Housing figures released Thursday point to a time that’s as rare as rain in the capital region these days: a “normal” homebuying season.
Those numbers show a Sacramento-area housing market with moderate price appreciation and a shrinking share of sales to cash-paying investors. Mortgage rates have fallen below 4 percent again, and only a small number of homes sold are foreclosures or short sales.
“Barring some shock to the economy, it looks like we’re setting the stage for a pretty strong spring,” said Andrew LePage, analyst for real estate information service CoreLogic DataQuick.
On Thursday, the Irvine firm released numbers for December showing a 6 percent annual gain in median home prices in Sacramento County and a 3.5 percent growth in sales volume compared with December 2013.
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Placer County, the region’s second-largest county in terms of home sales, also experienced a jump in sales volume and saw gains in home prices. The median price of all homes sold in Placer County increased by more than 10 percent in December 2014 compared with December 2013.
The latest statistics suggest a market that’s stabilizing after a wild ride of boom and bust.
Fueled by speculation and easy credit, home prices rose to unsustainable levels in 2005 before plunging by more than half in many neighborhoods. The market began recovering in early 2012 as investors jostled to scoop up cut-priced foreclosures by the thousands.
That led to a big rebound in prices, with year-over-year gains of up to 40 percent, before home values started to level out last year.
Average homebuyers today have a better shot at success because of reduced competition. The number of buyers paying all cash in Sacramento County has shrunk from a high of 36.5 percent in February 2013 to 24 percent last month, LePage said.
It was the lowest figure for any month since June 2010, he said.
“You’re less likely today than in the last few years to run into a cash-wielding investor,” LePage said.
And in a market once dominated by distress sales, traditional equity sales now make up the vast majority of transactions.
The Sacramento Association of Realtors reported this week that in December, more than 87 percent of existing single-family homes sold in Sacramento County and the city of West Sacramento involved sellers who walked away with cash after paying off their mortgages. Only about 6 percent of homes sold were bank-owned, the group said.
Buyers continue to benefit from historically low interest rates, which fell even lower this week. The average interest rate for a 30-year fixed-rate home loan dropped to 3.66 percent, mortgage giant Freddie Mac reported in its weekly survey of lenders. It was the lowest rate since May 2013.
Plunging oil prices and global economic insecurity are prompting investors to buy up relatively safe U.S. Treasury bonds, which has the effect of lowering mortgage rates.
“The recent volatility in the stock market has driven people to the bond market, causing yields to drop on the 10-year Treasury,” said Michael Popp, vice president of home loans for The Golden 1 Credit Union.
Golden 1 was offering a 30-year mortgage rate of 3.75 percent Thursday, with borrowers paying zero points.
“What that means for homebuyers is they’re able to afford a little more home now,” Popp said. “Someone who’s looking to put 20 percent down can afford a house in the $310,000 range at 4.5 percent, and at today’s rate they can afford $340,000.”
Kris Vogt, president of the Coldwell Banker brokerage for the Sacramento region, said the drop in interest rates is likely to persuade some potential buyers to make a move.
“What we’ve seen in the marketplace is timing,” Vogt said. “Consumers are looking for factors to come into play before buying a home, interest rates being one of them.”
One factor still holding the market back is lack of inventory, especially in the price ranges that most buyers can afford. There were about 2,400 single-family resale homes listed in Sacramento County and the city of West Sacramento in December – a drop from about 3,000 the month before – the Sacramento Association of Realtors said.
Given the pace at which homes are selling, it would take 1.8 months to move all the houses now on the market. Anything less than a three-month supply is considered a strong seller’s market. Tight inventory has been blamed for rising prices and sales numbers that are still below historical averages.
“People thought with price appreciation, we would see more inventory,” LePage said. “We got a little bit of an increase here and there but not spectacular.” A major question for the market, he said, is “Are we going to see a surge in inventory in the spring or not?”
Call The Bee’s Hudson Sangree, (916) 321-1191.