Coronavirus fears and sudden price spikes: Inside a volatile Sacramento housing market
This is quickly becoming the most complex and perhaps unnerving spring real estate season in Sacramento in years.
The main question: As more cases of coronavirus are announced, and as more people are sent home for quarantine, will buyers stay home too? Will would be sellers decide they don’t want crowds tromping through their house, touching their stuff?
But that’s only part of the confusing array of recent events and trends in play as the capital region heads into what are typically the big selling months of the year.
Home prices in Sacramento just jumped significantly in February. Mortgage rates have fallen to record lows, and may drop lower. The stock market is bouncing up and down wildly. New home buyers find themselves dealing with costs and complicated choices associated with new rooftop solar requirements. Then there is what likely will be a volatile presidential political campaign season ramping up.
Here’s an overview of what it all may mean for the coming months:
Coronavirus and open house crowds
New home subdivisions in Folsom, Rancho Cordova, Roseville and elsewhere will be putting out the welcome mats this weekend. And real estate agents will be setting up street corner signboards for open houses.
Given coronavirus concerns, will buyers show up? The early bet is that a few will avoid crowds until they see what happens with the virus in the coming weeks.
But home builders reported solid crowds at model homes last week after news broke about the coronavirus and they say they expect the same this month as long as there isn’t a spike in new cases
The New Home Company just launched a new set of hilltop homes in Folsom that drew crowds last weekend. And Ian Cornell, a spokesman for the fast-rising Folsom Ranch area south of Highway 50 in Folsom, said sales there are on a roll. Nearly 400 homes have been sold on the former grasslands near White Rock Road.
Builder reps are cautious though, and are advising visitors and employees to follow federal health safety guidelines.
Real estate analyst Gregory Paquin said the coronavirus is new territory. Buyers and sellers have learned to get used to uncertainty in recent years, but that’s been economic and political, not health-related.
“I’m not convinced we need to freak out about it,” he said. “I think it is (going to be) a strong spring.”
Seattle serves as a warning
In the Seattle area, hit more heavily by the coronavirus than anywhere in the country, there were signs this week of some retrenchment. Of 14 deaths nationally, 11 have been in the greater Seattle area.
“The reaction has been strongest among sellers, who worry about strangers entering their homes; this only started on Monday morning. Three canceled their listings, and at least one buyer canceled an offer,” Redfin CEO Glenn Kelman wrote on a widely read blog.
That suggests that the market reaction to the virus could be localized, said Leslie Appelton-Young, chief economist for the California Association of Realtors. “My takeaway is this is going to be like other natural disasters we’ve seen. The closer you are to the problem, the bigger of the impact.”
As of Friday afternoon, the Sacramento region had reported nine cases, including one death. An undisclosed number of people are being quarantined.
Stock market and economy
In an odd way, the coronavirus may give some buyers more reason to pull the trigger on a house purchase this spring.
Coronavirus fears led to plummeting stocks, which caused the Federal Reserve Bank to lower short-term interest rates, which may lead to lower mortgage rates or at least maintain the current historically low rates.
The drop in mortgage rates could be beneficial for some builders who are introducing new housing in the market now.
BlackPine Communities just launched construction on 200 single-family homes in Crocker Village, the new community adjacent to Curtis Park. Other than some supply chain hiccups, BlackPine head Mike Paris said he isn’t seeing any virus-related issues.
In fact, he said, sign-ups of potential buyers on the company’s “interest list” has been strong. New models will be open for visitors in Crocker Village sometime this spring.
Wait or sell a home fast?
Realtor Tim Collom said he’s getting more calls in just the last few weeks from people interested in putting their homes up for sale now, some of them out of concern that the market could go sideways in coming weeks or months if the coronavirus spreads.
Others though see low interest rates, and figure that makes their homes more sellable. It’s also an election year, which may prompt some sellers to move now rather than wait for even more market gyrations that could occur if the election campaign creates strife that affects the economy.
Looking for clues this week, Collom pointed out that the Sacramento Kings’ basketball game Thursday night was nearly a full house. “People are going to live their lives until they are told not to.”
He said his realty group, nevertheless, is going to be doing more videos of homes for sale, in case more people switch to shopping via the internet at least initially, rather than visiting a lot of houses.
Realtor Erin Stumpf says the current resale market is most active at lower prices. Sales of higher-priced homes, affected more by stock market investment portfolios, would slow first, she and others said.
A client of Stumpfs’ just beat out 16 other bidders for an older suburban Sacramento house priced at $380,000. The winning bid was for $405,000. “There is not a lack of enthusiasm right now” at the lower end of the market, she said.
Median house prices jump
In Sacramento County, the median single-family house sale price in February was about $397,000, a big jump from $375,000 in January, according to data from the local real estate multiple listing service compiled by appraiser and analyst Ryan Lundquist.
That is higher than last summer’s $390,000 peak. If prices continue to rise, buyers may go away again.
Of historic note: The $397,000 price is higher in pure dollars than the pre-recession high of $387,000 in Sacramento County in August 2005. But factoring for inflation, that 2005 high would be $508,000 today, making today’s prices still much lower than they were during the last “bubble.”
The median price in February in the four-county Sacramento, El Dorado, Placer and Yolo region was $425,000, up more than 2 percent from January, but lower than last summer’s regional $435,000 median.
It’s unclear what those increases mean for prices the rest of the year.
”We shouldn’t put too much weight on January (and February) median home price data that suggests more rapid price growth,” University of the Pacific economist Jeffrey Michaels said. “My initial take is that it looks like the number of sales are likely to be lower this spring, but prices should hold up and even appreciate modestly.”
Solar power decisions
Buying most newly permitted and constructed homes in 2020 will involve financial and lifestyle decisions for some families that never existed before. That’s because statewide, most new homes are now mandated to have rooftop solar panel systems.
In some subdivisions you’ll be asked: Do you want to buy those panels or lease them?
The answer to that question requires some serious math, comparing up-front purchase costs to long-term leasing costs, then calculating in how much each choice might affect your monthly utility bill.
In some cases, there is no choice. At the BlackPine Communities homes in Crocker Village, the panels are part of the home purchase. In other subdivisions, the home building company or the solar company will run the numbers with the buyer to show the comparative costs over time.
Mike and Maria Kalberg, longtime Folsom residents, just bought a place in Folsom’s upscale Russell Ranch, but went a step beyond. Mike Kalberg called the local electrical company, the Sacramento Municipal Utility District, to work out with them what their home electricity costs would be. He’s decided not only to buy the panels on his roof, he’s ordering more of them added to cover his electrical needs.
“SMUD has told us what we should get, and around what it should cost,” he said. “We’re going to upgrade.”
“He does his homework,” his wife said.
This story was originally published March 7, 2020 at 5:00 AM.