Thursday, July 11, 2013

Sacramento: Conventional Sales in June highest in Years, Inventory increases 18% year-over-year

by Bill McBride on 7/11/2013 05:46:00 PM

Several years ago I started following the Sacramento market to look for changes in the mix of houses sold (conventional, REOs, and short sales). Note: I used Sacramento because the data was available!

For a long time, not much changed. But over the last 2 years we've seen some significant changes with a dramatic shift from foreclosures (REO: lender Real Estate Owned) to short sales, and the percentage of total distressed sales declining sharply.

This data suggests healing in the Sacramento market, although some of this is due to investor buying.  Other distressed markets are showing similar improvement.

Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In June 2013, 26.5% of all resales (single family homes) were distressed sales. This was down from 29.1% last month, and down from 54.2% in June 2012. This is the lowest percentage of distressed sales - and therefore the highest percentage of conventional sales - since the association started tracking the data.

The percentage of REOs was at 7.4%, and the percentage of short sales decreased to 19.0%. (the lowest percentage for short sales since August 2009).

Here are the statistics.

Distressed Sales Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been a sharp increase in conventional sales recently (blue). 

Active Listing Inventory for single family homes increased 18.3% year-over-year in June.  This is the second consecutive month with a year-over-year increase in inventory - the first two months in two years - and suggests inventory probably bottomed in Sacramento

Cash buyers accounted for 29.9% of all sales, down from 33.6% last month (frequently investors).

Total sales were down 12% from June 2012, but conventional sales were up 30% compared to the same month last year. This is exactly what we expect to see in an improving distressed market - flat or even declining overall sales as distressed sales decline, and conventional sales increasing.

We are seeing a similar pattern in other distressed areas, with a move to more conventional sales, and a shift from REO to short sales.  

Possibly the most important number in the release this month was the year-over-year increase in active inventory.  This suggests price increases will slow in Sacramento, and I expect to see a similar pattern in other areas.