Sacramento Real Estate Market Update – August 2023
### Sacramento Real Estate Market Update – August 2023
Hello, Sacramento! Christopher Brown here, the Principal and Broker at Next Real Estate Group & Next New Homes Group. With summer drawing to an end and autumn on the horizon, let’s delve into our real estate market’s recent happenings.
#### **Housing Prices & Inventory Levels**
As of September 1, Sacramento’s average home price stands at $790,000 for active listings and $610,000 for sold homes. When juxtaposed against the previous month, there’s a slight decrease—2.3% for active homes and 0.3% for those sold. Yet, when we cast our eyes back to the same time last year, prices have surged by 9.7% and 1% respectively.
Our inventory levels have also been dwindling. The housing supply for Sacramento now clocks in at 1.6 months, a dip from the 1.7 months of the preceding month and a significant slide from 2.2 months a year ago. These metrics underscore the dominant Seller’s market we’re entrenched in. However, caution is advised before interpreting these statistics too literally.
#### **A Closer Look at August’s Performance**
August proved to be a bit of an enigma. A total of 2,775 homes found new owners—a 4.1% increment from July. Still, this figure is a significant 18.9% drop year-over-year. While the general interest in homes remained steady, it seemed many potential homebuyers opted for vacations, perhaps lured by the delightful weather. This has postponed many purchase decisions to the upcoming month.
Mortgage rates have also edged up, with the average 30-year fixed mortgage rate oscillating between the high 6’s to mid 7’s. With the Federal Reserve’s latest monetary adjustments, this trend may persist through the year, possibly spilling over into early 2024. However, most forecasts point to a downward trend in 2025, as inflationary pressures begin to wane.
#### **Decoding the Sacramento Market**
So, where does Sacramento stand?
Our city remains an undersupplied market. Despite builders ramping up construction, supply still lags behind demand. This imbalance, coupled with a paucity of fresh inventory on the resale market, signals a sustained Seller’s market, undeterred by the dual challenges of escalating prices and interest rates.
A recurring sentiment among potential buyers, particularly in our new home communities, is the intention to “wait until the market drops.” But let’s dissect this notion:
1. **Supply & Demand Dynamics**: Sacramento’s market is undersupplied when set against broader Californian and national benchmarks. Plus, our affordability factor still trumps many other markets.
2. **On Price Drops**: Some anticipate price corrections, but let’s get some perspective. The difference between the average active price ($790k) and the average sold price ($610k) primarily stems from overly optimistic sellers who later recalibrate their expectations to align with the market. It’s crucial to listen to market experts, as inflated price aspirations often need a reality check. To put it bluntly, sometimes professionals have to share some hard truths.
3. **Interest Rates & Market Dynamics**: With the current interest rate trend acting as a check on soaring prices, a reduction in rates will invariably spur demand, pushing prices upward. Therefore, for those in a position to buy a home now, it’s a propitious time. When interest rates dip, it’s an opportunity to capitalize on potential savings.
#### **A Tip for the Wise**
For both buyers and sellers, consider the power of a Seller credit for an interest rate buydown. Rather than shaving off $20k from a home’s price, using the same amount to bring down the rate can be more financially rewarding in the long haul. For sellers, it’s a tempting carrot to dangle, and for buyers, it’s a smarter way to stretch your dollars.
In closing, thank you for accompanying me on this market update journey. Whether you’re a prospective buyer, a seller, or just a real estate enthusiast, we’re here to guide you every step of the way. If you’ve found this update insightful, do share it with others. And for any personalized advice or queries, don’t hesitate to get in touch.
Here’s to smart choices and happy home hunting!