Whenever someone finds out we’re in real estate, the first question they ask is, “How’s the market?” It’s such a loaded question! So our answer is, “It depends.” (“on what,” they ask) On neighborhood and price range. The truth is that the real estate market in Sacramento is so diverse, and market conditions vary hugely by neighborhood and price range. We are always hesitant to make general claims about the market so that people don’t get the wrong idea. With that in mind, let’s throw all of our hesitations out the window and discuss the very, very broad market area of Sacramento County.
The graphs below cover SINGLE FAMILY HOMES (only) in all areas of Sacramento County and go 15 years back so we can see how we measure up historically. If you’d like to see an analysis of a more specific area, price range or time period, please contact us so we can send it to you.
Right now, we are seeing low inventory (the light green bars). Today’s buyers can tell you first hand that there is not much out there on the market. Well-priced homes are getting snatched up quickly, the average being 30 days on the market. This is driving sales prices up as you can see below…
FOR SALE (green) vs. SOLD (red)
Let’s take a look at the RED line because that’s what has actually sold. The average price of a single family home right now is $383,000. The highest data point (around Nov. 2005 – Jan. 2006) was $411,000. We are getting pretty close to that previous peak. Will values continue to increase? Only time will tell. Generally speaking, it is great time to sell. But it’s also a good time to buy because interest rates have slowly started to creep up. Buying a home now will lock in a great interest rate for the next 30 or so years. (P.S. We have awesome lenders to refer!)
Side note: Why we hate price per square foot
Our favorite appraisal blogger, Ryan Lundquist, does a great job of explaining why it’s dangerous to use price per square foot to price your home. He uses two great examples: a Lamborghini or Starbucks cups, so pick your favorite. The basic concept is that smaller homes will usually sell for a higher price per square foot than larger homes in the same neighborhood. So if sellers with larger homes use the higher price per square foot of smaller homes to price theirs, they can end up with unrealistic values. For my example, I’m going to use Costco. You shop at Costco because you can get a larger quantity of the same item you can buy at the grocery store, but for a cheaper price per item. So let’s say you need some strawberries. You can get an entire crate of strawberries at Costco for a cheaper price per strawberry than the small container at the grocery store. If you are obsessed with price per strawberry, it would make sense to shop at Costco all the time. But maybe you don’t need a whole crate of strawberries. Maybe they are going to go bad before you can eat them all, and you’re not willing to spend a higher total amount for an entire crate of strawberries that will go to waste. So as a buyer, you’re okay with paying a higher price per strawberry, but a lower total price at the grocery store.
What other analogies can you make for this price per square foot dilemma?