Sacramento Real Estate Market Forecast 2017: One of the Hottest?

Recent forecasts and predictions for the Sacramento real estate market suggest that home prices will continue rising in 2017, though possibly at a slower pace than what we saw during 2016. Despite a potential slowdown, the Sacramento housing market will probably continue to outpace the nation in 2017, in terms of home-price appreciation.

Home Prices Up by Double Digits in 2016

Strong housing demand and limited supply have pushed home prices north in Sacramento. House values rose by double digits during 2016, which is well above the national average.

According to the real estate information company Zillow, home prices in Sacramento’s real estate market rose by a whopping 11.8% from December 2015 to December 2016. The median home value in the city had climbed to $281,700 when this article was published. That’s fairly affordable by California standards, but more than 10% higher than a year ago. Additional gains are expected in 2017.

Forecast for Sacramento Real Estate Market in 2017: Slower Growth

Sacramento homeowners probably shouldn’t get used to the double-digit price gains of 2016. Most real estate market predictions for Sacramento call for a bit of a slowdown in 2017, in terms of price growth.

Sources ranging from Zillow to Realtor.com predict that home values in the area will rise somewhere between 6% and 7% during 2017. While that’s higher than the national outlook, it does signal a bit of a cooling trend for this particular market.

Of course, one could argue that home-price appreciation in the Sacramento real estate market needs to slow down. Double-digit increases in house values generally aren’t sustainable over the long term, because they tend to outpace wage growth and lead to affordability problems. So from an economic and affordability standpoint, slower price growth in the Sacramento housing market is a good thing.

Prediction: One of the ‘Hottest’ Markets of 2017?

Despite the predictions for slower home-price appreciation, the Sacramento real estate market is still expected to outperform the nation next year.

In its 2017 national housing forecast, Realtor.com predicted that Sacramento will be one of the top-performing real estate markets in 2017, in terms of price growth. The city was ranked as one of the top five markets to watch next year, along with Los Angles, Riverside, Tucson and Portland.

In a separate but related list, the Sacramento real estate market was forecast to be one of the “hottest” markets of 2017, based on price and sales increases. According to the company’s November 30th report:

“The realtor.com® 2017 top 10 housing markets based on price and sales gains are: 1. Phoenix-Mesa-Scottsdale, Ariz.; 2. Los Angeles-Long Beach-Anaheim, Calif.; 3. Boston-Cambridge-Newton, Mass.-N.H.; 4. Sacramento-Roseville-Arden-Arcade, Calif…”

According to the company’s predictions, the Sacramento housing market will appreciate by 7.2% in 2017, with a 4.9% increase in home sales.

Mortgage Rate Trends & Outlook Create Sense of Urgency

Mortgage rates have been on the rise lately, and they are expected to inch upward through 2017 as well. This, combined with the forecast for rising home values, is creating a sense of urgency among Sacramento home buyers.

In short, buyers who postpone their purchases until later in 2017 could end up paying more for a home, and for a mortgage loan.

The average rate for a 30-year fixed-rate mortgage loan rose by more than 60 basis points (0.60%) over the last five weeks, based on the weekly survey conducted by Freddie Mac. At the end of October 2016, 30-year mortgage rates were averaging 3.47%. On December 1, Freddie Mac reported that the average had climbed to 4.08%.

If a picture is worth a thousand words, the chart below speaks volumes. Freddie Mac published this chart on December 1, 2016, along with the results from their latest mortgage market survey. It shows average mortgage rates over the last 12 months (Nov. ’15 – Nov. ’16), in three loan categories. The large spike on the far-right side is where we are right now, at the start of December.

As far as forecasts go, Freddie Mac and the Mortgage Bankers Association both expect rates to rise gradually throughout 2017. Collectively, these mortgage and real estate market predictions send Sacramento home buyers a clear message: You might be better off buying sooner, rather than later.

Disclaimer: This article includes predictions and forecasts for the Sacramento real estate market in 2017. These statements were provided by third parties not associated with our company. We have presented them here as an educational service for our readers.