Homebuyers who have been patiently waiting on the sidelines for the real estate market to hit bottom so that they could jump in precisely at the absolute lowest price have likely missed the opportunity. It’s still a great time to buy with prices and mortgage rates at unprecedented lows but county home values have been on the rise since last September when the county’s median selling price was $235,000. The median selling price since has gradually increased. In May it was up to $285,000, last month it dipped to $265,000.
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According to the California Association of Realtors, the statewide median selling price last month was $312,000. It was the highest since September of 2010. Median home prices around the state have been posting month-over-month and year-over-year gains for the last three consecutive months.
One reason home values are on the rise is the fierce competition for a limited supply of inventory. For sale signs are rapidly disappearing in all neighborhoods and new listings are barely keeping up with demand. The results are higher prices and multiple offers. Nearly half of all new listings are selling for more than the listed price within the first 30 days.
An example of the slim selection of homes really hit home while I was searching available listings in El Dorado Hills. Currently El Dorado Hills has 122 active listings, about half the number available at this time last year. I was looking for a home priced less than $400,000, which left me with only 20 to choose from. My clients required three bedrooms and three baths and at least 2,000 square feet in size. That took me down to seven homes. My clients really wanted a pool which left only two from which to pick.
Previewing three-bedroom, two-bath homes with a minimum of 1,700 square feet priced less than $300,000 in Cameron Park and Shingle Springs shouldn’t take too long. There are only 10 currently listed for sale. Looking specifically for a bank REO? There is only one and only three short sales listings.
Prospective homebuyers who have waited before making a buying decision until all the stars were perfectly aligned have discovered that while interest rates and prices are low there are few homes to choose from. The low level of available housing inventory isn’t going to change very quickly. Here’s why: Institutional sellers are low on inventory. The number of foreclosures and short sales continue to decline. Foreclosures in our region are at their lowest level since early 2007. Currently, there are only 70 bank REOs for sale in the county. That’s only 11 percent of all county listings. Short sale listings account for another 11 percent.
For the first time in four years 78 percent of selling decisions are made by individuals, not institutions. Last month 34 percent of all sales were either shorts or REOs and that percentage will continue to shrink as the number of foreclosures and short sale listings decline. A reduced number of individual sellers will determine the future number of listings available. There are homeowners who would like to sell but can’t, some who can sell but will not and those who don’t want to sell.
Many homeowners would like to sell but can’t. According to the Zillow Negative Equity Report, in our four-county region — Sacramento, Placer, El Dorado and Yolo — 51.2 percent of homeowners with mortgages are underwater. They owe more than their home is worth; with Sacramento County having the highest percentage of underwater homeowners at 57.5 percent and El Dorado County the lowest at 36.7 percent. Nearly a quarter of area homeowners owe more than double the value of their home. Many of those folks don’t qualify for a short sale and are making their monthly payments on time. According to the Zillow report, only 9 percent of underwater homeowners are more than 90 days delinquent on their mortgage.
Another group of homeowners have sufficient equity in their homes. They could sell but won’t. These owners have weathered the real estate market. They didn’t bail as property values dropped 50 percent from 2006 and they are likely to stay in place now that the worst is over. Many have refinanced into lower interest rates or own their home free and clear of a mortgage. These folks are financially secure and positioned to hold on to their home for as long as it takes for values to rise. They are opportunist and will patiently wait until property values rise sufficiently to meet their expectations.
Don’t count on move-up sellers for more listing inventory. Anyone who has purchased a home in the last few years has done so with the intent of owning it awhile. This group of homeowners would normally be the vast majority of potential future sellers. That’s not going to happen this time. A recent industry survey found that 80 percent of homebuyers since 2008 said they planned to be in their home 10 years or more. That percentage is up from only 30 percent in 2006 who said they planned to remain in their home that long.
Property flippers are all out of the market and investors. Disappointed with miserly returns elsewhere, they are purchasing for the long-term. Builders will be little help in alleviating the housing crunch until their cost to build are less than what a new home will appraise for. The lack of available homes has already changed the market from a buyer’s to a seller’s market. Without new replacement inventory, sales will decline, albeit at higher prices.
Ken Calhoon is a real estate broker in El Dorado County. He can be reached through his Website at kencalhoon.com.