Is Sacramento In A Real Estate Bubble?

There was a recent report done by CBS News in Sacramento asking the question if we are in a real estate bubble or not. After all, home prices feel like they are back to the highs of the market in 2005 so it is a reasonable question to ask.

What is a real estate bubble? According to Investopedia, “A housing bubble is a run-up in housing prices fueled by demand, speculation and exuberance. … Speculators enter the market, further driving demand. At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices — and the bubble bursts.”

What were the circumstances that allowed the real estate bubble to occur in 2005/2006? Lending institutions encouraged 100% financing, no-income verification loans, negative amortization loans, and other sub-prime loan products. They gave buyers access to unlimited sums of money which allowed buyers to drive up home prices. Home values were not supported by income because income became an irrelevant part of the equation. Homeowners used to use their homes as piggy banks and refinance every 6 months and pull out tens of thousands of dollars at a time to support their spending habits. They even leveraged their homes to buy more homes and repeat the process. Access to these loans turned the entire population into potential homeowners which created an artificially high demand and caused the runaway home prices – a.k.a. real estate bubble.

The lending environment is vastly different today. Buyers are required to have skin in the game. While most buyers still do not put 20% down to buy a home, they are required to have some sort of down payment (FHA loans only requires 3.5% down). In addition to a down payment, income verification is a must today. Since income verification is a must, and if there is a debt-to-income ratio limit, then home values will ultimately be limited by the region’s income levels. This is the key to understanding if we are in a real estate bubble or not.

Instead of looking at home prices to determine if we are in a bubble, we need to look at home affordability. There is something called the Home Affordability Index. This index tells you what percentage of the population can afford the median home price. (If you are curious about the methodology of how this index is calculated visit http://www.car.org/marketdata/data/haimethodology/.) Every region across the country has their own historical average of what is affordable. For example, San Francisco has always been less affordable than Sacramento. You want to be sure that you compare an index to its own historical average.

Below is a chart from 1st quarter 1991 to 3rd quarter of 2016. The blue line is the median home price. The red line is the “unaffordability” rate. The percentage of “unaffordability” is the percentage of households who cannot afford the median home price. I chose to show the “unaffordability” as opposed to affordability because it is easier to observe the correlation.

sac unaffordability vs median price

Back in the 1st quarter of 2005, only 19% of households could afford the median home price!! Talk about a bubble! In the 4th quarter of 2011, 74% of households could afford the median home price!! What an opportunity! Where are we today? We are at 45% affordable (according to the chart, we are 55% unaffordable). Historically Sacramento County has ranged from 45% to 55% (the average of all the data points is 50% in case you were wondering). We are in the lower end of that range. If you look closely at the end of the chart, you’ll noticed that while home prices are increasing, home affordability is trending steady. How is that possible? The dropping interest rates have been able to keep homes affordable even though the values are going up.

Conclusion:

Now that interest rates are starting to climb again, we will see homes become less affordable. Does that mean we are in for some kind of bubble burst? Hardly. There aren’t any ingredients to cause a pullback in prices. Homes are still affordable relative to the income in the area. There are no signs of income dropping. Unless we see a serious spike in interest rates or a drop in income due to a recession, I believe these prices are here to stay. If the home affordability index drops down to 40%, then we should expect a market correction but NOT a bubble “bursting”. The last time the home prices were at this level, only 35% of households could afford the price. Today we see a much healthier 45%. Don’t let the local news station fool you with their sensational headlines. Remember to consult your local Realtor!

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Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 1/2 – 1/8

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 1/2/17 – 1/8/17

A: Anatolia K: Kavala Ranch SM: Somerset Ranch SR: Sunridge Park

 

There were 4 resale homes that came on the market:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
SR 4069 Big Meadow Way 2,256 4/2 $450,000 8
SR 4049 Big Meadow Way 2,368 3-5/2 $439,000 5
SR 12288 Habitat Way 2,389 3/2 $418,888 7
SR 4272 Borderlands Dr 2,081 3/2.5 $388,888 6

 

There was 1 home that went pending:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
A 11749 Dionysus Way 2,874 5-6/3 $419,000 25

 

There were no homes that sold.

 

Please visit my website at www.anatoliahomesforsale.com to search for all homes in the 95742 zip code or the rest of the Sacramento Metro area. Don’t forget to LIKE me at Facebook at Anatolia Real Estate.

