Sacramento Home Sales Pick Up in December

It’s just a gut feeling. You may not see it yet in the numbers, but industry partners agree. Real estate activity in the Sacramento region is picking up, and at the most curious time.

Normally, sales are slow through the holidays. We expect that. And the weather often discourages serious home buying reconnaissance. This past October, after twelve difficult months spent coming to terms with the new reality, the market seemed to sag under its own weight. It was so quiet in fact, that I was predicting a “nuclear winter” for Sacramento real estate.

So I was the most surprised guy in town when the phones lit up in late November. Agents were calling with new pre-quals and buyers were writing offers. Prospects who had dropped off the face of the earth were calling again with questions, and my title companies, appraisers and wholesalers were all experiencing the same. Like a faint but welcome breeze, there also emerged a barely perceptible sense of urgency.

As I got to thinking about what happened and how I could have guessed so wrong, I noted 4 key ingredients that may have combined to make homes appear more affordable again:

• A decline in prices. Home prices have fallen dramatically. We can talk about median price all day long, but that fails to acknowledge how much a particular home in a particular neighbourhood may have declined in value. Sellers have come to terms with this in greater numbers and are pricing more aggressively. Builders are even more dispassionate and aggressive.
• A decline in interest rates. We ended the year under 6% on the 30 year fixed, after seeing 7.25 briefly during the summer of 2006. Enough said.
• Pent up demand. Over a year had passed since the party lights went out on Sacramento real estate. Some purchases are purely discretionary; others can merely be postponed. Growing families eventually need that extra bedroom. Fence sitters watch prices decline and finally step up, knowing that they can never really time the bottom perfectly. Abundant inventory gives people an opportunity to buy their dream home in their dream neighborhood.
• Competition from other buyers. Clients have recently expressed concern over the re-emergence of competition. On well priced homes, we have once again seen multiple offers. The Sacramento market has languished for a year without buyers feeling any sense of urgency….until now.

I fully expected this brief flurry to subside, but so far is appears to have legs. Local predictions for the Sacramento real estate market still anticipate that values will fall a bit more in 2007 as supply and demand find their equilibrium. Inventory levels are still high, and I’ve written previously that I do not think they are falling as quickly as the HUD and Census Bureau reports indicate. The trauma is not over. But perhaps the patient has been stabilized and we can now look forward to a gradual return to normal health. All in all, 2007 looks far more promising that 2006.

Happy New Year!

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