Sacramento Real Estate Market - January 2008 - Part I

Posted by John Lockwood on February 6th, 2008

January’s real estate numbers for Sacramento County are in, and so on the one hand we’re ready for usual: a nerd-friendly, statistics-heavy look backward on the previous month.

Yes, I want to spit out all the boring numbers, but at the same time there’s something very exciting going on that’s a bit harder to measure, but it’s nonetheless quite real: we have gotten incredibly busy in January, with buyers who’ve decided that now’s the time to be shopping and writing offers. Not only that, but our buyers are starting to face quite a bit of competition on the best priced homes.

We’ve been answering about six new buyer inquiries per day for the last two weeks or so. and although we’ve averaged about 1,650 daily unique web site visitors for most of 2007, in January that number shot up rather dramatically to 2,207, the highest number ever.

Buyers Who Didn’t Get The Memo

A lot of people are focusing on the supply side of the market, and pointing out — correctly I think — that we still have a lot of Option ARM resets to work our way through. I call that the supply side because more foreclosures of course means more supply of homes. Based on such a the supply-focused analysis of option ARM resets, the market will continue to be bad well into 2009 or possibly later.

However, what I believe is happening in January is what the real estate bears haven’t spent much time on. Yet in retrospect it looks like it is precisely what one should expect to happen when prices fall like a rock: demand increases.

Thus, for example, this January the median price was $250,000 for Sacramento County, down a dizzying 27.5% from last year’s median price of $345,000. The last few months have seen some of the biggest drops in prices since the Sacramento County real estate market started its decline in September of 2005. The average sale price is down 28.4% (from $376,112 last January to $269,301 this January), and the sold price per square foot has fallen 27% to rest this January at $161.65.

Meantime, however, unit volume appears to have reached a bottoming out point. In September of 2007, the worst month for unit volume in recent memory, unit volume was down 41.3% from the same month a year earlier. This January, however, our unit volume is down only 1% from last January, and if the current surge in buyer interest continues, I would not be surprised to see year on year unit volume increases for many months in 2008 over 2007.