How's the Market?
Tuesday October 16, 2018
HOUSING PRICES STABILIZE
People will ask “how is the market?” and it is indeed an interesting time to be asking such a question. The Sacramento Bee reported on September 29, 2018 “Sacramento Home Prices Plateau. But will they become affordable again?” which has led me to do some of my own analysis to better understand what is going on in the Davis market.
After three years of drastic increases to home prices, with as much as over 20% in a given year, today’s buyers are relieved to see that this trend is coming to an end. Feelings of disappointment when not winning a bid on a house that seemed so perfect from the wonderful location, floor plan, size of the yard, and walkability to schools, have made some people give up their hope of becoming a homeowner at this point in time. A bidding war was not in the plans when they said “hey honey, let’s make an offer on that house close to Joe’s school”.
Prices may have plateaued, with buyer’s being able to secure a contract at 98% of the asking price, but Davis remains a seller’s market. The graph below reflects a six year trend of average monthly sales, inventory and properties that have gone pending. The pattern looks similar each year with an abnormal increase in 2014 to 2017 due to influx from the Bay Area and historically low interest rates. This year’s data shows some indication that we are going back to a more normal cycle like in 2013.
Employment in Yolo county is good and strong with a low unemployment rate of 3.9%. UC Davis has a huge impact on the real estate market with its total student population of 37,000 and employer to over 23,000 staff and faculty. The campus is still growing to a projected 40,000 students by 2020 which will ensure movement in the Davis real estate market. As observed in the above chart, the quarterly housing sales cycles match the activity of the university broken down by season as follows:
Winter (January - March): Faculty begin to receive job offers. Slowest time of year but there is activity
Spring (April - June): Students receive their acceptance letters & more faculty job offers
Summer (July-September): Vacation time for students and faculty and Davis is a ghost town. More out of area buyers in July & August and momentum picks up in September with start of new school year.
Fall (October - December): Late comers are looking for housing. Typically see post docs and scholars not dependent on the academic calendar.
The Davis housing market has kept pace in the past six years, and although sales have declined compared to last year, we are returning to a more normal cycle similar to 2013. So the current market is good news for buyers and it also remains positive for sellers since there is demand for housing. If a house is priced right, it will sell which is good news for all parties involved.