After plummeting to abject lows in the housing crash, Sacramento-area home prices are now rising faster than almost anywhere else in the nation, Zillow said in a report released today.
Home values in the four- county Sacramento region rose by nearly 30 percent in June from the same month a year ago, according to the online real estate tracking firm, based in Seattle. Zillow predicts values will continue rising by about 19 percent in the coming year.
"You guys are on fire in Sacramento," said Zillow senior economist Svenja Gudell.
Zillow said in its quarterly report that Sacramento topped the list of 30 major metro areas that it tracks, and Zillow spokeswoman Camille Salama said in an email that the capital region had bested 350 metro areas it covers for price appreciation.
Nationally, home prices rose by 5.8 percent from June 2012 to June 2013, the firm reported.
Other cities in California Riverside, San Francisco, San Jose and San Diego round out a select group that saw price appreciation in excess of 20 percent from June to June.
The only cities outside California that experienced similar gains were Las Vegas, with a 29.4 percent rise, and Phoenix, with a 21. 8 percent increase, according to Zillow.
Gudell called what's happening in Sacramento an "extreme boom" driven by an incredibly tight supply of homes for sale and bidding wars breaking out among buyers scrambling to get into homes while prices and mortgage rates remain relatively low.
Rates for 30-year fixed mortgages are now around 4.5 percent after reaching historic lows of about 3.5 percent this spring.
And despite their rapid rise, homes values are still nearly 40 percent below the prices reached at the peak of the housing boom in 2005. Thousands of area homeowners still owe more than their houses are worth.
"Sacramento is still relatively affordable," Gudell said. Home prices and area incomes have yet to get out of whack, as they did in the housing bubble.
"It's not a bubble, but it might feel like one," to buyers competing for homes, she said.
The news from Zillow jibes with other data firms that have shown record increases in area home values in recent months.
Last week, DataQuick said Placer County had experienced a record increase in its median home price, with a 32 percent gain from June to June, while Sacramento County fell just short of the record it set in May when it had a 42 percent year-over-year gain in the median.
Those rapid gains are the result of a market that was priced too high in last decade's bubble and fell too low in the downturn, experts said.
"We were a housing market that overcorrected in the recession," said Pat Shea, president of Lyon Real Estate in Sacramento. "That positioned us to have an algebraic rise" when the market turned.
Jeff Michael, head of the Business Forecasting Center at the University of the Pacific in Stockton, agreed. Cities such as Sacramento, Las Vegas and Phoenix, which were "crushed by the declines in housing" were poised to see the biggest gains in an upturn, he said.
But Michael said he and other experts were caught off guard by the speed of rising home values.
"It is a correction to the real underlying value of houses, but it has happened extremely quickly," Michael said.
Heavy investor activity fueled the initial rush to buy homes, he noted. It was followed by traditional buyers, who had the means, "feeling like this is the end of a historic opportunity to buy homes cheap."
Michael said he has a hard time envisioning prices continuing to rise by 20 or 30 percent in the next year. If they do, he said, it might be time to start talking about a housing bubble.
At the same time, he said: "It's hard to see a market appreciating this rapidly stopping on a dime and saying, 'We got prices right.' It's something that bears watching."
What do rapidly rising prices mean for would-be buyers or sellers?
Lyon's Shea said the supply of homes for sale has been gradually rising from all-time lows earlier this year. At one point, there was less than a month of inventory on the market, meaning it would take about that long to sell off all the houses.
A six-month supply of homes is considered optimal for both buyers and sellers.
Now there's a little more than a month's supply, he said, but buyers should be ready to persevere. Prices and interest rates will likely rise in coming months, he said, so those wanting to make moves should at least try.
"It's a little inconvenient, a little uncomfortable," Shea said. "But it's about where you want to live, quality of life and pride of ownership."
Kris Vogt, president of Coldwell Banker in the Sacramento-Tahoe region, said the buying climate has reached a fever pitch, and sellers are hesitant to move for lack of houses to buy.
He said those hoping to sell and buy should consider options such as short-term rentals to avoid the stress of not being able to find a new home right away. Also, he said, having cash in hand from a sale will give them a better chance against other buyers.
"If you can be patient and be diligent, I would not give up. If you want to purchase a home this summer or fall, you're going to be better off than next year."
Call The Bee's Hudson Sangree, (916) 321-1191.
Editor's note: This story was changed July 23 to correct that Las Vegas and Phoenix are the cities outside California that experienced home price gains above 20 percent from June 2012 to June 2013.