Big Picture Real Estate Update for Shasta County
Redding Real Estate is still going strong. Over the past 3 years homeowners have gained back a lot of the equity lost during the Great Recession. We are still short of reaching the peak sales prices of 2006, but we are still heading in the right direction. In the months ahead you will likely be hearing mixed reports about sales from different news outlets, but I wanted to share them with you first. Yes, overall sales are slightly decreasing. Yes, compared to last year, inventory is growing. However, there is a silver lining in all of this news. What was once a robust foreclosure market is now being replaced by normal equity sales. Home prices are increasing because distressed property sales are decreasing. This month I have taken a few minutes to touch on some of the hottest topics in the Redding Real Estate market. Enjoy the information and if you have any questions feel free to contact me at 530-222-3800.
Make today…A great day!
Homes sales are dropping nationally
We need to look at distressed sales versus conventional sales. The foreclosure market previously drug home prices down in the Redding area. As distressed sales have declined, home values have increased. Simply stated, fewer sales means fewer distressed property sales. This is a good thing! Don’t buy into headlines…they are designed to get your attention.
The best headline I can find to support my position is the following… Bill McBride from Calculated Risk, said this,
A decline in existing home sales doesn’t mean the housing recovery is over. Far from it. We need to look at the composition of sales, distressed versus conventional. The percent of conventional are increasing. That is a positive sign.
The real estate market is stronger today than at any time since the bottom of the market in 2009.
Second Home Buyers and Move Up Buyers
Americans still aspire to buy second homes and have contributed to the growth of the market consistently since its bottom in 2009. As the population continues to age, we expect people to continue to use their savings to buy second homes in the Redding area.
Many Americans desire to move up to larger homes as well. This is a newer development over the past several years and will add to the overall number of sales this year. There are very valid reasons for making this type of investment. Long term, real estate has always performed well as an investment and with low interest rates many homeowners are seizing the opportunity to make a move while the cost is low. Visit www.reddinghomes.com to see what’s for sale.
Real estate is still a great investment
Against every large investment available, real estate has still proven to be the #1 long term investment. The barrier for entry into real estate is low and the long term benefits are high. In every age segment real estate has proven to be the best long term investment. In addition, home ownership is a great hedge against rent inflation. Think about it…you need to live somewhere, why not build equity in your own home and protect your monthly overhead.
Appraisal issues are not the biggest challenge today
Over the past 3 years as the market appreciated quickly, appraisals were an issue. Now that home appreciation is slowing down, appraisal issues are not as common. Appraisals still play a factor whenever you sell a home to a buyer requiring financing. In fact, most of the time there are 2 sales that take place when selling your home. The first sale is to the buyer. The second sale is to the bank in order to get the financing. It is critical to make sure that you are prepared to justify the price.
Distressed properties are representing a very small percentage of all homes for sale in the Redding area. California estimates that 1% of ALL homes are distressed properties. In addition, 12% of all homes with mortgages in California are under water and in a negative equity situation. This is much smaller number than in the worst part of recession in 2009. In 2009 nearly 50% of all sales in Shasta County were distressed property sales. In 2014 distressed properties are projected to be below 20% of all sales. As homes continue to appreciate slowly over the next several years, distressed properties are projected to reach normal levels. To view foreclosure properties for sale visit www.reddinghomes.com/foreclosures/
Interest Rate Projections
As I have stated nearly every month, interest rates are going up. The government is continuing to taper the amount of mortgages that they purchase. Tapering will lead to higher interest rates over time. The most recent expectations state that interest rates will be well over 5% by this time next year. For every 1% that the interest rate increases, the buyers purchasing power is effected by up to 10%.
In conclusion, we are entering a normal real estate market. This year home appreciation is likely going to slow to a modest 3-5% and the Redding real estate economy is going to feel more stabilized. Home inventory will continue to increase slowly and fewer and fewer distressed properties will be on the market. The cost of purchasing real estate will likely increase slowly as interest rates increase, and the average days it takes to get a home sold will also likely increase. Well priced homes and “quality properties” will continue to sell quickly with the right marketing strategy in place.