Sellers’ Markets in Sacramento?

Posted by John Lockwood on March 7th, 2007

This morning I took a look at the real estate inventory numbers for twenty-two Sacramento County communities.

It surprises me even now how cowed I’ve become by bubble bloggers and the Sacramento Bee. Why am I having such a hard time saying this? Spit it out, John! OK, here goes:

By inventory standards alone, exactly half of the twenty-two communities I looked at are in what most authors would consider a sellers’ market.

I’ll post the numbers here in a minute, but first, some explanation / definitions. First, what’s inventory? Well, it’s simply the number of months it would take to sell off the homes we have active right now, if we stopped taking listings. So it’s the number of active homes now divided by sales per month. Some authors suggest using last month’s sales as a guide, but others think using the average over the last twelve months gives a more accurate picture. (I recently shifted to the latter method, realizing that December’s slow sales or July’s peak season would tend to skew the picture too much, so using a yearly average is more accurate).

OK, so now that we know what inventory is, what’s the difference between a buyers’ market and a sellers’ market? A few weeks ago attended a real estate seminar where the speaker drew the line between a buyers’ market and sellers’ market at six months of inventory. OK, sure, that line is somewhat arbitrary, but in researching it further, it crops up surprisingly often. Roselind Hejl quotes it in her article on Pricing Your Home for Sale. My colleague in the Sacramento area and widely published real estate author Elizabeth Weintraub cites the same number in her article on Hot, Cold, and Neutral Markets. (Surprisingly, elsewhere in the article she defines a neutral market (partly) as one having between two and four months of inventory — Kathy Horvath quotes the more traditional six to eight months for “a normal market”).

Well, alright then, on to the numbers:

Community Sold in last year Average Monthly Sales Available Now (03/06/2007) Inventory (in months)
East Sac 95819 274 23 59 2.6
Land Park/Curtis Park 95818 254 21 61 2.9
Folsom 875 73 309 4.2
So Land Park Greenhaven 95831 317 26 112 4.2
Downtown 95816 126 11 46 4.4
Carmichael 95608 555 46 221 4.8
Rancho Cordova / Gold River 95670 552 46 239 5.2
Sacramento Arden/Arcade 95825 265 22 118 5.3
Rosemont 95826 380 32 179 5.7
Citrus Heights 95621 471 39 228 5.8
Citrus Heights 95610 371 31 182 5.9
Rosemont 95827 183 15 93 6.1
North Highlands 95660 318 27 173 6.5
Antelope 95843 548 46 299 6.5
Elk Grove 95758 751 63 416 6.6
Fair Oaks 95628 385 32 215 6.7
Natomas 95834 247 21 152 7.4
Elk Grove 95624 773 64 482 7.5
Elk Grove 95757 490 41 320 7.8
East Sac 95817 172 14 121 8.4
South Sac Freeport / Franklin 95823 575 48 479 10.0
Downtown 95814 45 4 50 13.3

Now before you clap your hands together in glee and rush out to overprice your home, perhaps a few caveats are in order:

  • It may be that this shift to a sellers’ market is a seasonal phenomenon. Other authors have commented that inventory is down in Winter, so we may be seeing partly an artifact of that. One way to tell would be to re-run the numbers in July or August.
  • I have a listing in one of the five-point-something months communities, and it’s been a bit of a bear getting this one sold. So inventory alone doesn’t tell the whole story, and it may be that these rosey numbers are a fairly recent pheonmenon.

One thing to always remember when you look at real estate market data is how intensely local it is both in time and space. One of the most important services your Realtor® can provide is to get you current, accurate data for your community and subdivision. Because we’re trying to have more general appeal on the blog, we routinely paint with a much broader brush here than we do when running comparable sales for our clients.