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 11/13 – 11/19

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 11/13/17 – 11/19/17

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

 

There are 5 resale homes that have come on the market:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
K 11883 Stoney Oaks Ct 2,149 4-5/3 $515,000 5
A 11899 Cobble Brook Dr 2,751 4/3 $475,000 4
SR 4242 Borderlands Dr 1,983 3/2 $442,500 2
SM 3611 Rockdale Dr 1,603 3/2 $399,000 4
A 4336 Anatolia Dr 1,345 3/2.5 $315,000 4

 

There were 2 homes that went pending:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
SM 3542 Edington Dr 2,159 3-4/2 $450,996 50
SM 12551 Solsberry Way 1,880 4/2 $424,900 59

 

There were 4 homes that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
K 5413 Mill Water Cir 3,105 6/4 $520,000 6
SR 12269 Montauk Way 2,195 4/3 $440,000 7
K 5307 Crystal Cove Dr 2,396 4/3 $425,000 53
A 4045 Aragon Way 1,870 3/2 $390,000 9

 

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.

39

Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 10/30 – 11/6

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 10/30/17 – 11/6/17

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 DOM
A 11878 Delavan Cir 2,975 4/3 $525,000 7
K 5201 Mossy Stone Way 3,105 5/3 $524,000 7
SM 12591 Solsberry Way 2,767 4/3 $499,900 7
SR 4026 Pinoche Peak Way 3,041 4/3.5 $475,000 5
A 12039 Erato Cir 2,811 5/3 $469,000 9
SR 12229 Canyonlands Dr 1,543 3/2 $398,500 5

 

There were 9 homes that went pending:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
SR 4041 Quarter Dome Cir 3,440 5/3.5 $594,999 5
SR 12413 Kibbie Lake Way 2,983 4-5/3 $515,000 33
SR 4026 Pinoche Peak Way 3,041 4/3.5 $475,000 5
K 11879 Country Garden Dr 2,495 4/2.5 $469,500 19
SM 3758 Rockdale Dr 2,631 4/3 $465,573 35
K 12055 Sage Wagon Way 2,495 4/2.5 $449,999 81
K 5114 Otter Pond Way 2,785 5/2.5 $449,500 32
A 11891 Rubilite Way 1,977 4/2 $429,000 5
A 11725 Alder Lake Ct 2,007 4/2.5 $410,000 16

 

There was 1 home that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
A 11793 Azalea Garden Way 2,113 3-4/2 $414,900 73

 

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.

39

Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 10/23 – 10/29

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 10/23/17 – 10/29/17

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

 

There are 5 resale homes that have come on the market:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
SR 4041 Quarter Dome Cir 3,440 5/3.5 $594,999 5
A 11885 Blushing Cir 4,037 5/4 $579,900 7
A 4463 Malana Ct 3,137 5/3 $549,000 7
SR 4242 Borderlands Dr 1,983 3/2 $450,000 4
A 11891 Rubilite Way 1,977 4/2 $429,000 5

 

There were 4 homes that went pending:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
A 11975 Mandolin Way 3,467 6/3.5 $529,000 31
A 4089 Aragon Way 2,982 4-6/3 $450,000 49
A 4055 Glen Springs Way 2,291 5/3 $415,000 5
A 11725 Loisdale Way 2,139 4/3 $399,999 56

 

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.

39

Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 10/16 – 10/22

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 10/16/17 – 10/22/17

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 4055 Glen Springs Way 2,291 5/3 $415,000 5
A 11725 Alder Lake Ct 2,007 4/2.5 $410,000 7

 

There were 5 homes that went pending:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
A 4468 Malana Ct 3,470 4-5/3.5 $575,000 16
K 5413 Mill Water Cir 3,105 6/4 $520,000 6
SM 12590 Thornberg Way 2,767 4/3 $475,990 25
SR 4002 Pinoche Peak Way 3,075 3-4/3 $449,888 22
SR 4068 Preserve Way 2,081 4/2.5 $422,500 95

 

There were 5 homes that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
K 5374 Otter Pond Way 2,785 4/3 $464,900 8
K 5021 Copper Sunset 2,361 4/3 $462,000 7
A 4013 Kalamata Way 1,870 4/2 $403,000 9
A 11723 Arete Way 1,877 3/2 $370,000 6
A 4362 Mount Kisco Way 1,345 3/2.5 $300,000 9

 

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.

