A few years ago, Sacramentos real estate market had a massive glut of foreclosed homes depressing prices. Now, after investors bought those houses by the thousands, the area has the opposite problem.
There are so few homes for sale today that prices keep going up, buyers lack options, and homeowners are unwilling to sell, partly because theres hardly anything to buy.
Its caution that people are exercising, said Pat Shea, president of Lyon Real Estate. Its a big deal to put your home on the market and not know where youre going to move to.
Earlier this week, the Sacramento Association of Realtors reported that in February there were about 2,000 homes for sale in Sacramento County and the city of West Sacramento. It would take about two months to sell all those houses, the group estimated.
Theres more than twice the inventory now than at the same time last year, but buyers are still at a big disadvantage. Anything less than a three-month supply of homes for sale is deemed a sellers market, and it takes far more listings to achieve a power balance between buyers and sellers.
Were better than we were by almost double from last year, but two months of inventory is still about half what wed like to see to make an equitable market, said Paula Swayne, president of the Sacramento Association of Realtors.
Buyer demand is being fueled by mortgage rates that remain historically low, and prices in the Sacramento region that are still relatively affordable compared with last decades housing boom.
Demand is outstripping supply, and thats pushing up prices.
On Thursday, DataQuick reported that Sacramento Countys median home price rose from $230,000 in January to $245,000 in February, a 6.5 percent increase in one month. Februarys median home price in the county was 29 percent more than the median price of $190,000 in February 2013, the San Diego-based real estate information service said.
Other counties in the region, including Placer and Yolo counties, saw similar gains.
A big part of the median increases is a shift in the mix of homes sold. More move-up buyers are purchasing higher-priced properties, while sales of lower-priced homes favored by investors and entry-level buyers are drying up.
In Sacramento County last month, the number of homes that sold for less than $300,000 dropped by nearly a third from February 2013. The number of homes that sold for $300,000 or more increased 47 percent, DataQuick reported.
The rise in the median also reflects a market in which sellers who price their homes at current market value are getting multiple offers and selling fast, experts said.
This is a solid sellers market. End of story, Shea said.
What real estate agents and buyers alike are hoping for is a spring buying season that shows a return to some kind of normalcy after a decade of wild boom and catastrophic bust, followed by several years in which investors dominated the market by snapping up foreclosures.
Already, there are some signs of stability, they said.
About 81 percent of sales in February were ones in which sellers had equity in their homes, the Sacramento Association of Realtors reported. Last year at the same time, only about 57 percent of sales were traditional equity sales, it said.
Pending sales in February were up 30 percent from January, though slightly down from February 2013, the group said. And the number of active home listings picked up about 4 percent from January to February in a typical seasonal increase, it said.
Swayne said she expects March figures, released next month, will show even greater advances in sales and listings.
Its been a great month so far, knock on wood, she said.
Shea, too, said the region has been seeing a surge in sales in March.
He expects a steady rise in listings during the spring and summer months, though I dont think youre going to see a dramatic rise in inventory.
One reason is that new housing has traditionally provided options for those want to sell their homes and upgrade in the capital region, he said. But theres little new housing thats move-in ready, he said. Builders say more new homes are expected to come online later this year and early next year.
New construction needs to be a viable option to fuel the move-up markets, Shea said.
DataQuick analyst Andrew LePage said new home sales, historically a pressure-relief valve in Sacramento, were 68 percent below average in February. There were 99 new homes sold in February in Sacramento County; the average for the month going back to 1998 is 313, he said.
Were way below normal levels of new home construction in the region, no matter how you look at it, LePage said.
Other experts said they think factors that have held back potential sellers will gradually dissipate, increasing inventory this spring.
Jeffrey Michael, an economist who heads the Business Forecasting Center at the University of the Pacific in Stockton, said there are a number reasons that listings have been so limited, despite steeply rising prices.
Investors now own tens of thousands of homes across the region and most arent selling yet, he said.
Rising prices have pushed many homeowners, who once owed more than their homes are worth, back into positive equity. But they are not yet in a position to sell and move up, he said.
Others are still trying to establish creditworthiness to get new loans.
Despite these challenges, it still seems probable that higher prices will still lead to more listings this spring and summer, Michael said in an email.
LePage said rising prices will eventually cause some investors to part with their rental houses and will persuade more homeowners thinking of selling that nows a good time.
It just looks like prices need to go up another notch or two, and that will unlock inventory, LePage said. People will be out from underwater, and people will be satisfied with what their homes will fetch.
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