Upper end of the market offers buyers more choices

Sacramento Homes for Sale

If you are like most residential home buyers looking at homes for sale in the Sacramento area, you may be frustrated with the relatively low number of homes for sale.  If you are looking at homes under $500,000, or in the sweet spot that most other homeowners are looking, from $250,000 to $450,000, it remains a very strong seller’s market. 

There are simply more buyers than sellers.  Buyers seeking homes in the $200,000 to $300,000 price range rarely have the luxury of waiting weeks for the asking price to fall.  In fact, many buyers make offers as soon as houses are listed and still get shut out by competitors.

In this under-$500,000 market, the competition among buyers is fierce and consistent, and without an excellent realtor on your side, the odds are great that you will not find a home that is turn-key.  Instead, if you find a home at all, you’ll likely have to put a few bucks into the home to bring it up to your standards.

In contrast, the air is a bit thinner over $500,000, where there are fewer buyers and less competition.  This provides buyers with a better inventory of homes and allows you a bit more time to shop and negotiate.  At the upper end of the market, you are going to have more options and you’re more likely to find a home that is turn-key. 

It’s normal to have more competition near the lower end of the market and less competition at the higher end.  The disparity is simply the result of supply and demand, with more buyers and average incomes at the lower end of the market and fewer buyers with above average incomes at the higher end of the market.

What’s different today is the extremely tight supply of homes at prices most people can afford.

In May, Sacramento, Placer, El Dorado and Yolo counties combined had only about 1.6 months of inventory in the $200,000 to $300,000 price range.  By contrast, there were 3.8 months of inventory in the $500,000 to $750,000 price range and a year’s worth in the $1 million-plus price range.

These inventory figures reflect the time it would take to sell all homes on the market in those price ranges.  Anything less than three months of inventory is considered a seller’s market, while four to six months of inventory signals a more balanced and healthy market.

Although there is more inventory in the market this year compared to last year, it may not feel like it to many folks because the competition is significant among buyers.

Unfortunately for home buyers, this situation will not resolve itself anytime soon.  With the hangover from the housing bust and recession, many of those who are in a position to buy homes are very limited in terms of what they can afford.  Demand will remain strong under $500,000 and the supply of homes will remain limited until home builders start selling more new homes at affordable prices.  The economic reality is we have a lot of people employed and being compensated in a way that creates demand for homes $500,000 and below, but not a lot of salaries that can support $500,000 and above.

The good news is that the move-up market, when you get there, will be a much easier place to be a buyer in the foreseeable future.  You will get more bang for your buck.  If you are looking at homes for sale in Sacramento or you’re considering selling your home, I’d be happy meet with you personally to discuss your situation and explore all available options.

Sharon D’Arelli, Realtor