Want to buy an affordable house in the Sacramento area? Better get in line.
The number of homes for sale at prices most people can afford is historically low, while houses are selling two or three times faster than they would in a calmer market.
That’s led to bidding wars and frustrated purchasers.
“It’s a buyer brawl,” said real estate broker Barbara Lebrecht, with Weichert Realtors, Galster Group, in Fair Oaks.
Lebrecht represents clients in areas such as Citrus Heights and Rancho Cordova, where homes tend to sell in the $275,000 to $350,000 range. That’s about the most a family in Sacramento County, earning roughly $75,000 to $85,000 a year, can afford, according to Zillow’s online affordability calculator.
(That estimate assumes a 10 percent down payment and moderate monthly debts. Only one-third of the households in Sacramento County earned $75,000 a year or more, according to the latest available census figures from 2015.)
Any decent home is likely to attract fierce competition.
“If you’re looking at the median (home price of $330,000) and under, it’s cat scratch,” Lebrecht said.
Things are nearly as tough for move-up buyers in the $400,000 to $600,000 range in areas such as Folsom, she said. They can sell their lower-priced home easily, but might have to rent for awhile before they can find a more expensive house.
“It’s very difficult to tell someone, ‘You have to move twice,’ ” the broker said.
Pat Shea, president of Lyon Real Estate, said that in Sacramento, Placer, Yolo and El Dorado counties there were 886 homes for sale under $350,000 at the end of May.
The caveat, he said, is “Where are those houses and what do they look like?”
Many are small. Some are fixer-uppers or in less-than-desirable neighborhoods, a search on realtor.com showed.
“Instead of an extreme-weather alert there should be an extreme-inventory alert,” Shea said.
He compared the housing shortage and rising prices to the situation that’s been commonplace for decades in the San Francisco Bay Area.
“What happened in the Bay Area, it’s coming here. It’s arrived,” Shea said.
So what’s going on?
A little over five years ago, the Sacramento real estate market hit bottom after a disastrous housing collapse. Cash-paying investors swooped in to buy thousands of foreclosed homes at fire-sale prices.
That stabilized home values and started an upward trajectory. It could have led to a more-normal market as the economy recovered, but things didn’t work out that way.
Instead, people stayed put in homes they already owned. Many were happy with the historically low interest rates they’d refinanced to – usually under 4 percent and in some cases around 3 percent.
Even if they did want to move, there wasn’t much to buy.
In a typical recovery cycle, homebuilders in California would erect homes by the thousands. Those homes would be aimed at first-time buyers, move-up buyers and people from the much-pricier Bay Area looking to cash out and relocate.
But builders, who were hit hard by the housing collapse, have been far more cautious in recent years. They’ve constructed a limited number of homes, mainly at higher prices. That means the Sacramento region’s usual housing relief hasn’t arrived.
That’s one reason why first-time buyers such as Cornelious Burke are having a hard time finding a house.
Burke, 31 and a member of the city of Sacramento’s Planning and Design Commission, spent nearly two years looking to buy his first home. He put in multiple offers and was outbid repeatedly.
“At open houses, you’d run into five or 10 people you know,” he said. You’re competing against your friends – people from the gym, church or work. It started to become a weird social phenomena.”
“It was very daunting as a first-timer,” Burke said. “I felt defeated when my offer was rejected.”
Finally he found a house in good shape near Sacramento Executive Airport. He quickly put in a bid over asking price and got it for under $280,000.
In May, there was only about a month of inventory on the market in Sacramento County and the city of West Sacramento – meaning that’s how long it would take to sell all the homes, the Sacramento Association of Realtors reported. In the most-popular price range, $300,000 to $350,0000, there was only about three weeks’ worth of inventory.
Burke’s agent, Doug Covill, said well-priced homes usually sell within a week or two of listing, and sometimes much faster. “If you have a house at $280,000 or $300,000, you have days worth of inventory,” Covill said.
The Realtors association said that in May, houses in that price range spent an average of 19 days on the market before being snapped up. In the $300,000 to $350,000 range, homes sold after an average of 14 days on the market – a record low.
In such a lopsided sellers’ market, Lebrecht said buyers need keys to success.
One, she said, is figuring out what’s essential and what’s expendable. How important is it to have two bathrooms instead of one? Are good schools important? How about neighborhood safety?
First-time buyers often need to go through a steep learning curve before they’re successful, she said.
Like Burke, new buyers often have to put in three to five offers before one gets accepted. That’s because they have to adjust their expectations, she said.
“To write a successful offer,” Lebrecht said, “it can take an offer $15,000 above the asking price … not $5,000 under.”