39

Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 10/9 – 10/15

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 10/2/17 – 10/8/17

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 DOM
SM 3566 Edington Dr 3,037 4/3 $515,804 6
K 5413 Mill Water Cir 3,105 6/4 $510,000 5
SM 3546 Edington Dr 2,691 3-4/3 $501,851 6
K 11879 Country Garden Dr 2,495 4/2.5 $469,500 5
SR 4036 Branigan Lake Way 2,330 4/3 $469,000 3
A 11789 Azalea Garden Way 2,347 4/3 $439,000 8

 

There were 7 homes that went pending:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
SM 12686 Thornberg Way 3,653 4/3 $532,470 15
SM 12674 Thornberg Way 3,037 4/3 $497,695 16
A 4315 Cadee Ct 2,885 5/3 $489,000 6
K 5307 Crystal Cove Dr 2,396 4/3 $425,000 53
A 11793 Azalea Garden Way 2,113 3-4/2 $414,900 73
SR 12349 Canyonlands Dr 1,768 3/2 $388,800 7
A 4045 Aragon Way 1,870 3/2 $380,000 9

 

There were 3 homes that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
K 4712 Owl Tree Ct 2,768 4/2.5 $525,000 12
K 5481 Mossy Stone Way 2,361 3-4/3 $450,000 22
SR 4073 Timberland Dr 2,195 4/3 $439,900 7

 

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.

39

Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 10/2 – 10/8

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 10/2/17 – 10/8/17

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

 

There are 8 resale homes that have come on the market:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
A 4468 Malana Ct 3,470 4-5/3.5 $575,000 6
SR 12413 Kibbie Lake Way 2,983 4-5/3 $540,000 8
A 11818 Cobble Brook Dr 3,179 5/4.5 $495,000 4
A 4315 Cadee Ct 2,885 5/3 $489,000 3
SM 3782 Rockdale Dr 2,631 4/3 $466,863 4
SR 12349 Canyonlands Dr 1,768 3/2 $388,800 6
A 4045 Aragon Way 1,870 3/2 $380,000 8
K 5425 Mossy Stone Way 2,000 3/2 $379,000 3

 

There were 5 homes that went pending:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
SM 3775 W Rockdale Dr 2,365 4/3 $462,740 3
K 12055 Sage Wagon Way 2,495 4/2.5 $449,999 59
SR 12269 Montauk Way 2,195 4/3 $440,000 7
A 4348 Mount Kisco Way 2,019 4/2.5 $389,900 14
A 4013 Kalamata Way 1,870 4/2 $389,000 9

 

There were 5 homes that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
SR 4008 Borderlands Dr 2,983 5/3 $517,500 21
SM 12558 Cordonia Way 2,631 4/3 $473,573 3
A 11777 Dionysus Way 2,711 4/2.5 $427,000 63
K 5400 Jade Springs Way 2,363 4/2.5 $425,000 36
SR 4087 Borderlands Dr 2,081 3/2.5 $403,400 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.

39

Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 9/25 – 10/1

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 9/25/17 – 10/1/17

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 DOM
A 11829 Delavan Cir 4,322 4-5/3.5 $549,990 2
SR 4002 Pinoche Peak Way 3,075 3-4/3 $468,888 6
SM 3775 W Rockdale Dr 2,365 4/3 $462,740 4
K 5114 Otter Pond Way 2,785 5/2.5 $449,500 3
SR 12269 Montauk Way 2,195 4/3 $440,000 7
A 4051 Copper Lake Way 1,686 3/2 $375,000 6

 

There were 4 homes that went pending:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
SR 4000 Borderlands Dr 2,597 3/2 $498,888 50
SM 3758 Rockdale Dr 2,631 4/3 $465,573 33
A 4323 Niobe Cir 2,668 4-5/2.5 $420,000 67
A 4362 Mount Kisco Way 1,345 3/2.5 $299,900 9

 

There were 6 homes that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
K 11886 Elk View Way 2,316 4/3 $450,000 15
SR 4033 Branigan Lake Way 2,704 3-4/2.5 $448,000 88
A 4109 Aragon Way 2,459 5/3 $435,000 7
SR 4135 Etoway Way 2,287 5/3.5 $429,000 8
A 3979 Aristotle Cir 1,829 3/2.5 $400,000 14
A 4054 Glen Springs Way 1,557 3/2 $365,000 4

 

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.

