Builders wrapped up 2013 by delivering a surprising number of new home sales for the holidays, normally the quietest time for residential real estate.
Sales figures for December aren’t out yet, but some builders said the Sacramento region experienced a mini-burst of activity between Thanksgiving and New Years after months of lagging sales.
The slightly better end to 2013 could be a sign of things to come as the 2014 home buying season gets under way, they said.
“We are having a wonderful December,” Barry Grant, northern California president of Meritage Homes, said Monday. “We haven’t sold as many homes in a month since last June.”
Buyers snapped up four homes at Solstice, a Meritage community that opened Dec. 15 in El Dorado Hills, before any model homes were built, Grant said. Homes there range in size from 2,800 to 4,200 square feet and are priced from about $500,000 to $600,000.
At the New Home Company’s Meadows development in Folsom, sales manager Jeff Martin said three buyers signed purchase contracts in the two weeks before Christmas. The small community features single-family homes up to 2,375 square feet near bike trails and shopping. Prices range from $425,000 to $495,000.
“Obviously the expectations are not too high going into the holiday season,” Martin said. “It’s been an amazing two weeks.”
That’s especially true because only two homes sold at the Meadows in the four months after it opened in September, said Kevin Carson, president of the New Home Company in northern California.
“We did in one month what we couldn’t do in four months,” Carson said.
Starting last summer, rising interest rates and prices cooled the ardor of buyers, who had returned to the Sacramento market in 2012 and the first half of 2013 after a catastrophic five-year housing crash.
The median price for single-family resale homes in Sacramento County had risen steadily for months but flattened at around $240,000 beginning in July, according to real estate information service DataQuick.
At the same time, new home sales in the Sacramento region started falling, from more than 250 in April to 79 in August, the North State Building Industry Association reported. The trade group tracks sales at about two-thirds of the new home communities in Sacramento, Placer, El Dorado, Yolo, Sutter and Yuba counties.
“Ever since July we’ve been struggling with sales,” Carson said. Then, in an unexpected twist, customers began returning to sales office after Thanksgiving, he and other industry experts said. “Starting in December, the traffic quality was really good.”
What drove the holiday home sales?
Buyers and builders said it was the belief that interest rates and prices would rise in 2014.
“I knew things were going up, and I was a little afraid to wait until the first of the year,” said Erin Safford, who closed on her new home Monday at the Meadows-Folsom.
Safford said she made the decision to buy Thanksgiving weekend and wanted to have the keys to her new home by the end of the year. She said she negotiated upgrades on flooring, cabinets and counter tops, and the builder picked up all the closing costs.
Safford said she got the impression those bonuses might not be available after Jan 1, so she decided to buy when many others were sitting out the season.
“I’m a single mom of two. I didn’t need to take this on at Christmas time,” she said. “But I figured it was the only way to get the house I wanted at the price I wanted. You never know what the market’s going to do, but I had a gut feeling it was going up.”
Many experts believe home prices in the Sacramento area will continue appreciating this year but at a much more modest pace than the double-digit gains of early 2013.
Mortgage rates are also expected to rise in 2014.
Last summer, amid speculation that the Federal Reserve would curtail its massive bond-buying program, interest rates jumped from less than 3.5 percent to more than 4.5 percent for 30-year fixed-rate mortgages. News that the Fed would not yet cut its $85 billion stimulus effort pushed rates down again in October and November.
Then in December the Fed announced plans to taper its bond purchases, which have kept mortgage rates near historic lows. Rates inched back up, and they are expected to keep rising gradually but steadily throughout the year.
Meritage’s Grant said that expectation was probably the biggest factor boosting holiday home sales, though the unseasonably dry weather in December also played a role.
“Several factors were driving sales for us, but mainly a recognition that the interest rates ... (are) going to move slowly and inexorably up,” he said. “People are looking at current interest rates as something of a bargain.”
Grant said the same perception may help boost sales ahead of the normal spring buying season.
“I’d be surprised if the same factors that drove a very positive December aren’t going to help us in January and February as well.”