As I looked out the back window on Saturday, I noticed that the ornamental crab apples trees are starting to bloom. Spring is just around the corner and the real estate market is heating up even more. The last few years have been extremely interesting for real estate in Placer County. We saw the foreclosures come through and every second home on the market seemed to be a foreclosure with holes kicked in the walls, missing appliances and other damage. We saw the short sale boom and it went from being a situation where the owners didn’t want the neighbors to know they were selling, to it being commonplace and almost a trendy thing to do a “strategic short sale”. While bank-owned properties are still popping up and short sales are still happening, we have seen a definite change over the last 6 months. Most listings are seeing multiple offers and we are seeing more and more “regular sales” where we have an actual homeowner with some equity and a buyer that is purchasing to move in. I have read a lot of the predictions for where the market is going this year and most experts tend to agree that we will continue to see appreciation this year. The California Association of Realtors forecasted that the median home price in California would increase by 5.7 percent. Each market place is different and I think we will see an increase of well over the predicted statewide appreciation. We are seeing homes that sold last year for under $200,000 now selling in the $250,000 range. On the higher end, I have seen examples of homes purchased last year for $500,000 that would now easily sell for $600,000. Both of these are examples are around a 20% increase. Even within Lincoln, the rates of appreciation will be different in different neighborhoods and different price ranges.
Will appreciation continue? There are some indicators that we can watch to predict what will happen. The first one that is affecting our area significantly in terms of pushing the prices higher is supply and demand. Right now, the demand far exceeds the supply in most price ranges. Days on market are low (with the exception of short sales) and multiple offers are common. When we start to see the supply rise and days on market go up we can predict that the rate of appreciation will start to level off. I do think that because our demand far exceeds our supply that this won’t start to balance out at least until the end of summer.
The second indicator to watch is the interest rate. Interest rates are very good right now and a borrower’s buying power is quite strong. As rates go up, affordability goes down and this causes home prices to level out or even start to drop. A general rule is that as rates go up, prices go down. We have continually been hearing (over the last 3 years) that rates are going to go up. This hasn’t really happened. At certain times they may have ticked up a little but overall rates have been great. We’ll have to see what happens.
The current market is good for sellers. If you are thinking about selling this year, I wouldn’t wait too much longer to do it. There will be more homes coming on the market this summer, so get a jump on the competition. Call me to see what your home is worth, you may be surprised! I can put together a CMA (comparative market analysis) for you for free. This is a fun time for me being able to tell people their homes are worth more than they thought they were. I like to be able to give good news! A few years back it was exactly the opposite, people thinking their homes were worth much more than they really were…Give me a call, I’ll give you a number that is realistic and based on comparable sales. Hopefully the real estate market and the overall economy will head in the right direction!