How’s the Market?

August 6th, 2014 by Rob Saxe

Part 2 – Buyers Might Have An Advantage

In the past, a “normal” or balanced real estate market was defined as any market with 6 months of homes to sell at the current pace of sales. Rocklin and Roseville has not had 6 months of homes to sell at the current pace of sales since the second quarter of 2008.

From the second quarter of 2008, the inventory of homes to sell, save a blip or two here and there, has decreased until June of 2013 when it slowly started going up.

I start with the inventory levels as that is what usually defines what type of market we’re in..a buyer’s market or a seller’s market. Now? Not so much.

Market evidence points to a new “normal” where even though inventory levels are low, buyer demand (read = slumping sales) is not further reducing inventory but rather, it’s increased 215% in just over a year.

What Is The New “Normal”?

First, let me explain that I’ve never seen a “normal” real estate market. I’ve been selling real estate for over 12 years full time in Rocklin and Roseville. I’ve seen an enormous run up in values from 2002 to 2006, then a catastrophic crash to a “correction” where values increased 51% from January 2012 to January 2014 to now where we’re just slugging along.

Our market, as with other markets, has responded to low interest rates, mortgages that were too easy to get and the affordability of homes. These factors tend to work together to create a booming or bust market coupled with economic news that right now is mixed at best.

So What’s This Mean To Buyers In The Rocklin and Roseville Real Estate Markets?

As I said in Part 1 of this series, click here, our market looks like this right now:

Sales have declined as demand isn’t there.
There are more homes on the market now than in the past 3 1/2 years.
The average list price, although it has surged since January 2012 to January 2014, has leveled off.
Homes are taking longer to sell than they were a year ago.

Aside from the market appreciating roughly 51% over the last 2+ years, this is good news for buyers looking to move up or buy their first home. With more homes coming on the market and sales as well as price appreciation slowing , buyers are perfectly poised to get a better deal on the purchase on a home that has been on the market over 30 days.

When a home doesn’t sell in the first two to three weeks of market time, usually because it’s priced too high, it gets stale. Generally, seller’s get a little fidgety and start considering a price reduction.

This is the perfect time, when showings have declined and interest is waning for that home, to get a lower purchase price.

The average market time today has increased from 21 days a year ago to 32 days today. This gives buyers a bit more time to find the right home and get in an offer without worrying too much about competing offers. Multiple offers are still out there but not like last year.

Why Have Sales Slowed?

A concern for the thinking buyer will be the reasons why the market has slowed. As I see it, they are:

Affordability – The market correction we had from an undervalued market to now drove prices up over 50% from where they were in 2011. Keep in mind that currently, we are still 20% below the highs of 2006. I believe this is the number 1 reason the market has slowed down.
Millenials are not buying homes – First time homebuyers are absent from the market. Folks are coming out of college with a load of debt and no job prospects are living at home with mom and dad. This is really hurting real estate nationwide and especially in an area like ours.
Lack of supply – Up until recently, there haven’t been a lot of homes to choose from on the market. That is changing as values have gone up and homeowners are coming out from being underwater on their mortgages.
Investors have run back to their caves – While there is still some flipping of homes going on in the lower price points, North Highlands and Citrus Heights are still seeing some flipping, the percentage of investors buying now that the market has become less affordable (read = too risky for investing) has slowed dramatically.
Interest rates – While interest rates are still historically low, affordability isn’t so any uptick in rates is compounded by a lack of affordability.

When you look at real estate historically, after a downturn like we had what you see is a period of unsettled activity just like what we’ve had. That could last 3 to 5 years.

Right now through the fall and winter, I believe, is a window of opportunity for buyers who are watching the market closely. We’re in one of those unsettled times.

How’s The Market Looking Going Forward?

The answer to this question is anyone’s guess. 100 economist lined up their thoughts one year ago this month and said that the market would be improving into 2018. Even the most pessimistic outlooks are positive.

Since, they have revised those numbers down but none of them is saying anything catastrophic and given that values have flattened out and sales have slowed, we’re not looking at a bubble market either. No frenzied buying is happening now further driving prices up. Home appreciation has slowed as well coming in at just over 6% for the last year.

This in itself should be an encouraging sign to buyers.

My honest opinion is that if you’re looking to buy a home in the Rocklin or Roseville area, the best time just might be this fall/winter. Home values might just stall, the inventory of homes for sale might build up further and prices could even come down slightly. I think that might be a stretch but considering all the factors, this fall/winter might be the most affordable time until the next downturn, and it WILL downturn, to buy a home for the next several years.

Buying or selling a home in Rocklin or Roseville? If so, I’d like to help you. Please call or text me directly at 916-532-7653 or click here, for my contact page.

Saxe Realty Services is the most comprehensive online source for Rocklin and Roseville real estate information. Whether you are looking for the latest sales, trends or homes for sale in Rocklin or Roseville, Saxe Realty Services has it all at your fingertips.