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Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 12/26 – 1/1

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 12/26/16 – 1/1/17

A: Anatolia K: Kavala Ranch SM: Somerset Ranch SR: Sunridge Park

 

There was 1 resale home that came on the market:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
A 4328 Mount Kisco Way 2,019 4/2.5 $335,000 8

 

There were 3 homes that went pending:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
K 5025 Heather Ranch Way 2,491 4/3 $450,000 10
SR 12441 Kibbie Lake Way 2,246 3/2 $429,000 48
SR 4023 Cuyamaca Cir 1,946 4/2 $378,888 43

 

There were 3 homes that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
K 5424 Copper Sunset Way 2,811.00 5/4 435000 26
A 11764 Arista Way 2,416.00 4/3.5 380000 31
A 3954 Iron Gate Way 1,690.00 4/2 337000 15

 

Please visit my website at www.anatoliahomesforsale.com to search for all homes in the 95742 zip code or the rest of the Sacramento Metro area. Don’t forget to LIKE me at Facebook at Anatolia Real Estate.

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Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 12/19 – 12/25

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 12/19/16 – 12/25/16

A: Anatolia K: Kavala Ranch SM: Somerset Ranch SR: Sunridge Park

 

There were 2 resale homes that came on the market:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
A 11865 Marsyas Way 3,937 5/4.5 $550,000 14
SR 4133 Pingree Lake Way 2,256 3-4/2 $435,000 12

 

There were no homes that went pending.

 

There were 6 homes that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
A 11869 Marsyas Way 3,942 4/3.5 $549,000 148
A 11880 Marsyas Way 2,943 4/3 $480,000 41
K 5211 Rose Canyon Ct 2,452 4-5/3 $445,000 26
A 4337 Hartland Way 2,580 4/2.5 $420,000 44
A 11792 Brook Valley Way 2,291 5/3 $395,000 14
SR 12245 Habitat Way 2,081 3/2.5 $377,500 11

 

Please visit my website at www.anatoliahomesforsale.com to search for all homes in the 95742 zip code or the rest of the Sacramento Metro area. Don’t forget to LIKE me at Facebook at Anatolia Real Estate.

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Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 12/12 – 12/18

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 12/12/16 – 12/18/16

A: Anatolia K: Kavala Ranch SM: Somerset Ranch SR: Sunridge Park

 

There is 1 resale homes that has come on the market:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
A 5025 Heather Ranch Way 2,491 4/3 $450,000 4

 

There were 5 homes that went pending:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
A 4376 Rosenstock Way 3,516 5/4 $549,000 68
K 5424 Copper Sunset Way 2,811 5/4 $449,900 26
K 5211 Rose Canyon Ct 2,452 4-5/3 $449,000 26
A 5213 Otter Pond Way 2,615 4/3 $399,888 60
A 11840 White Rain Way 2,114 5/3 $369,000 17

 

There was 1 home that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
K 11919 Country Garden Dr 1,794 4/2 $372,900 14

 

Please visit my website at www.anatoliahomesforsale.com to search for all homes in the 95742 zip code or the rest of the Sacramento Metro area. Don’t forget to LIKE me at Facebook at Anatolia Real Estate.

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Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 12/5 – 12/11

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 12/5/16 – 12/11/16

A: Anatolia K: Kavala Ranch SM: Somerset Ranch SR: Sunridge Park

 

There are 2 resale homes that have come on the market:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
A 11749 Dionysus Way 2,874 4-5/3 $419,000 5
SR 12292 Habitat Way 2,619 3/2.5 $400,000 1

 

There were 3 homes that went pending:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
K 4729 village Mill way 2,316 4/3 $410,900 36
SR 12292 Habitat Way 2,619 3/2.5 $400,000 1
A 11764 Arista Way 2,416 4/3.5 $389,900 31

 

There were 3 homes that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
SR 12307 Pawcatuck Way 1,692 3/2 $365,000 11
A 12261 Great Plains Way 1,667 3/2 $365,000 14
A 11710 Arete Way 1,531 3/2 $337,000 11

 

Please visit my website at www.anatoliahomesforsale.com to search for all homes in the 95742 zip code or the rest of the Sacramento Metro area. Don’t forget to LIKE me at Facebook at Anatolia Real Estate.

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Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 11/28 – 12/4

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 11/28/16 – 12/4/16

A: Anatolia K: Kavala Ranch SM: Somerset Ranch SR: Sunridge Park

 

There were no resale homes that came on the market.

 

There was 1 home that went pending:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
A 3954 Iron Gate Way 1,690 4/2 $340,000 15

 

There were 9 homes that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
K 5405 Almond Falls Way 3,291 5-6/3.5 $490,000 38
A 4300 Franconia Ct 2,832 4/3 $475,000 5
SR 3995 Machias 2,597 3/2 $460,000 31
A 4071 Preserve Way 2,700 5/4 $449,000 15
K 4674 Village Mill Way 2,145 4/2 $430,000 5
A 4490 Ruby Landing Way 2,564 5/3 $407,000 38
A 11826 Dionysus Way 2,042 4/2 $388,000 10
K 5474 Mossy Stone Way 1,794 4/2 $366,500 6
K 5321 Otter Pond Way 1,794 4/2 $355,000 32

 

Please visit my website at www.anatoliahomesforsale.com to search for all homes in the 95742 zip code or the rest of the Sacramento Metro area. Don’t forget to LIKE me at Facebook at Anatolia Real Estate.

