Will Home Prices in Sacramento Keep Rising?

Single family home prices in Sacramento have been going up since about mid-2012. Prices over the last 12 months have followed the same path, although fluctuating somewhat in the rate of increase.

Figure 1 shows an increase in average Sacramento home prices of about 8-10% over the last year. Prices are increasing beyond pre-recession levels and they continue to go up. The average home appreciation in the U.S.over the same period was about 5%.

Figure 1.

One of the factors that has pushed prices higher in Sacramento is that buyers continue to be willing to pay retail prices in order to find nice homes. Figure 2 shows that over the last year, sale prices are about 98% of listing prices, which suggests that buyers don't expect much of a discount from sellers. If this was a buyer's market, we would expect to see buyers demanding (and receiving)  a five to eight percent discount. A hot seller's market would see multiple offers and above-list price offers.

Figure 2.

Figure 3 highlights another condition creating rising prices in the Sacramento area. The number of months it would take - given the current sales activity - that it would take to sell all the homes for sale in Sacramento is under two months, and that time period has actually reduced from last year. Residential real estate markets are usually considered to be price-stable when inventories are in the 5 to 6 month range.

Homes are selling quickly in the Sacramento market. Even though prices have been rising for twelve quarters, the willingness of buyers to pay list price, lack of inventory and the resulting low number of days that homes remain on the market will continue to drive prices up in the Sacramento residential real estate market.

Should You Buy Now or Should You Wait?

The Federal Reserve  told us all last week that interest rates are going to rise, but it will be a slow climb.

Should be smooth sailing, right?

Cheap money we can count on for the time being, so there's no hurry to think about the future, right?

Not so fast! 

Interest rates bottomed out about a year and a half ago, and they've been going up since. So,
the rise in rates is not something we need to plan for... it's here...

Check out this chart:

If you have to make payments, it doesn't take much of an interest rate hike to make that house you dream of buying much more expensive - an increase of just 1.5% (like from 3.3% to 4.8%) can make that $300,000 dream home actually cost you about $100,000 more in interest!

The upshot is that a higher interest rates usually means you will be forced to make a higher payment or you will have to buy less house.

Ask yourself:

Are homes in Sacramento going to be less expensive or more expensive in five years? 

Can we expect interest rates to stay low?

Find the house you love and buy it now while prices and interest rates are reasonable.

Arcade Area Sees Del Paso CC Preparing for U.S. Senior Golf Tournament

                                                                                                    

The groundskeepers and construction crews are busy at work getting Del Paso Country Club ready for the 2015 U.S. Senior Open to be played June 22 through June 28th. 

I drove by the course yesterday and snapped some pictures. Grandstands and service tents are visible at the corner of Marconi Ave and Morse Ave and down Morse Ave along the back of the course.

Del Paso Country Club was first developed in 1916

Hospitality and service tents
Corner of Morse and Marconi

Grandstands 
Actually, there shouldn't be much to do to get the course ready for action, as the members recently completed a $10 million dollar renovation that marks the seventh remake of the course and its layout since the first 1916 design by John Black.

New park-like fairway design

I remember living in the neighborhood back in the 1970s when Del Paso hosted the Gene Littler Swing-for-Cancer Charity event. Other major tournaments of the past included

• 1957 US Women's Open
• 1960 US Senior Women's Amateur
• 1976 Women's Amateur
• 1982 US Women's Open

130,000 fans are expected at the event. Marconi Ave will be closed all week from about Lacy Lane all the way to Watt  Ave. Pope Ave will also be closed.

 Del Paso CC was laid out back in the day on a 147 acre parcel of land left over after developers carved up much of the Rancho Del Paso land grant.

It was mid-twentieth century when the area really took off. 

In the 1940s, developer Jere Strizek went on a tear, building Town & Country Village out of old recycled building materials, and designing and building homes and apartments throughout the area. Today, the district is just beginning to change the look that Strizek stamped on it throughout the forties.

Under construction 1946

Ad for some of the original T&C Village Shops. The Maleville's (Coral Reef Restaurant) owned an appliance store

Bohemian Gardens cost Strizek $1,000,000

1948

BTW -Thanks Atomicpear for some of the great images

And finally, the go-to getaway right in the middle of the neighborhood - ALDOS!

