Prices Rise for Second Straight Month – Bottom of the Market has Passed
In the Sacramento Area, the median sales price of single family homes has rose for the second straight month. The median price for March 2012 was $165,900. Up from $160,000 in January 2012. The increase in price is due to the economics of Supply and Demand.
Low Supply: Currently, the amount of homes for sale on the market (inventory) is at 1.1 months. That means at the current rate of sales, if no new homes came on the market, we would sell out of homes in only 1.1 months. That is lowest amount of inventory EVER on record in the Sacramento Area. A “normal” or “balanced” market is considered to be around 5 months of inventory. The peak of the inventory was in September 2007 with 14.2 months of inventory. Since then, the banks have been more cautious about putting too many homes on the market at one time, short sales have been succeeding at a higher rate, many investors began purchasing properties at auction before they had a chance to come on the market and now some banks are even beginning to rent properties out and also sale in bulk to large investors where 500 homes are purchased at one time and never make it to the open market.
High Demand: Many investors and potential buyers have been sitting on the sidelines while prices where in a free fall a few years ago. Once interest rates reached the 4% range, many first time buyers got into the game and began purchasing. The investors saw the activity increasing and realized the bottom of the market was coming and are now writing all cash offers on many properties to either flip or hold and rent as investments for the long term. Currently, due to the low supply and high demand, most homes that hit the market are receiving multiple offers, all cash offers and offers above the list price. The demand has not been this high for the past 7 years. Because of that, many sellers are choosing now as a great time to put there house on the market as the Sacramento Market has shifted to a “Seller’s Market.”