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Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 11/14 – 11/20

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 11/14/16 – 11/20/16

A: Anatolia K: Kavala Ranch SM: Somerset Ranch SR: Sunridge Park

 

There are 6 resale homes that have come on the market:

Nbrhd Address SqFt Bed/Bath Asking Price
K 5424 Copper Sunset Way 2,811 5/4 $449,900
A 11829 Spring Walk Way 2,176 3-4/2 $429,900
SR 12296 Habitat Way 2,579 4/3 $410,000
A 4221 Anatolia Dr 2,763 5/3.5 $399,000
SR 4023 Cuyamaca Cir 1,946 4/2 $378,888
A 3954 Iron Gate Way 1,690 4/2 $340,000

 

There were 3 homes that went pending:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
A 11869 Marsyas Way 3,942 4/3.5 $549,000 148
SR 12245 Habitat Way 2,081 3/2.5 $379,900 11
A 4076 Glen Springs Way 1,557 3/2 $325,000 63

 

There were 4 homes that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
K 12046 Quail Falls Way 2,316 4/3 (3 0) $430,000 5
K 12027 Country Garden Dr 1,794 4/2 (2 0) $365,000 5
SR 4140 Big Meadow Way 2,033 4/3 (2 1) $345,000 16
A 11788 Village Pond Way 1,557 3/2 (2 0) $315,100 2

 

Please visit my website at www.anatoliahomesforsale.com to search for all homes in the 95742 zip code or the rest of the Sacramento Metro area. Don’t forget to LIKE me at Facebook at Anatolia Real Estate.

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Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 11/7 – 11/13

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 11/7/16 – 11/13/16

A: Anatolia K: Kavala Ranch SM: Somerset Ranch SR: Sunridge Park

 

There are 3 resale homes that have come on the market:

Nbrhd Address SqFt Bed/Bath Asking Price
SR 12441 Kibbie Lake Way 2,246 3/2 $439,000
A 11792 Brook Valley Way 2,291 5/3 $399,900
SR 12377 Muir Trail Way 2,092 4/3 $385,000

 

There were 5 homes that went pending:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
K 5405 Almond Falls Way 3,291 5-6/3.5 $499,500 38
A 4337 Hartland Way 2,580 4/2.5 $429,900 44
A 11764 Arista Way 2,416 4/3.5 $389,900 12
A 4152 Tulip Park Way 2,176 4/2 $384,900 5
SR 12307 Pawcatuck Way 1,692 3/2 $339,900 11

 

There were 5 homes that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
K 5228 Mossy Stone Way 2,817 4-5/2.5 $400,000 102
K 12066 Mallard Lake Way 2,128 3-4/2.5 $408,000 22
A 4363 Mount Ivy Way 1,688 4/2.5 $312,500 6
A 4440 Malana Way 2,401 4/2.5 $430,000 13
A 11758 Bagota Way 2,585 4/2.5 $387,500 21

 

Please visit my website at www.anatoliahomesforsale.com to search for all homes in the 95742 zip code or the rest of the Sacramento Metro area. Don’t forget to LIKE me at Facebook at Anatolia Real Estate.

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Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 10/31 – 11/6

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 10/31/16 – 11/6/16

A: Anatolia K: Kavala Ranch SM: Somerset Ranch SR: Sunridge Park

 

There are $ resale homes that have come on the market:

Nbrhd Address SqFt Bed/Bath Asking Price
A 4412 Yeates Ct 4,097 5/3 $564,900
A 4729 Village Mill Way 2,316 4/3 $424,900
A 4152 Tulip Park Way 2,176 4/2 $384,900
SR 12245 Habitat Way 2,081 3/2.5 $379,900

 

There were 4 homes that went pending:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
A 4490 Ruby Landing Way 2,564 5/3 $410,000 38
K 11919 Country Garden Dr 1,794 4/2 $372,900 14
SR 12261 Great Plains Way 1,667 3/2 $368,888 14
A 11710 Arete Way 1,531 3/2 $343,000 11

 

There were 3 homes that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
K 5416 Mossy Stone Way 2,840 5/4 $403,500 5
K 5329 Otter Pond Way 1,794 4/2 $365,000 11
A 11867 Blue Topaz Way 1,634 3/2 $340,000 8

 

Please visit my website at www.anatoliahomesforsale.com to search for all homes in the 95742 zip code or the rest of the Sacramento Metro area. Don’t forget to LIKE me at Facebook at Anatolia Real Estate.