Thursday, July 28, 2016

Why luxury real estate is booming in Sacramento!

As Sacramento real estate prices remain as hot as the summer temperatures, a certain segment of the market stands out more than any other: luxury homes. In fact, luxury real estate is booming in Sacramento, Placer, and El Dorado counties, with skyrocketing sales volume and price appreciation numbers that would be considered solid for a year, yet alone a couple of months.

Far from the overinflated high-end prices during the real estate bubble a decade ago, strong financials and market causation serve as a strong foundation for luxury homes in the region. 

We’ll share plenty of data that show how the luxury home market is booming, but first, let’s examine some of the underlying reasons for the strong showing: 

The Sacramento area is exhibiting favorable financials, with steady job growth and a noticeable boost of energy from downtown revitalization and the new arena. Interest rates still near historical lows, with buyer demand remaining high, exerting upward pressure on prices. However, there are far more homebuyers than sellers – and that’s even more pronounced in the luxury market, where it’s estimated there are four buyers to every one home for sale! 

But there are two more interesting factors that are driving the top of the price range in the area. Bay Area residents are jumping into the Sacramento, Placer, and El Dorado markets like never before, scooping up luxury homes at a high rate. 

Sacramento also has more move-up buyers, as steady equity gains over the last five years have allowed more people to sell their homes and springboard to a more expensive or luxury homes.

Here are 25 more data points that show how luxury real estate is booming in Sacramento:

1. While the definition of a luxury home may waver based on the area of the country we’re looking at and the home prices in that area, a luxury home in the Sacramento region (Sacramento, El Dorado, and Placer County) is typically classified as $900,000 or more. 

2. If we examine all luxury homes sold in the second quarter (Q2) of 2016, the average sale price was a generous $1.219 million.

3. Trendgraphix Inc. tracked the 177 luxury homes that sold in the greater Sacramento area during Q2 of 2016. 

4. They found that 177 luxury home sales was an increase of 5% from the same Q2 of 2015, and up a whopping 74% from Q1 of 2016.

5. In the same four-county Sacramento region, 101 luxury homes sold in from January to March of this year (Q1), which represents a 65 percent increase in volume from Q1 of 2015. 

6. During Q1 of 2016 there were 52 single-family luxury home sales that closed this year, compared to only 32 luxury transactions in Q1 of 2015.

7. 34 single family homes sold for between $1 million and $2,499,999 in Q1 of 2016, which was a significantly 80% increase in sales volume compared to Q1 of 2015 when only 19 sold.

8. In the same period this year there were 12 luxury homes that sold for $2.5 million to $4,999,999, close to double the number from the 7 sold in Q1 of 2015.

9. Luxury homes are hitting the market like never before. The current average list price of luxury homes in the Sacramento region during Q1 was a sizable $1,507,000. 

10. Closed sales for luxury homes in that same period averaged $1,212,000, which is well above the $900,000 entry point we set to be considered a luxury home.

11. But that price range dominates the luxury market, with 87% of all luxury homes sales in Q1 sold for $900,000 to $1.5 million. 

12. The uptick in luxury home sales actually started during Q4 of 2015, with a huge spike in high-end real estate transactions at a time of year when home sales are typically very slow.
13. If we set Sacramento County aside for a moment and just look at El Dorado and Placer Counties, what does the luxury home market look like? 

14. El Dorado County saw 344 escrows closed in June, which was a 10.6% increase from June of 2015. The median sale price in El Dorado was $425,000 in June, which was a healthy 11.3% increase from the previous year.

15. In Placer County, 798 real estate sales closed in June, which was almost identical to the number in June 2015, though the median price went up 5.9% to $423,000.

16. Sacramento County reported 2,090 closed escrows in June, a modest 3.1% increase from June of 2015. But home prices saw a big boost, jumping 10.7% year over year to a median price of $310,000.

17. Breaking down the market by zip code, here are the areas that registered a median price increase in the past year of:

More than 25%:

+15% to +25%:

18. In many ways, the data on home sales in the luxury market mirrors trends in home prices in among all homes in Sacramento. For example, current median resale prices in Sacramento County hit an average of $310,000 in June. That’s a change of +$5,000 from only a month earlier in May and a jump of +$30,000 from June of 2015. 

19. Sales volume rose 3% during that same period to 2,090 single-family resale homes closing, which was the highest volume in eight years.

20. The $310,000 benchmark the highest level in almost nine years, since August of 2007 when prices hit $314,000.

21. (For reference, the highest point for Sacramento home prices was $374,000 in August of 2005.)

22. Like we mentioned, rising home prices in the Bay Area are starting to significantly influence luxury home sales in the Sacramento region. With a median sale price of $643,200 as of March of 2016, an inexplicable 5.5% jump from only one month earlier, affordability is beyond reach for many people. And that door is completely closed for a good portion of people in San Francisco where the median sale price in March was $1.13 million, up 5.7 percent from a year earlier.

23. With home prices like that, it makes perfect sense for some Bay Area residents to start buying in Sacramento, whether as an investment, in semi-retirement, or to make the reverse commute. Data shows that the high home prices in the Bay does create “spillover” into the luxury real estate market in Sacramento, Placer, and El Dorado.

24. Not surprisingly, the high-end home sale numbers from North Lake Tahoe/Truckee often represent the top range of home prices in El Dorado and Placer County. 

25. In fact, single-family luxury homes sold at a 62% higher volume in Q1 2016 than a year earlier. Home prices typically go over a million dollars in that region, and the most expensive home sold in the whole region was a $7.18 million six-bedroom home with more than 6,000 square feet!


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