How is the Real Estate market differing in Spring 2014 vs. 2013?

We are hearing recent ​real estate ​news referencing sales and ​volume slowing this spring compared to spring 2013. So what is happening and impacting the market this spring compared to 2013? There are definitely some external factors that have shifted. Below is a chart for all of placer county. As you'll see, active listings continue to increase with less sales. Comparing to spring 2013, inventory has essentially doubled.

Placer county active listings - pending sales - closed sales

It's important to understand and dissect these factors influencing the real estate market to be better understand where the market is today and possibly heading. 

Interest rates-

​Interest rates will impact the cost to borrow and ultimately impact the mortgage payment that one can afford to pay. Since 2013, rates have generally slightly increased. Increased costs to borrowers will impact the potential price range afforded and may ultimately price out a buyer due an increased monthly payment.

Further, lending regulations have continued to change and at times becoming more challenging for some borrowers to obtain a loan. Josh Borba, broker associate with MLS mortgage in Auburn, states, "Recent changes to lending rules and regulations have made obtaining a new home loan a much more difficult process. One of the main hurdles is that lenders are lending on a lower debt to income (DTI) ratio.  The good news is that although rates are up slightly from a year ago, they are still extremely low which helps to keep borrowers DTI lower so they gain greater purchasing power."

The future movement of interest rates are impossible to predict but will ultimately have a significant impact on the overall real estate market. We have been spoiled with cheap borrowing costs the last few years, which in return, has stimulated the markets and has ultimately contributed to real estate values appreciating over the past few years while keeping monthly payments affordable.

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Investors- 

Cash investors have been an integral part of the market the last few years. Large investment companies like Blackstone have purchased homes in bulk quantities that has contributed to the market recovery and contributed to less inventory available on the market. ​With investor activity slowing more recently​, this is perhaps ​a gauge of how investors view current market conditions. The fact that investor cash home purchases has slowed is likely an indicator that perhaps they view home prices too high and/or not affordable anymore compared to rental income received. Investors exiting the market has contributed to the increase of inventory.

Placer County Inventory

Buyer demand/inventory increasing-

Buyer demand is slowing (partially ​due to reasons above), and consequently, inventory has increased. The above chart shows inventory essentially doubling compared to last year. The impact of demand/supply is critical overall as gives a general​ indicator where prices will move. When a shortage of inventory exists- prices will generally increase upward (as we saw in 2013). In many areas- the markets were appreciating at double digit percentage in 2013. On the flip side, if there is an exceeding over supply of homes on the market, prices will generally begin to decline as we saw during the mortgage crisis many years ago. 

Regarding the local markets I've analyzed, while remaining at healthy levels thus far, housing inventory has increased in many areas and median and average prices have shifted from increasing in 2013 to more level in 2014 (thus far). After this spring season passes, if buyer interest slows into the fall and inventory rises- we could see median and average prices slowly begin to drop down from current levels. 


Conclusion-
I hope discussing the above factors helps give a better overview of the overall market conditions and begins to explain the difference between spring 2014 (thus far) vs. 2013.  

Again, it is important to understand that there are segmented markets within the overall market that are important to analyze (my April blog discussed this topic). If you are curious what the value of your home is in today's market, contact me for a detailed comparative market analysis (CMA).  

Bryan Lynch, Realtor
Direct: 530-878-1688
Cell/Text: 916-765-6785
Email: BryanLynchRE@gmail.com
www.BryanLynchRE.com
License#01790398

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Disclaimer: All information deemed reliable but not guaranteed. The information is meant entirely for educational purposes and casual reading only and is NOT intended for any other use.