What is going on?? Why aren’t people selling their homes!!
Well, let’s talk about what needs to happen for people to take that leap of faith. First, there has to be available inventory (homes for sale) so that when the sign goes up in their lawn, they have somewhere to go. Now, if ‘somewhere to go’ is out of California, you might have a better chance of finding a replacement home. But if you’re planning to just move into a larger home, smaller home, one that better suits the needs of your family, that may be a little more challenging.
Did you notice how busy it is at Home Depot and Lowes these days? We're not seeing any shortage of home improvement projects. But I’m doubtful that those shoppers are making improvements so that they can sell. Heck, today you just have to put the sign out and buyers come flocking. Making improvements is optional if you’re going to sell. We do recommend that you look your best when you sell in order to get the most for your home, but buyers are taking homes ‘as is’ much more often than they used to.
Let’s talk about the numbers.
There are 50% fewer homes on the market as of the end of 2020 compared with what we had at the end of 2019. Yet, we have 30% more pended sales! So as an example, if we used to have ten homes for sale in a neighborhood, today we have five; however, there are 13 buyers who are wanting to move into those five homes. Hence why homes are receiving multiple offers and buyers are willing to deal with condition issues that in a ‘normal’ market may be something that’s negotiated.
It’s not an ‘anything goes’ market, but we’re close. And remember… this is supposed to be our slow time! Over the past 15 months, we’ve seen values go up by 14.5%. Our ‘normal’ market increases were 6-7%. On average, homes are selling in 17 days. That’s right -- from the time you say “our home is on the market” until you’re in escrow, is fewer than three weeks. That’s down from 38 days this time last year.
Is this a crazy time? YES.
Oh, and by the way… we’re still in a pandemic! When it began just 11 months ago, I don’t think anyone could have predicted that Sacramento would be experiencing the increase in our real estate market that we’ve seen. But, as we know, our region has a lot to offer. Space, affordability compared with some other metropolitan areas, and most important -- we’re close to everything!
Within a 90 minute drive in any direction you can be in a whole different world. In the bay area, 90 minutes might only get you to the next town. People are realizing that with their jobs now being done at home, they have options. Is all of the activity from the bay area? No, but a certain percentage of it is. Our own locals are also wanting to make a move. In a normal market, we have decent sales activity at this time of year. But the biggest issue this year is that we have nothing to sell. Literally! Supply and demand is off the charts and we’re not seeing big changes coming anytime soon.
Why? People need somewhere to go.
Oh sure, you can sell your home ‘subject to finding a replacement property’, but you’re also going to be competing with five other buyers who aren’t contingent. One is probably going to be cash, so that’s a challenging option. One thing you can do is negotiate a rent back from whoever buys your home. Stay in your current home after it closes and become the ‘tenant’ until you’re able to find an acceptable home to move into.
Sounds a bit scary, I know, but we have to think outside the box when the options are few. Would a buyer be willing to do that? Allow you to rent your own home? Maybe. What I do know is that you’d better have a skilled negotiator working for you when you make those kinds of deals. Creative deals are what makes things happen when you’re faced with fewer options.
To say that I can predict how this year is going to go would be laughable. Once we get the vaccine and kids go back to school, will interest rates go up? Maybe. At least that’s what they’re saying. If values have gone up 14.5% and then we follow that with an increase in the interest rates, will that have an affect on our market -- most likely, YES. Buyers will be priced out of the home that they could have bought now. A change in rates of 1% affects buyer’s purchasing power, yet the decline in prices takes much longer to realize.
Are we in a bubble?
I don’t think so. Sacramento is developing into ‘the place to be’. Will we see a flood of homes coming on the market this spring? Doubtful. I think that so many people have refinanced their current home, lowering their interest rate, with the intention of staying right where they are. For some, they have to move. Jobs, affordability, fed up with California… we’ll see all of these things come into play, but we won’t see enough homes hit the market to flip it to a neutral market for a long time to come. We’re growing, but builders aren’t keeping up with the demand. It’s basic economics.
So, if you or someone you know is beginning to think about making a move, call me. Buying or selling - we do it all. The greatest compliment you can pay us is to refer our services to your friends and family, or of course, to use us for your own real estate needs.
Wishing you an amazing 2021
~Carol