What happened in 2022? What to Expect in 2023!
Real Estate Market update for Sacramento, Placer, and El Dorado Counties
This Market update is for Sacramento, Placer, and El Dorado Counties as of Jan 7, 2023.
Year 2021 was an EXTREME Seller’s market.
Year 2022 the Real Estate market has shifted.
What can we expect for 2023????
The Facts!
So right now today (Jan 7, 2023), if I went into the multiple listing service and I wanted to pick homes to show you, there’s just a total of 2,553 homes available. That number is VERY low for those three counties and for this time of year.
Typically, we would want that over 4,000 available at least in the MLS to show buyers. Normally we see 6000 to 7,000. And back when the market crashed before, I’ve seen this number as high as 16,000 in 2006.
Now, as far as closed sales, we also have a low number. If I go back 30 days, we have only closed 1,069 homes for all of Sacramento, Placer, and El Dorado County.
Now let me turn those numbers into what I call an absorption rate with some simple math. If we have 2533 homes available and have sold 1069 in the last 30 days AND these trends continue….. We have a 2.4 month supply of homes. (Hint: 2553 divided by 1069 equals 2.38)
So if no other homes come on the market, we’re going to be out of homes in 2.4 months. Technically the market is still a “Seller’s market”). Here are the definitions some of us use to label markets.
Seller’s Market– Less than 3 months Supply of homes. Neutral market 4-6 months’ supply. When we get over a 6 months’ supply, we are definitely in a Buyer’s market.
Now, what’s going on with the price of homes?
Remember my numbers are as of Jan 7 2023 and for Sacramento, Placer, and El Dorado counties.
If I go back 12 months, the prices of homes that have closed escrow have dropped to about 2.1%.
As far as pricing the marker peaked out March- May 2023. If I just go back eight months, and that’s really when the market peaked, we’re actually down 15%. The prices were still going up the first quarter of 2022 and hit the peak and started to settle.
Now, don’t freak out yet. If you bought a home nine years ago, you would still be up 110% today. And this trend is historically true for California. Since WWII, home prices have doubled every 7-10 years.
Impact on Buyers
So if you’re a buyer, even though I said it’s technically a seller’s market, you have some advantages in 2023 that you did not have in recent years.
Sellers are going to be willing to do various concessions. What type concessions?
Repairs to the home or provide a credit for repairs.
Credits to buyer closing costs and/or you could use that credit maybe to buy your interest rate down.
My best advice to you is to be very objective about real estate market trends. Do not buy into the hyperbole either way.
Our market in this region is primarily driven by just 3 factors: the local job market, interest rates, and migration from higher priced areas in California.
Be objective in that you should be buying a home that you can afford for the next 7-10 years.
Know your numbers do your homework.
Impact on Sellers
Now, if you’re a seller, there are still buyers on the market out there for your home.
But instead of the sale taking three, four days,…the sale may take three, four months to get your home sold.
Be prepared to negotiate with your buyer.
At least 50% of all homes that get listed are doing at least ONE price reduction before they go under contract.
We are now really transitioning to a “normal” market.
Impact on Investors
If you’re an investor and you were looking to buy a house to remodel, and then sell (“Flip”), I would be careful with your projections and estimates. The last 10 years, investors have had appreciation as a “safety net”. That safety factor may not be available.
If you’re buying a home to use as a rental…great! Turn into a rental, great. In our region, there is a shortage of rental homes.
As always, if you have any questions on the market in our region or in California, please reach out, text/call, or email.
