The real estate market is “hot.” We hear words like that all the time, but my question is often, which market are you referring to? Are you talking about every neighborhood in Sacramento? Does this include all price ranges and property types? In other words, if we say the market is “on fire,” does that mean we’re seeing the same “fiery” trend with condos in Antelope, duplexes in West Sacramento and vacant land in Del Paso Heights?
While it’s easy to generalize about real estate in one sweeping cliché, the market is actually very different depending on what we’re looking at.
In fact, the Sacramento market is a bit like a Hot Pocket that’s been taken out of the microwave a tad too early. Some portions are blazing hot, while others are only warm. Or to use a different analogy, the market is like a matryoshka doll. Just as there are many little dolls within one large doll, there are many sub-markets within the larger market.
Let’s consider three aspects of local housing trends:
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1. Aggressive bottom: The bottom end of the price spectrum is incredibly aggressive right now in the Sacramento area. In fact, some of the highest value gains lately are being found at lower price tiers because there are many more buyers trying to afford the entry-level market. This makes for a climate where multiple offers and offers above asking price are commonplace for the moment. This is not to say the rest of the market is not hot, but only that every price range is not experiencing the same level of heat. Moreover, when we see impressive county sales stats each month, we always have to consider how forceful increases at the bottom may have helped pad the overall stats.
2. Days on market: On average last month it took 37 days to sell a house in Sacramento County. But did you know that for properties under $300,000 it took an average of 35 days to sell while homes priced above $500,000 took an average of 62 days to sell. This shows us the market is not the same at every price level. The general truth in our market is the higher the price, the longer it tends to take to sell the home. Of course, this isn’t always the case for every property, but it is definitely a consistent reality, and it’s a good reminder the market doesn’t behave the same way at every price level.
3. Inventory: The market could readily handle about twice as many listings as there are now, which shows supply and demand are definitely not in balance. At the moment there is only 1.3 months of homes for sale in Sacramento County, but that’s not true of every price range or subdivision. For example, there is less than a one-month supply of houses for sale under $300,000, which means competition is incredibly fierce in that price range. Yet above $1 million there is a 16-month supply of listings right now. The top and bottom of the market aren’t the same, right?
If I could offer one piece of advice to someone reading this column, it would be to respect how different the market can be depending on price, location and even property type. The temptation in real estate is to view everything with the same rose-colored lenses that only see a blazing hot market. While this is understandable, if you’re not careful you might overpay for a property or even price yours too high by projecting another neighborhood’s hot trends onto our own.
Ryan Lundquist is a certified residential appraiser in the Sacramento area. Contact him at firstname.lastname@example.org.