbidding and then feeling buyer’s remorse.
“There’s this frenzy because of low inventory,” he said. “After the property gets bid up … buyers get cold feet.”
The dearth of resale inventory has some prospective buyers turning to new construction. Taylor Morrison Sacramento has tripled in size over the last two years, said Meg Gore, vice president of sales and marketing for the Scottsdale-based home builder.
“In 2014, we had three communities. This year we have 16,” Gore said of the properties in greater Sacramento.
Frustration-less buying has drawn people who feel their options are limited in the resale market, Gore said.
“Many people are making bids on homes and are losing out. You don’t necessarily have that with the new home. If you get beat out by one, we have another lot,” she said.