Will the Sacramento market continue to support the rapid rise in home prices?

Many prospective buyers know all to well the challenges of todays market. First investors out bid everyone with cash offers. Then the home prices increased 25% before they could find one. Then rates skyrocket reducing buyers qualifications by nearly 15%. The question Is will it sustain itself?

  • August 05 2013 - Sacramento
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Answers (7)

Yes, don't worry. This too shall pass.
  • August 05 2013
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Many prospective buyers know all too well the challenges of today's market is an understatement. :) Do you realize that in the entry-level price range of around $200,000, every 1/2 point increase in interest rates knocks a buyer's purchasing power down by $25,000? We've already had a 1% increase over last year in interest rates.
  • August 06 2013
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Funny, we don't ask this about getting on the highway.

When you get on the ramp, you accelerate quickly. You never think, "can I keep us this pace of acceleration?" You accelerate, merge into traffic, and go about your merry way.

That's what recovery in a market can be like. It could be a slow rise over many years, as was predicted even a year ago; it can be a fast jump up and then a leveling off, or a fast jump up and a not-quite-as-fast rise. And, it can be a false start and head right back down again.

I'm rooting for rise.
  • August 06 2013
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Profile picture for hpvanc
Is the rise supported by local incomes and employment numbers?  It may be sustainable on a local basis, however you need to factor in the potential for inflation/deflation which is more of a national factor in the housing market. If inflation doesn't rise, appreciation quickly becomes unsustainable, and the local markets that have seen the rapid rises will collapse.

If this proves to be just another manic phase in the nationally manic/depressive housing market, the buyers you are encouraging to extend as much as they can, pay above appraisal, and hurry before it is too late, they will be the shortsales and foreclosures of the next depressive phase.

No one can predict it perfectly, but if you make an effort to look at the whole picture including global, national, regional/state, and local factors including core general inflation, wage growth, job migration, and local supply and demand while keeping your biases and optimism out of your analysis, you can beat the accuracy of the average prediction by a wide margin.
  • August 06 2013
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Profile picture for SteadyState
Funny, we don't ask this about getting on the highway. ....

Unfortunately there is no stimulus and tax incentives to encourage people to make questionable financial moves during merges onto highways

The analogy will be applicable the day a Ferrari pushes another 1 HP car to merge onto the highway while a 18-wheller slows down traffic to allow the 1HP car to come onto the rightmost lane. At that time everyone will ask the question if the 1HP can can accelerate, keep up with the speed or will slow down to a halt.
  • August 06 2013
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Excuse me. I stand by the analogy, it IS applicable.

If the question can be rephrased as, "can prices continue to go up 10-15-20% a year," the answer is assuredly, "No." My point is that it is a weird question to ask, because we wouldn't expect such a thing in other contexts. Well, maybe in launching rockets.

  • August 06 2013
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Profile picture for SteadyState
Excuse me. I stand by the analogy, it IS applicable.

Really - there is a mapping from home prices in Sacramento to merging on a highway?
  • August 06 2013
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