The housing market is recovering from the worst recession we have ever faced in this country, some areas better than others. Take a look at Bay Area Real Estate for example, houses are now higher in costs then when the housing market crashed, affordability is lower. This means that fewer people can get into homes, so what is a person to do? You move a little further out where homes are more affordable and commute into work. This is happening right now, everyone has heard the term “super commuter”, if you haven’t then let me introduce you to them. These are folks that commute from the Sacramento area into the Bay Area for work, commuting up to 3 plus hours each way.
This is bringing Bay Area money to the Sacramento area which is making the demand for homes increase. Tie that to record low interest rates and extremely low inventory and you have upward pressure on home values. Statistics show that Sacramento County Real Estate, the average price per square foot has jumped nearly 27% in the last three years. That is pretty fast appreciation great if you’re an investor bad if you’re a first time home buyer.
So what does that mean for Placerville Real Estate?? We are also experiencing a very low inventory of homes for sale, which is pushing prices higher. The closer you get to Sacramento the more upward pressure on home values. I happen to live in the Pollock Pines/Camino area and the average price per square foot has increased over the last three years by an astounding 30%. El Dorado Hills seen 15% increase over the previous three years. I selected these two area because they represent the high and low end of the real estate market in our area but even County wide the average price per square foot has increased by 16%.
So there are some numbers on homes values, now let’s take a look at mortgages. Okay, I will admit because I see this in my business that banks are still tight on money and mortgage underwriters are playing a bigger role in the condition of the house. That said, more people are moving to FHA mortgages, which are good loans for sure, but the down payment is 3.5%, I have seen a lot of VA loans-0% down and Fannie and Freddie recently announced a 3% down conventional mortgage as well. I see adjustable loans out there on many lender rate sheets at the MLS meetings. What happened to the old adage of 20% down payment that everyone was talking about a few years back?
Not to mention that the mortgage interest rates which are being held down by the Feds who are trying to get the economy going again. If the Feds start raising rates because they feel the economy improving that will cause a run to get into the market before people are priced out for an indefinite period of time which will cause more upward pressure on home values. That’s great if you already own a home but not for a first time home buyer, they are left holding the bag and looking for a rental (that’s a whole other story).
I heard an ad on the radio by a national mortgage lender that sounded something like this, “push button, get loan”. Mortgage defaults are currently low but that can change on a dime as we have all seen with the last downturn. So here is the real question, are you feeling more optimistic that lenders, underwriters and borrowers have been cured of their “Bad Behavior” or not? Do you think that banks have eliminated risky lending patterns and that Americans are now strong savers?? Only time will tell.
If I can help you or someone you know buy or sell real estate, let me know. Call, text or email me today.