The Redding real estate market is experiencing a completely unexpected market shift in 2012 09/6/2012 - Redding, CA
Home inventory is changing. Today there are 756 homes for sale in the entire Shasta County MLS, the lowest number I have seen since the peak of the market in 2005. With the relatively high number of short sales and foreclosures in our area, it will likely take at least 2 more years to get them through the system.
Multiple offers are common. With low inventory, and availability of financing, appreciation will naturally have to follow and in some areas it already is. I have been testing list prices at 5-10% higher than recent sales, and in almost all cases we are selling or at least getting offers. Interestingly, this is happening in many other areas in the country as well. Las Vegas, Phoenix and Florida all had areas that at one time had 5 to 6 times the number of homes for sale than they do today - just like Shasta County. All three of these areas have experienced appreciation - in some cases up to 30% - from a year ago. We don't have that yet, but here is what is happening now and why I encourage potential sellers to take advantage of this crazy supply/demand situation.
Foreclosures are declining. At one time foreclosures were almost 35% of our inventory, today they are about 13%. When properties do go to foreclosure sale, often times the investor buyers snatch them up and banks don't take them back. These so called "flip properties" then get a nice face lift and come on the market as "regular sales". Often, because they are usually very nice, they sell for as much as any other normal sale in the area. So instead of a beat up, "as-is" foreclosure, we have a nicer move in condition property at a price that can be 20-35% higher than the bank would have put it up for. This one trend alone is starting to give appraisers the "comps" they need to bring in values at higher prices and it will continue.
Lending guidelines are getting easier. Any lender will tell you that lending guidelines today are the toughest they have seen in 20 years. With that said, they also believe that because the market is improving and confidence is growing, more reasonable conditions lay ahead. In fact, I can tell you that in the lower price points there are likely 5-10 buyers for every new listing. All of these buyers are pre-approved and eager to buy. No exaggeration! Buyer confidence is no longer an issue and if you watch the media, what used to be 50-50 negative to positive is now much more toward the positive.
A positive affordability index. If you combine the lowest interest rates in 20+ years with prices that are still in many cases 40% below the peak; you have the highest affordability index since the 1990s. Buoyed by this, buyers are willing to pay a little more than recent sales because even at a slightly higher price, the payment is the same because the rate is lower. If this continues, along with improvements on the employment front, appreciation should follow.
We have a completely unexpected market shift in 2012. A supply that hit 2200 homes in 2008 is now at just over 700. Foreclosure Radar lists 713 properties that are in default in Shasta County. It is likely that another 500 properties are struggling. If every one of them came on the market (and as little as 30% will), they would in most cases be absorbed immediately, many by the investor flippers described above.
The market reset is nearly complete. Barring any major economic changes, I believe a housing recovery is on its way. As I mentioned earlier, the market still has to work through the next 2 years of short sales and foreclosures. But, in spite of these challenges the market is still showing signs of price stability.