39

Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 9/18 – 9/24

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 9/18/17 – 9/24/17

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

 

There are 13 resale homes that have come on the market:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
A 4366 Cregan Court 3,052 4/2.5 $539,000 6
SM 12686 Thornberg Way 3,653 4/3 $532,470 3
A 11975 Mandolin Way 3,467 6/3.5 $529,000 5
SM 3561 Edington Dr 2,691 3-4/3 $501,065 3
SM 12674 Thornberg Way 3,037 4/3 $497,695 3
SM 12698 Thornberg Way 2,691 3-4/3 $489,688 3
SR 4026 Pinoche Peak Way 3,041 4/3.5 $489,495 6
SR 4036 Branigan Lake Way 2,330 4/3 $469,000 4
SM 3542 Edington Dr 2,159 3-4/2 $455,996 3
SM 12678 Thornberg Way 2,159 3-4/2 $444,290 3
SM 12690 Thornberg Way 2,159 3-4/2 $443,790 3
A 11785 Azalea Garden Way 1,973 3/3 $413,000 6
A 4013 Kalamata Way 1,870 4/2 $389,000 4

 

There were 2 homes that went pending:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
SM 12590 Thornberg Way 2,767 42828 $475,990 23
K 5307 Crystal Cove Dr 2,396 4/3 $425,000 47

 

There were 7 homes that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
SR 3990 Machias Pl 2,983 42828 $542,000 2
SR 4028 Branigan Lake Way 2,704 4/3 $492,888 34
SR 12429 Kibbie Lake Way 2,597 3-4/2 $489,000 8
A 11783 Justinian Dr 2,396 4/2.5 $450,000 7
SR 4077 Pingree Lake Way 1,983 3/2.5 $428,000 18
A 11837 White Rain Way 1,478 42796 $361,000 3
A 4335 Mount Kisco Way 1,688 4/2.5 $340,000 24

 

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.

39

Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 9/11 – 9/17

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 9/11/17 – 9/17/17

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

 

There are 5 resale homes that have come on the market:

Nbrhd Address SqFt Bed/Bath Asking Price DOM
SM 12551 Solsberry Way 1,880 4/2 $439,000 5
A 11864 Slate Falls Way 2,176 4/2 $438,888 5
A 4348 Mount Kisco Way 2,019 4/2.5 $389,900 6
SR 12236 Habitat Way 1,543 3/2 $374,000 3
A 4362 Mount Kisco Way 1,345 3/2.5 $299,900 3

 

There were 5 homes that went pending:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
K 5374 Otter Pond Way 2,785 4/3 $464,900 8
A 4089 Aragon Way 2,982 4-6/3 $450,000 19
K 5481 Mossy Stone Way 2,361 3-4/3 $450,000 22
SR 4033 Branigan Lake Way 2,704 3-4/2.5 $449,500 88
SR 12236 Habitat Way 1,543 3/2 $374,000 3

 

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.

39

Anatolia, Kavala Ranch, Sunridge Park Real Estate Market Update 9/4 – 9/10

Anatolia, Sunridge Park, and Kavala Ranch Real Estate Listings

AnatoliaClubhouse (1)

 

 

 

 

 

Data from 9/4/17 – 9/10/17

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 DOM
A 11855 Golden Amber Ct 2,548 5/3 $549,000 7
K 5374 Otter Pond Way 2,785 4/3 $464,900 6
A 11897 Slate Falls 2,176 4/2 $439,000 5

 

There were 5 homes that went pending:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
K 4712 Owl Tree Ct 2,768 4/2.5 $538,000 12
SM 12558 Cordonia Way 2,631 4/3 $485,573 3
K 5021 Copper Sunset 2,361 4/3 $460,000 7
K 12055 Sage Wagon Way 2,495 4/2.5 $449,999 56
SR 4087 Borderlands Dr 2,081 3/2.5 $399,900 11

 

There was 1 home that sold:

Nbrhd Address SqFt Bed/Bath Sold Price DOM
K 12297 Habitat 1,915 3/2 $385,000 50

 

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.