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Myfolsom Real Estate Update


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#1 Steve Heard

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Posted 14 August 2013 - 01:00 PM

As we head toward the end of the traditional summer buying season, it's time to take a look at where the Folsom real estate market has been and where it's heading.

 

Despite fears of another housing bubble, the area has seen tremendous growth in prices and sales over the past 18 months.  I don't know if it's confidence in the future or safeguarding against it, but buyers seem to have determined that we saw the bottom of the market around February of 2012, and have been buying ever since.trans.gif

 

Who's buying? Everyone, it seems.  At the lower end, the modest 1200 to 1600 square foot 3 bed 2 bath home has proven to be a great target for investors large and small, and for first-timers and folks re-entering the market.

 

The mid priced homes have been moving well, with many buyers moving up to larger homes, and a few first-timers looking long term.

 

Higher end homes, in the million dollar category, have also started to move and builders such as Elliott and DR Horton are back to building with a frenzy.

 

The questions I'm often asked are, 'how high will they go' and 'how long will this last?'

 

Who knows? All I can do is point to stats and trends, and speak from experience.  Those stats have shown that sales have out-paced new listings almost every month since February of '12, and prices have risen almost every month as well. They also show that things may be changing, and in a hurry.

Take a look:

  • Lowest average price per square foot for homes sold in Folsom in recent years occurred in February of 2012 at $148.

  • Prices have climbed almost every month since, and as of July 2013, we're at $194 per square foot, down slightly from the $196 mark set in June.

  • For the first time since October of 12, June saw more homes listed for sale in Folsom (126) than were sold (117).

  • July's listings were at 144, while 100 were sold.

folsompricerperfootjuly2013_zps9a801bf8.

 

 

Is it over? Did sellers miss out on the buying frenzy? Did buyers wait too long and decide to pull back?  I don't think it's over, but it may be slowing, experts point to rate increases as the culprit.
 
According to Andrew Vierra of Wealthwise Mortgage, interest rates in May were a 3.625% for a payment of  $456 per month per $100,000 in mortgage debt. Today rates are at 4.625%  or $514 per month, per $100,000 borrowed.  That makes a difference of over $400 per month on a $400,000 loan.
 
I don't think it's time to hit the panic button though, many are realizing that with rents continuing to rise, it may not be much of a stretch to buy, and prices are still far off their high mark of 2005, when homes here were selling for $271 per square foot.
 
Even with 144 homes on the market as of today, we're far below the record of  561 homes for sale in August of 2006, and at the current rate of sales, we have about 1.6 months worth of inventory.  5 to 6 months is generally considered a healthy or balanced market.
 
As for distressed properties, unless something drastic happens, that era may be over.  3 years ago, there were 153 short-sales and 40 bank-owned homes on the market. Today, 5 short-sales and 3 bank-owned.
 
So, it looks like our market is healthy, or getting there, and as long as people have jobs and optimism about the future, or jobs and fear that they'll miss the boat, and if the economy does't tank, and if rates don't climb too high...
 

What do you think?


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#2 chris v

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Posted 14 August 2013 - 01:40 PM

I'm optimistic as my house goes on the market tomorrow. Wish me luck.

#3 Steve Heard

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Posted 14 August 2013 - 02:07 PM

I'm optimistic as my house goes on the market tomorrow. Wish me luck.

Tell us about it, and good luck. 


Steve Heard

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#4 folsombound

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Posted 14 August 2013 - 03:03 PM

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Posted Today, 02:40 PM

I'm optimistic as my house goes on the market tomorrow. Wish me luck. 

Good luck!  I hope you get multiple offers, over asking!



#5 caligirlz

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Posted 14 August 2013 - 08:51 PM

Folsombound, the formating on your post looks really weird. Did you quote & respond? On a side note, I'm having trouble editing from IE.

 

Steve, I don't know what to think. I'm just happy that I got in when I did, and I am content. It wil be interesting to see what happens through the fall/winter.  



#6 rip

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Posted 15 August 2013 - 10:23 AM

As usual Steve good information.

If you want some doom and gloom check out Mark Hanson's blog:

http://mhanson.com/blog

 

I'm not nearly as pessimistic as he is, but he does make some interesting observations.  The idea that the artificially low interest rates over the last year or so have acted like a stimulus comparable to the 2010 home buyer tax credit rings true. Then, as now, people were saying the market had hit bottom and was in recovery mode.  I personally bought into it, and listed my home just as the credit expired, only to see sales fall off the cliff.  Not only did my house not sell, virtually nothing else in my local market did either for nearly 6 months.  As we all know, prices continued to decline and didn't hit a true bottom until almost 2 years later.  If he is right about the low interest rates as stimulus theory, it begs the question on what will happen when that stimulus is removed all at once, as has happened over the last 6 weeks.  Keep in mind there has never been a time in history when interest have climbed so rapidly in such a short time period.  The general rule of thumb is for every point interest rates increase, buyers buying power decreases by 10%.  If you add the 1.5% spike in rates plus the 30ish% rate of appreciation you have your average buyers purchasing power decline by around 45%. Add to this the exit of large scale investors, I think it would be wise to be cautious over the next few months.



#7 folsom44

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Posted 15 August 2013 - 01:16 PM

Steve, is the greater sacramento area in general seeing an upward trend? Thank you!



#8 4thgenFolsomite

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Posted 15 August 2013 - 01:17 PM

I would add though that interest rates were artificially low and had plummeted.  if they start to creep up, then yes that will have a cooling effect on real estate sales and in the stock market.  but I think that even if there is a big correction from fearful investors, eventually sanity and reason will return when people readjust to interest rates in more standard territories.


Knowing the past helps deciphering the future.

