Sacramento’s housing market cools off from fevered rebound
08/14/2014 1:55 PM
08/15/2014 6:14 AM
Sacramento’s housing market has cooled down a few degrees after a feverish two-year rise in home prices.
Figures released Thursday by real estate information service DataQuick showed year-over-year gains in median home prices dropping into the single-digit percentages in July for the first time in nearly two years across much of Sacramento, Placer, Yolo and El Dorado counties.
The same trend played out in the Bay Area and Southern California.
“Sacramento’s not alone here,” said DataQuick analyst Andrew LePage. “California as a state hit the first single-digit gains in all-home medians in 25 months.”
In Sacramento County, the median sale price of all homes rose about 8 percent in July compared with the same month last year. In July 2013, the median price had risen an astounding 45 percent since July 2012, DataQuick said.
Those huge gains represented a sharp rebound from the state’s epic housing crash of 2006 to 2012 but ultimately were unsustainable, LePage said. In the housing bubble of the mid-2000s, loose credit and exotic mortgages allowed prices to climb beyond reason, followed by a massive wave of foreclosures.
These days, there’s only so much buyers are able or willing to pay, and credit standards are much tighter, LePage said. That’s slowing appreciation, which isn’t necessarily bad for homeowners, he said.
“People have affordability constraints,” LePage said. “There’s not a lot of stretch financing available like there was eight or nine years ago. Buyers can’t stretch so far, and that’s a good thing.”
The number of homes sold also declined in many areas across the state, DataQuick reported
In Sacramento County, sales of all homes – including new homes, resale houses and condominiums – were 9 percent less than the historical average for the month of July going back to 1988, LePage said.
The drop-off was concentrated in the lower price range, while home sales picked up significantly in the upper range, he said.
Sales of homes at less than $200,000 in Sacramento County dropped 21 percent in July compared with the same month last year, LePage said. Sales of homes worth more than $400,000 picked up 19 percent in the same time frame, he said.
LePage attributed the discrepancy to how different income groups weathered the housing collapse and recession. In general, he said, those with more income tended to retain more equity in their homes and are making housing moves now, while prices are still far less than the peak of 2005 and interest rates are hovering around 4 percent.
“The higher you go up the price ladder, the less underwater people were,” LePage said. “They’re able to move around.”
Pat Shea, president of Lyon Real Estate, said the low inventory of homes for sale at less than $200,000 is another big reason sales volume fell in that price range.
“There’s nothing to buy,” he said.
Shea disputed the idea that the market is flattening.
Lyon’s data affiliate TrendGraphix showed 2,700 new escrows opened in July in the four-county area. That was the highest figure for any month in the past two years and a 12 percent increase over last July, which was considered a good month for home sales, he said.
New escrows in the $400,000 to $750,000 price range jumped 45 percent last month compared with July 2013, Lyon said in a news release.
The number of homes for sale has been growing steadily from record lows last year, but it’s still low enough to be a strong seller’s market, experts said. TrendGraphix reported 2.5 months of inventory in July in the four-county region. Real estate inventory is often measured in the time it would take to sell all the homes on the market. Less than 3 months of inventory is deemed a seller’s market.
Sales got off to a slower start this year than in a typical buying season, Shea said, but appear to be trending up this summer.
“Volume is going to play catchup in next few months and maybe even into the fourth quarter,” he said.
Other industry leaders said the reduced price gains in July weren’t a sign the market was slipping.
David Ragland, chairman of the North State Building Industry Association, which represents the region’s home builders, questioned the idea that the market might be faltering when year-to-year price gains were nearly 8 percent, a high figure by historical standards.
“Year over year the price appreciation may have slowed,” Ragland wrote in an email, “but it is still well above the 3 percent-4 percent appreciation rate of a ‘normalized’ market.”
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