Inventory Increasing in Sacramento

This article in the Sacramento Business Journal notes several trend in the Sacramento area. First off while sales are slowing down "Local new-home sales from April through June dropped 14.3 percent from the first quarter and 15.8 percent from a year earlier. But the average price rose, climbing 12.9 percent from a year ago to nearly half a million dollars today."

I think the 500,000 point is an important one to keep in mind. While the overal median price in California is over $500,000, further price growth beyond that is difficult as people simply cannot afford the homes. Investors have driven the price up to the point where roughly 83% of Californians cannot afford a home in the state. This means a great deal of outside investment money has frothed prices up to a pretty high level.

In the macro economic terms this is dangerous to local economies. Why? Because every dollar a home owner must spend on a house is money not spent elsewhere in the economy. So when outside investors drive up the price of California real estate it has the effect of extracting money from the local economy in the form of increased mortgage payments. Since affordability has suddenly become an issue in Sacramento, it indicates that while prices have increased somewhat (12.9% over the same period last year) buyers are more resistent to the higher prices. As the article notes Meanwhile, in the market for existing homes, "we have sellers who seem to have priced too aggressively," he said."
Here are the other counties in the article.

• Placer, $587,130, up 15.2 percent year to year
  
• Sacramento, $465,699, up 12.3 percent
  
• Yolo, $527,722, up 26.9 percent
  
• Sutter, $335,425, up 10.2 percent
  
• Yuba, $361,949, up 25.5 percent.