MidYear 2014 Real Estate Market Update
The Redding real estate market has experienced real changes in 2014. Prices are up, sales are down and inventory is growing slowly. This year home buyers have experienced a higher interest rate environment compared to last year. At the same time, home buyers have more homes to choose from compared to last year.
Home owners wanting to sell a home in the Redding area are experiencing a much stronger market than in years past. In fact, homes located in popular locations with competitive prices are selling in an average of 30 days or less. In today’s market, homeowners are competing against fewer foreclosures and short sales. The reduction in distressed properties for sale is leading towards a much more stable housing market.There are several issues that will impact the market in the second half of the year…This month I will touch on the major topics.
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The active home inventory in Shasta county is averaging around 1,100 each day. Last year home inventory in June averaged around 900 homes for sale. The higher home inventory is creating two issues. First, home shopping periods for buyers are extending. Buyers have more to choose from, which means it takes longer for a buyer to feel confident that they have seen all the homes available for sale. Secondly, home sellers that are priced over market value are sitting longer and in some cases receiving fewer showings and longer marketing periods and in some cases price reductions. You can view today’s new and most recently updated listings here.
Interest rates are currently averaging around 4.5% for a 30 year fixed mortgage. Experts predict that the interest rate environment will be above 5% next year. As the federal government continues to taper the amount of mortgages purchased, rates are projected to increase. For every 1% that the interest rate increases, the mortgage payment also increases by nearly 10%. Assuming that home prices remain stable, the cost of purchasing a home next year will be higher if rates increase.
Pending Home Sales
The amount of pending home sales nationally is down compared to last year. There are several factors contributing to this change. First, the amount of lower priced properties available for sale this year is down compared to last year. This reduction in lower priced properties is resulting in fewer home sales to first time home buyers, low income buyers, and investors. Secondly, last year we were still selling homes to a large back log of buyers that were sitting on the sidelines waiting for a clear indication that the market had rebounded. Now that the majority of back log buyers have purchased, the number of sales each month have balanced.
Home Price Expectations
Home prices have jumped nearly 30% on average in many price ranges in Shasta County since the bottom of the market in 2009. This year, home price appreciation has slowed down. One reason is the higher interest rate environment compared to last year. Another reason has been the increase in the number of homes for sale. It’s a simple equation of “supply and demand”. As the supply of homes for sale increases and sales remain the same, prices appreciation slows down. For the remainder of the year, most experts predict home appreciation will level off with small increases in select markets.
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