The cooling trend in Sacramento area real estate that began nearly a year ago is continuing and moving the housing market toward a much needed equilibrium point.  Unfortunately few seem to understand this.  Despite a slight uptick in activity during August, September saw another decrease in sales and though inventory remains high it too is finally beginning to scale back.  Here are a few quick statistics of interest from the Sacramento Association of Realtors. 

• Closed escrows of single family homes in September were down 38.1% from a year ago. 
• The median sale price of a single family home was $363,000 which is down 5.7% from September 2005
• Closed escrows of Condos/PUDs in September were down 36% from a year ago.
• The median sale price of a Condo/PUD $237,000, 4% lower than September 2005

The Sacramento market was one of the hottest housing markets in the nation the past couple of years so while this may look gloomy to some it is simply an overheated market moving back toward equilibrium.  Despite our sluggish sellers market our Sacramento economy remains stable and interest continue to be very low.  Based on the economic stability of the region and the strength of real estate nationally it is my observation that the primary forces causing skepticism in the market is psychological.  That is, the constant drumbeat in the news of gloom and doom in real estate combined with the large number of people who are too late in trying to capitalize on the phenomenal appreciation we have experienced the past several years creates a misinformed public who perceives the negative news as reality.  And, the dynamic continues.  However, once the housing market reaches the equilibrium point between buyers and sellers the standoff will end and we will move into a "normal" market for the first time in several years.  And that's my two cents! 

California's most expensive real estate market.

Affordability in markets such as ours here in California certainly presents a challenge for buyers and us as agents.  Recent statistics provided by the California Association of REALTORS®  bear this out. 

In the C.A.R. survey, the median home price in California during January 2006 was $551,300.  The median is the point at which half of the homes sold for more than a specific amount and the remaining half sold for less than the amount. 

The highest median home price in the C.A.R. survey during that same period was in Santa Barbara County's South Coast where the median priced home was $1,120,000.  The lowest median home price in the survey was in the High Desert where homes sold for $321,500.

New construction of single family homes is anticipated to be continue at a steady pace in 2006.  Despite what our local papers seem to tell and inspite of gradually rising interest rates the future continues to look bright for new home construction.

According to the February Housing Market Index compiled by the National Association of Home Builders and Wells Fargo Bank, new home builders appear confident the new home market will remain healthy and continue to stabilize in the coming year.

In a news release yesterday by the National Association of Home Builders, home builder and NAHB president David Pressly said, "After several record-breaking years for home sales, builders are anticipating a return of the market to a healthy and steady pace." 

More information on the housing statistics and what they mean can be found on the NAHB website.

Can you tell in this photo if the sun is rising or setting on the new home industry?  Well, this is certainly no big surprise for anyone watching the economy and the housing market but the market is throttling back just a bit.  The California Building Industry Association recently sent out a news release indicating a projected slowing of new home construction in 2006. 

While the outlook is far from bleak, the reality is the CBIA is projecting 185,000 to 205,000 new home starts in 2006 which is down approximately 5% to 10% from the record numbers of homes constructed during 2004 and 2005.  All in all, I would say the sun isn't setting on the robust new home market.  In fact, the sun may be shining even more brightly on buyers because they may find builders willing to negotiate great deals to keep their inventory moving.

What are your thoughts?  What would you be looking for in a newly constructed home?  Please share your comments by clicking below. 

The past five years the nation's real estate market has been red hot for sellers and their agents.  But just as when we overeat and don't exercise during the holidays when they are over we realize we need to regain balance in our lives.  So too, we need balance in the housing market.  Well, have no fear 2006 is here and the key word for the housing market in 2006 is balance.  

According to David Lareah, the chief economist of the NATIONAL ASSOCIATION OF REALTORS®, "A modest slowdown in home sales, coupled with improvements in housing inventory, means the market is in the process of normalization. That will help to bring balance between home buyers and sellers, yet sales will remain historically strong.

While REALTORS® have enjoyed the overheated market we also know the housing industry cannot sustain double-digit price increases year after year.  A cooling trend certainly will help to settle down prices and increase affordabililty.  In turn, this will benefit first-time home buyers as well as our economy by creating more homeowners. 

Home sales for 2005 are projected to finish the year at an amazing 7.1 million units.  Sales of existing-home are forecast for 2006 to slow by 4.4 percent to 6.79 million this year making it the second highest on record.  A modest slowdown from the past five years which saw consecutive annual record sales.  Similarly, new homes sales which are estimated to be a record 1.29 million in 2005 are projected to dip only slightly to 1.21 million.

Economics 101 - Supply and Demand.  Great news for home buyers.  Buyers are no longer going to be fighting over a limited supply of homes in 2006.   Bidding wars we saw in recent years are going to only fond memories for home sellers and their REALTORS®.  That means home prices generally will appreciate slower and closer to the long-term norms which is the overall rate of inflation plus one or two percentage points. Again, good new to buyers because lower price appreciation provides greater opportunities for first-time buyers yet maintains the investment advantages of home ownership for sellers.

More good news for buyers and sellers is that anticipated loan rates will increase nominally and are not projected to go above 6.7% during 2006.  Stabilizing the supply of homes, capital and demand by home buyers will return balance to the housing market and maintain affordability.  All good things for REALTORS® and all Americans. 

Prediction for 2006:  I am going out on a limb here but I believe 2006 will be another great year (near record sales) for homeownership!

For those who enjoy statistics here are a some to ponder from the CA ASSOCIATION OF REALTORS®.