Feb. 7, 2014
From The Desk of Josh Barker at RE/MAX
The Redding Real Estate market has continued to perform well over the past 12 months. The initial recovery that took place in 2012 was the first real sign that the housing market was improving. In 2013, the market stabilized and many buyers realized that home prices were increasing quickly and that it was time to jump in with both feet. Now in 2014, the Redding real estate market is positioned to grow with move up buyers, new construction, and equity sellers that were underwater just a few years ago. This month I wanted to share a few points that will be driving the market in 2014.
To your success!
The change In Interest Rates
In December, the Federal Reserve, in a unanimous vote, decided to further decrease its bond purchasing. The bond purchases were the government’s stimulus package created to keep long term mortgage interest rates artificially low in order to help drive the housing market. Most experts believe that tapering will cause interest rates to increase as we move through the year.
Interest rates have remained relatively stable since the onset of the tapering in December. This is probably because the first round of increases had already been ‘priced into’ the equation last summer when rates skyrocketed by over a full percentage point just on the speculation that tapering would take place later in 2013…Steve Harney.
Most experts believe that 6% interest rates will be the point in which housing prices will be threatened. If the economy outpaces interest rates, then the threat will be minimalized.
The Economy is Showing Signs of Growth
Nearly every state in the union is showing signs of economic growth. As employment recovers, more home buyers will enter the home purchasing market in Shasta County. As the economy improves, the Redding housing market is going to experience more and more move up buyers in 2014. If the economy holds strong, then new construction will grow at a faster pace. New construction in Shasta County adds a large economic boost to the local economy.
Rent Affordability Going Forward
Home inventory is dangerously low. With very few housing starts in Shasta County between 2006-2013 the housing market is heading towards a housing shortage. This shortage is going to put pressure on the rental market. As population growth takes place, family formations, and kids move out of Mom and Dad’s house, there will be an added demand for housing. Rental rates increase when demand increases.
Existing home sales
For the first time in over 24 months the total number of homes selling each year in Shasta County is down. This does not mean that the market is crashing. The decline is due to several factors. First, there are fewer investors purchasing this year because of the lack of distressed properties for sale at bargain prices. Second, there are fewer homes for sale due to the lack of new home construction. Finally, due to the price increases over the past 24 months and increase in interest rates, the previous low income home buyers are now priced out of the market.
Home prices in Shasta County
The average list price in Shasta County is $346k. Last year the average list price was $313k. This change represents a 10% increase in the average sales price. The main reason for the increase is a result of more home owners in the upper end market listing their homes for sale.
The average sold price in Shasta County is $221k. Last year the average sales price was $202k. This change represents a 9% increase in the average sales price. The main reason for the increase is a result of fewer homes selling in the lower end due to a lack of inventory.
The Real Estate projections for 2014 are based on several factors. First, since the Redding market has already experienced double digit appreciation over the past 24 months, homes prices are no longer undervalued. Second, interest rate increases are going to have an effect on purchasing power. Remember, interest rates were held artificially low by the government in order to boost up the housing market. Now that the market has improved, the government is going to slowly remove itself from the equation. Finally, a low overall home inventory will cause home prices to climb based on buyer demand. Supply and demand is the healthiest way to experience home appreciation and will provide the greatest stability going forward.
Josh Barker Real Estate Advisors Stats for January
Homes listed for sale…….23
Thank you for all your great referrals in January!