Here are Yolo County residential real estate market trends as of August 23, 2023, based on analysis of sales in Metrolist MLS for my presentation at the Yolo County Association of Realtors marketing meeting last week. In the past, I’ve not included county-wide data nor West Sacramento. I’ve added both at the request of local agents.

The Elephant in the Room-Interest Rates

Every presentation I’ve done since the pandemic started has included a discussion of interest rates. The drop in interest rates at the start of the pandemic helped fuel the rapid increase in prices we experienced. The rapid increase in interest rates in early 2022 put the brakes on residential real estate, especially in California, by hammering affordability.

The graph above shows the longer run of interest rates this century, trending down to a low below 3% during the pandemic with a rapid return to 2002 levels in less than two years. Interest rates are now at their highest point since I started my career as an appraiser in June, 2002.

This graph explains the residential real estate inventory effects from the change in interest rates since 2019:

Almost 2/3 of current mortgages have interest rates below 4%. There is a very strong financial incentive for anyone with one of these mortgages to not sell their home because a replacement will trigger a much higher monthly payment, thus reducing the available inventory.

Let’s look at the demand side:

This graph is a little difficult to decipher but tells a crucial story for residential real estate. The left Y-axis shows the monthly payment for the given terms. The right Y-axis shows the average loan size. The X-axis shows the interest rate. The dots show the meeting of the average interest rate, loan amount, and monthly payment for each year.

To buy the typical house in 2021, the payment was approximately $1,800 per month. Now, in 2023, the typical house payment is $3,000 per month. Affordability has been hammered by the rise in interest rates and not helped by increasing prices.

Combined, we have very reduced inventory combined with reduced demand. In 2022, the demand reduction “won” in our region, leading to price drops. In 2023 so far, the reduction in supply seems to be “winning” with price increases common. The residential real estate industry is probably the biggest loser in 2023 with significantly fewer sales this year compared to previous years.

Yolo County Data

Below is a breakdown of sales in 2023 by community for residential sales on 60 acre or less lots, excluding condominiums, townhouses, and halfplexes. Note that small acreage residential sales are included in this snapshot.

Most of the sales in Yolo County occur in Woodland, West Sacramento, and Davis.

Below shows the growth in mean sale price for Yolo County since 2016. Prices have increased significantly over the past seven years.

A closer look at sales since 1/1/22 shows a different story:

Prices peaked in the spring of 2022, declined the rest of the year, and started to increase again in the spring. The last two months show some softening of prices.

Current inventory countywide is above the lows of the pandemic era but significantly lower than typical:

Inventory is lower than typical but monthly mean days on market countywide is back to pre-pandemic levels:

Another measure of market strength is the sale price to list price ratio, or how much the sale price of a home changes from the reported list price. If the ratio is greater than 100% shows prices getting bid up while under 100% it shows sellers forced to discount.

This measure increased dramatically during the pandemic, dropped after the rise in interest rates in 2022, and has recovered to a somewhat stronger level.

Sales volume is depressed below pre-pandemic levels because of lack of inventory meeting lack of demand. After two/thirds of 2023, Yolo County has about half the number of sales typical year to date before the pandemic.

Countywide, prices are stable to increasing with low inventory and typical days on market. Let’s take a look at the larger Yolo County markets.

Davis and Woodland

This analysis only includes sales of homes on less than one acre of properties labeled as “single family residences” in Metrolist, the local MLS. The same rules apply to the West Sacramento analysis below.

Sales volume has drifted downwards for both Davis and Woodland:

Metrolist tracks how many offers were received for each sale, another indicator of market activity. Davis and Woodland both show elevated numbers of sales receiving multiple offers in 2023 so far:

Below are summary statistics for Davis and Woodland:

Inventory is relatively low but above pandemic levels. Days on market, multiple offers, and the sale price/list price ratio show both markets overall are leaning towards sellers at present.

Davis price trends since 1/1/22 show a peak in the spring of 2022 followed by decline to a low at the start of 2023, with prices increasing so far since:

Woodland follows a similar pattern:

To recap, Davis and Woodland are showing low inventory, low sales volume, some buyer competition, and increasing prices.

West Sacramento

The story is familiar for West Sacramento.

Sales volume for 2023 so far is about half prior to the pandemic with two-thirds of the year gone with the longer trend declining.

Multiple offers in West Sacramento are elevated but appear somewhat more volatile than in Davis and Woodland:

West Sacramento Summary:

Price trends in West Sacramento follow the same pattern as in Davis and Woodland: peak in the spring of 2022, followed by decline to a bottom in early 2023, with rising prices now.

Yolo County Small Acreage Residential

Finally, let’s look at the Yolo County Small Acreage Residential market. In this analysis, I included homes sold on 1-60 acres reported to be one home on a lot, two homes on a lot, manufactured homes, or modular homes. I excluded Davis and Dunnigan addresses because these two markets trend differently from the rest of the county.

Inventory is on the low side at present in shortage. This market typically has 6-12 months of inventory but is somewhat more volatile because of lack of activity.

Recent price trends are stable to increasing. Please keep in mind that conclusions are significantly more uncertain because of lack of conformity between the properties sold.

Note that this market did not have the same protracted dip seen in other Yolo County markets throughout 2022.

Takeaways

• Rates continue to dominate our local residential real estate markets.
• Very low supply is overriding low demand.
• Prices switched from declining to stable to increasing throughout the county.
• We have a very low number of sales.
• Valuations are difficult at present because of changing market trends and few sales to use for sales comparison.

Thanks for reading. Please leave any comments or questions.