#9 Steve Heard

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Posted 15 August 2013 - 04:18 PM

Steve, is the greater sacramento area in general seeing an upward trend? Thank you!

 

Yes, although it varies by market, there's a price point at which any property will sell.

 

Sacramento county average price per square foot was $114 in May of last year, and it was $162 in July. Inventory is climbing just as it has in Folsom.

 

El Dorado county has seen similar gains in both price and inventory. 

   

 

 

I would add though that interest rates were artificially low and had plummeted.  if they start to creep up, then yes that will have a cooling effect on real estate sales and in the stock market.  but I think that even if there is a big correction from fearful investors, eventually sanity and reason will return when people readjust to interest rates in more standard territories.

 

Yes, people will always need housing and they will pay the going rates for both the homes and the loans. 

 

Years from now, people will look at this past year or so as the time they made a ton of money by buying at the bottom, while others will decry how they missed the boat.


Steve Heard

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#10 Duke

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Posted 16 August 2013 - 06:44 PM

...'Yes, people will always need housing and they will pay the going rates for both the homes and the loans. Years from now, people will look at this past year or so as the time they made a ton of money by buying at the bottom, while others will decry how they missed the boat...".

 

Respectfully disagree.



#11 Steve Heard

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Posted 16 August 2013 - 10:00 PM

...'Yes, people will always need housing and they will pay the going rates for both the homes and the loans. Years from now, people will look at this past year or so as the time they made a ton of money by buying at the bottom, while others will decry how they missed the boat...".

 

Respectfully disagree.

Please elaborate. Let's discuss. Do you disagree with the entire statement or particular parts of it. 


Steve Heard

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#12 Carl G

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Posted 17 August 2013 - 07:10 AM

Please elaborate. Let's discuss. Do you disagree with the entire statement or particular parts of it. 

 

Steve - I personally think the American Dream is changing.  Fifty years ago, owning a home was pretty much a given, now, not as much, and fifty years from now, I think even less so.

 

As America becomes more stratified I believe we will have a permanent underclass that will not be able to afford a home and will adjust accordingly.  I do wonder if we will see smaller homes become more common.  In large cities you can already find micro-apartments.  I'm guessing we see a growth in micro-homes part due to cost and part due to "green" concerns.

 

I hope this isn't getting too political, but I also question whether the public will allow the government to raise the cost of loans too much.  I think this society is getting addicted to cheap money.



#13 Howdy

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Posted 17 August 2013 - 07:44 AM

 

 I also question whether the public will allow the government to raise the cost of loans too much.  I think this society is getting addicted to cheap money.

Look at what has happened since rates started to rise from the spring. Applications for residential loan applications have been down in 13 of the last 15 weeks. Last week was the first week they were up in the last 5. Lots of price drops in the last month. Its not a sellers market like it was in the spring. If you think you are going to throw a junky, non upgraded house up for sale at top market price and have people beating down your door for it, that ship has sailed. 



#14 4thgenFolsomite

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Posted 17 August 2013 - 07:48 AM

 

Steve - I personally think the American Dream is changing.  Fifty years ago, owning a home was pretty much a given, now, not as much, and fifty years from now, I think even less so.

 

As America becomes more stratified I believe we will have a permanent underclass that will not be able to afford a home and will adjust accordingly.  I do wonder if we will see smaller homes become more common.  In large cities you can already find micro-apartments.  I'm guessing we see a growth in micro-homes part due to cost and part due to "green" concerns.

 

I hope this isn't getting too political, but I also question whether the public will allow the government to raise the cost of loans too much.  I think this society is getting addicted to cheap money.

 

In the 1950s and 1960s, an average house was three bedroom, one bath, two car garage, and simple.  No a/c, no built-in appliances, no marble countertops, no masterbathrooms.  And yet somehow everyone managed to thrive!  Today the expectations are much higher and the idea of an entire family sharing one bathroom would seem unthinkable.  If builders started building houses like those and priced them lower, then more people could afford them.  Of course, the mark-up on adding these amentities is much greater than the cost of building them, so its not going to happen.  And of course other costs have gone up too.  Permits, land costs, benefits for employees, it all adds up.

 

I understand that the majority of building permits requested in the US in the past year has been for apartments or multifamily housing, rather than single family homes.  I think that is the trend.  Any house with its own yard is going to be higher as a result. 

 

as for society getting addicted to cheap money, I think its the stockmarket and wall street that are addicted to that and afraid of the effects of the withdrawal of QEII, etc.  but people will need to buy homes and cars and start businesses and everything else they take loans out on and suck up the increase in interest rates.  After all, people are paying double digits on their credit cards, so paying 5 percent isn't going to stop them, at least not once they get used to the idea. 

 

its a good discussion to have.  money and investments is all about emotion.


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#15 Carl G

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Posted 17 August 2013 - 07:44 PM

Look at what has happened since rates started to rise from the spring. Applications for residential loan applications have been down in 13 of the last 15 weeks. Last week was the first week they were up in the last 5. Lots of price drops in the last month. Its not a sellers market like it was in the spring. If you think you are going to throw a junky, non upgraded house up for sale at top market price and have people beating down your door for it, that ship has sailed. 

It is funny you say that.  The house next door been on the market for a couple months.  When first listed I thought it was way too high for what it was.  After one month they dropped the price $25K and then another $25K after the second month.  Even now it is a higher price per square foot then what Steve listed above.  Ten years ago the house was immaculate; the then owner repainted in and out, got the yard looking very nice, and fixed everything that was wrong.  Since then it's been a rental and had nothing done to the house.  The sprinkler system broke.  Weeds now fill the yard.  Maybe another $50K lower and you're talking a more reasonable price.

I'm guessing quality is moving now and the stuff just thrown on the market will sit on the market unless priced very agressively.






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