This year has been quite active in the news headlines, so let’s take a closer look at real estate statistics as we head into the last quarter of 2016. As real estate values appreciate in relation to median income rates, we see market trends much more sensitive to seasonal and external market pressures. Numerous market metrics dipped noticeably in January, and began their annual climb as the year progressed. It appears that we’re seeing a similar trend this year as certain aspects of the market show some retraction in anticipation of the holiday season, school events, and changing weather.
The currently available inventory of high end real estate, and buyers are very particular about the homes they’re viewing. Buyers are searching for value now more than ever. As home values have appreciated, buyers look for desirable and unique features. A discernible “value” has become much more important in the last 12 months as home prices creep back to previous highs. Since high end market stats are very sensitive to each transaction, I like to look at a longer time horizon for luxury home numbers.
As home prices appreciate and new homes are built, the total number of homes in the area over $1 million tends to increase. Additionally, increased stability in the economy and increased consumer demand has helped stabilize income for high net worth individuals driving the Sacramento luxury real estate market. Luxury real estate in Sacramento has been stable as available inventory and number of sales increases. Buyers are still looking for value, and seeking out properties with unique benefits. I expect the Sacramento luxury home market to continue its upward trend as disposable income increases with the economy. Look out for political/economic policy changes and a potential stock market adjustment to impact this section of the market.
Although I’m hesitant to use the term, we may actually be seeing a “normal” market! Measured appreciation, reasonable lending practices, and seasonal adjustments point toward some stability in the general real estate market. Interestingly, the total housing units required to keep up with population is lagging behind. Household growth is projected to be approximately 165,000 in 2016, but there are only 98,000 new housing units. This leaves 67,000 households behind on housing opportunities. This uneven supply and demand is expected to keep the market moving aggressively in spite of the lower California affordability rate.
Expect to see a lower appreciation market for the next 12-18 months. I’m curious to see how the Presidential Election results will impact the national economy and real estate market. My prediction is that things will change much less than most expect and we will see “business as usual” for the first year. Potential changes in control of the House and Senate may result in policy changes that could affect housing and finance regulations over the next political term.
Overall my outlook is positive, but measured for our local real estate market during the next year. Data shows slow appreciation and slightly increasing inventory of available homes in all price ranges. The market appears to be balancing between a sellers market back to a more balanced market, slightly favored toward sellers.
High end real estate will stable movement as many homeowners downsize and cash out. Luxury buyers will continue to move from the Bay Area and other locations around the country to take advantage of the temperate weather, reasonable cost of living, and the available school districts.