A great neighborhood and an interesting part of Sacramento history.

A Wealth Equation

 There's an old-time wealth equation:

 "To have more than you've got, you must become more than you are".

Rich people have this figured out.

While many of us will read this aphorism and (rightfully) assume we need to start a personal development course or learn a new skill to achieve more financially in life, wealthy folks often just go get help.

Rich people have fiduciaries.  

They invest in trust relationships with professionals - fiduciaries- who look out for their interests and grow their money - for a fee.

Many people think these kinds of fees are a waste of money. Or they don't think they have enough money to spend on professional advice.

The rich know better.

High net worth folks (HNW) achieve more financially and multiply their knowledge and time by cultivating relationships with specialists  like attorneys, accountants, real estate brokers, and investment advisors. The government recognizes the value and protection provided by fiduciary relationships. In fact, the SEC wants to require more types of advisors to act as fiduciaries. In essence, a fiduciary places a  client's interests above all others, even their own. 

 Is this really such a big deal?

Does the average middle-class married couple really need to worry about their financial future, not to mention paying someone to handle tasks that one could learn from the Dummies Guide...?

The answer to the first question is "absolutely yes", and the answer to the second question is, " Get the Dummies books first, read them, and then see a professional".

 Consider retirement planning, for example...

 Retirement is one of the most important phases of life. 

It actually encompasses several phases of life, from an active lifestyle in the early years of retirement to a quieter, possibly assisted, lifestyle as a person ages. And for many of us, our retirement years may unfold over a third of our lifespan. 

This requires a plan!

Even so, half of your friends and relatives who are nearing retirement age have less than $10,000 saved for retirement and a third have nothing. 

HNW people don't make this mistake. They realize that retirement is too big to be left to chance. 

But they also know that they probably don't have all the skills, time, energy, or will power to do it alone.

So they capitalize on the expertise of their fiduciaries.

For instance...

• Attorney- Can you plan and write a legal will or trust that will not only pass your estate on to your heirs as you wish, but that will also allow you to continue to live as you wish, even if you become unable to look after yourself? Do you have the knowledge and time to follow the changing estate laws and rules, so that you can maintain and update your estate as laws change? 
• Accountant- Taxes must be paid and the rules are extremely complex.  Enough said.
• Real estate broker- Countless couples are finding out that their single biggest asset when they retire is the equity in their home. Selling the family home and buying a dream retirement home may seem impossible, but your real estate broker can show you how you may be able to purchase a nicer retirement home than you imagined, and make no payments. Will that help your cash flow?
• Financial planner- Where will your monthly retirement cash come from? Many people think that they'll need less money as they age, because they'll have fewer expenses. Not true. And most people are counting on social security and a retirement plan provided by their employer. But most workers don't have a defined-benefit retirement plan these days, so it's impossible to predict what you'll get from your boss. This means that, in order to make sure you'll have enough money in retirement, you'll have to save and build a nest egg on your own. And you will also need to make a plan to crack the nest egg open when it's time and manage your money as you spend it. This means staying away from sales people who promise fool-proof retirement plans and sticking with a qualified fee-based planner who will build and manage a plan with reasonable goals, risks,  triggers and stop-gaps and strategies to manage any changes in economics which may hurt your income as you age. Can you do this task yourself? 

And this is just the headache of retirement planning! What about wealth-building, running your business, managing your yearly taxes, or getting your kids through college?

Each of us has only so much time, energy, knowledge, and capacity. Spend a little now to make a lot and save a lot in the future.

Mid Year Sacramento Area Values

Three weeks until summer begins and 2015 is almost half over!

Time to check in on your balance sheet. Real estate values have been going up nicely - around a percent a month in most areas.

Here's what the Sacramento area market looks like this month for a three bedroom two bath home around 2,000 square feet in size:

We don't really think of Sacramento as one market, so we've broken the region down into several smaller snapshots. 

There are other small markets in the region, but these areas represent the Sacramento metropolitan area fairly well. There are many small markets in the region. I'll cover those areas in future posts.