Just when I thought the market couldn’t get any wonkier…
The real estate market is never boring. I’ll give it that. After a Jekyll & Hyde year in 2022 when things began red hot and ended ice cold, I was expecting a rather “ho-hum” year for the 2023 Sacramento real estate market. So far, its been anything but routine. Let’s dive into the details and stats to find out where we may be going.
Back in January (see the post), I had made the following predictions:
1. The “bear” market would end;
2. Interest rates would settle down; &
3. Home prices would bottom out.
Well, if you’ve been paying even casual attention to the market and economy, you know that I got 2 out of 3 right. While the market has indeed come out of hibernation with increasing home sales and an end to steep price declines, it has done so in spite of interest rates remaining stubbornly high. This has come as quite a surprise to nearly everyone. After all, higher rates were the reason for the late 2022 market slowdown, so why would anyone expect the market to rebound if rates remained at elevated levels???
The surprise X-Factor in 2023 has been the astonishingly low number of homes for sale. Let me try to put this in perspective…in every year from 2013 to 2019 (pre-pandemic market), the greater Sacramento region saw 23,000 to 24,000 homes for sale from January thru July. So far this year, that figure stands at nearly half that amount at 13,000!!! Below is a great statistical visual from my favorite appraiser, Ryan Lundquist, that clearly shows how odd this year has been. Every month has seen significantly fewer new listings come to market compared to historical norms.
So even with mortgage rates remaining around 7% and pricing many buyers out of the market, home prices have actually been able to increase since there are so few options for the remaining buyers to purchase.
Think of it this way: let’s say you want to buy the new iPhone 15 that comes out next month. Then right before the release, its discovered that all of the 85 million new iPhones produced have a fatal manufacturing defect and can’t be sold.
As a result, you will think twice about buying or upgrading your phone since this market disruption would drastically increase the prices of the limited remaining phones in the market. You will likely just hold onto your old phone even if it had problems as the cost to upgrade is just too great.
That’s precisely what’s happened in the real estate market! But instead of a manufacturing defect/recall keeping homes out of the market, high mortgage rates are to blame, acting like “golden handcuffs” on homeowners. Golden handcuffs are often referred to when employees feel locked into their jobs because the conditional future benefits are too good to walk away from today. Similarly, homeowners feel locked into their homes as more than half have mortgage rates under 4%. The cost of “upgrading” is simply too great, so they stick with their current home even if its not really what they want.
They’re pretty, but they’re still handcuffs
Similarly, your low mortgage rate is saving you money, but its got you locked in. How does it feel to be chained to your current home?
All of this means is it’s the PERFECT time to sell if you don’t have to buy again in the same market or if you owe little or nothing on your home mortgage. Home values are arguably over-inflated due to the low supply, and there are still buyers able, willing, and needing to purchase. If you have considered selling your home, we should chat about how to best take advantage of the current market conditions.
Interest rates were to blame for 2022’s abrupt halt & 2023’s oddities, so its very important we keep an eye on the rate horizon if we want to predict where the market is heading as we approach 2024. I wrote a fun Top Gun themed post earlier this summer about how I think mortgage rates will improve later this year, and another post adding to that argument is in the works (coming later this month). Lower mortgage rates will break the chains for many would-be handcuffed sellers, improve affordability for buyers, and ultimately lead to a revival for this incredibly sedated real estate market.
If you may be in the market to buy or sell in the next 12 months, call me now to discuss your circumstances and how I can help you navigate this ever-evolving market. There are indeed opportunities out there if you know where to look and have professional guidance.
There are only two things in life that are certain; death and taxes! As our population ages, the largest transfer of wealth ever will take place through inherited real estate, and the tax implications are huge. Unfortunately, most homeowners are not prepared to easily & efficiently transfer their property to heirs. Learn the benefits of establishing a living trust so your assets and heirs are cared for after you pass away. Selling a home through probate can be a costly and frustrating process for your loved ones, so we’ll give you the tips and the contacts for setting up your living trust now! 
As Baby Boomers approach retirement age, many are looking for ways to be financially secure. A reverse mortgage can be a useful tool that help homeowners aged 62 and better to utilize the equity in their homes for living expenses, health care costs, home improvements and more! There are many stigmas around these loan programs, some of which are flat out untrue! Come attend this seminar to learn the good, the bad, and everything in between from industry professionals who specialize in helping senior borrowers make wise financial decisions.
It’s now more attractive & easier than ever to build an Accessory Dwelling Unit (ADU) on your property. Our community does not have enough housing units to accommodate our growing population, which is why we’ve experienced record increases in home values and rental rates in recent years. State laws have been recently eased to allow ADUs to be build in nearly every residential neighborhood in Sacramento! Attend the workshop to learn how our city’s planning department is implementing these changes to ADU permits, and how local builders are creating customized & comfortable units that are attractive and appealing to residents.
We love helping our clients purchase their first homes! Our aim is to educate and empower new home buyers to feel confident in the process and their decisions. We will discuss down payment assistance loans, improving your credit score, and why its so important to have experts explain and guide you in this life-milestone transaction. Come learn how our firm helps you to find, finance, and negotiate your first home, and why the upcoming Fall season may be the best time to buy a home! 
Matt Sundermier's Memos on Real Estate & on Life 