What is Wrong with the Elk Grove Housing Market?
It’s not just sellers of homes in Elk Grove who are asking what the hell is going on in the Elk Grove housing market. Sacramento real estate professionals are also baffled because they tell me so. But whenever I am perplexed, I search for answers, and I think I’ve figured out what part of the problem is with our Elk Grove home buyers this fall, and also part of what’s wrong with the Elk Grove housing market.
Let me also mention that this phenomenon seems to be isolated to Elk Grove / Laguna. I sell homes from Galt to Lincoln, and cover a wide sales territory over many counties in the Sacramento Valley, and the only place where this situation seems to exist is in Elk Grove and Laguna.
This spring, buyers were snatching up homes like crazy. I call these guys our Tier 1 buyers. They were motivated, had the bucks, were pre-approved and wanted to close escrow on a nice home in Elk Grove. Didn’t matter if the ZIP was 95624, 95758 or 95757, all three of those ZIPs experienced similar market movement across the board. Elk Grove or Laguna, homes were moving.
Now, we have what I call our Tier 2 buyers and our Tier 3 buyers, the ones who aren’t necessarily all that motivated, and might, maybe, perhaps, purchase a home if it fits all of their criteria and is priced right in the right location with the right amount of amenities and upgrades. If a home is missing one of those things, a Tier 2 or Tier 3 buyer is likely to pass it over in favor of another. They also don’t have a lot of financial security and many are unable to pay closing costs. They typically buy with leveraged financing above 80%. Not only that, but these buyers are obviously writing multiple offers, which is wrong on so many levels.
I don’t know if they’re doing it through one agent or multiple agents leaving the others clueless, but they write the offer they want on the house that they want the most, knowing that they might not get it because others probably want it, too. So, then they write an offer on their second-choice home. Because that home is second choice, they feel it doesn’t deserve the same consideration as their number one choice, so they sign lowball offers, ask for all sorts of concessions and then wait to see which way the wind blows.
On the other hand, our absorption rate in those 3 ZIPcodes in Elk Grove is 41%. A year ago in July it was 75%. You calculate an absorption rate by dividing the number of closed sales by the number of homes for sale. Our inventory is almost double over the past 15 months and by any stretch would be considered low at roughly 2.4 months. MLS reports we have 454 homes for sale in Elk Grove, with an average square foot price of $175 and 52 days on the market.
I guess I will now need to advise sellers to put into a counter offer that the buyer promises there are no outstanding offers floating about on other homes before we enter into an acceptance. Because when I ask agents if their buyers are serious, the answer I received this morning from a buyer’s agent was, I kid you not: “I don’t know, let me ask.”
Homes are closing in Elk Grove, and I’m living proof that it’s happening, but what a trip. One can’t be an emotional tree-hugging softie in this kind of real estate market, and sellers really need an assertive agent. A new client mentioned a few days ago when I was out at her home that the reason she wants to hire me to represent her is because I’m tough and firm but nice about it. I prefer to think that I am focused with thick skin. I work hard to get the job done.