Inside Sacramento’s wild real estate market, where homes sell in hours and buyers have no shot

Music teacher Mateo Dillaway and his fiancee sold their Bay Area townhouse and moved to Sacramento last summer in search of a bigger home at a reasonable price. They wanted to start a family and targeted south Placer County as a destination.

Marie and Tyler Krueger, lifelong Central Valley residents and parents of two, sold their Rancho Cordova house when COVID-19 hit and are in search of their “forever home,” hopefully one with some acreage around Wilton or Elk Grove.

Ian Woo, an attorney, is tired of his noisy midtown apartment building and is looking for his first house in a quiet area, perhaps Campus Commons, with an extra bedroom he can turn into a teleworking office.

The problem they all face is big: They have jumped into the most unusual – and competitive – real estate market in years in the capital region. Entering 2021, there are fewer houses on the market in Sacramento than any time in the last 20 years. The competition is beyond intense, real estate industry participants say.

Infused with buyers escaping the Bay Area’s high prices during the COVID-19 teleworking moment and with maturing millennial couples starting families, Sacramento’s real estate market has tilted dramatically toward sellers over buyers. Houses sometimes get 10 or more bids, and typically sell within days at more than the asking price.

“This is basically the most imbalanced market we’ve seen in terms of demand far exceeding supply,” real estate analyst Ryan Lundquist said.

In Sacramento County, there were 719 houses available for sale at the end of January, a 46% drop from the end of January 2020, according to the Sacramento Association of Realtors.

Dillaway and his fiancee, Lili Assefnia, a nurse, have bid on nine houses since they got here last summer and lost out each time. In the meantime, housing prices continued increasing.

“The market is insanely competitive,“ Dillaway said. He’s grateful, he says, to be in a position to try to buy a home in an area he feels is a good place to settle and start a family. He figures a home will show up. In the meantime, the pair are lowering their expectations. “We are hopeful, but it is a challenge right now.”

Marie Krueger, who works in insurance, and her husband, who works in information technology, are renting an Elk Grove apartment and are touring homes, but everything in their price range gets snapped up, sometimes by Bay Area buyers with cash in hand.

“I’m mad at them,” she said laughing, but feeling frustrated. They’re hoping the market will balance itself come spring.

“We don’t expect any bubble to pop,” she said. But she and some real estate experts say this spring could bring a reprieve with more houses on the market. “This isn’t our first rodeo. But it is one of the strangest rodeos.”

A competitive real estate market

The Sacramento region is not alone in facing an unbalanced market with limited housing stock. Realtor.com last month reported nationally the number of homes on the market had dropped 40% in December compared to the year before, calling home-for-sale inventory “an all-time low.”

“We eventually expect to see improvements in the supply of homes for sale, especially in the second half of the year,” said Realtor.com chief economist Danielle Hale. “Until then, finding a home will continue to be a top challenge for buyers across all price ranges.”

Sacramentans who’ve moved to Boise, Idaho, and other cities in the west report the same shock: Fast-rising prices and no inventory.

The imbalance in Sacramento is due in part to the COVID-19 era phenomenon of teleworking, which has prompted some Bay Area residents to pull up roots and relocate to the Central Valley while keeping Bay Area jobs. Some of them come with cash in hand from selling Bay Area homes.

San Jose and San Francisco are among the few places in the country awash in available houses for sale. San Jose saw a 124% increase in the number of houses up for sale in December, compared to the year before, and San Francisco listings jumped 100%.

Sacramento was ranked as the third most-likely landing spot nationally for Bay Area migrants in 2020 in a recent LinkedIn analysis, trailing Seattle and Austin, Texas, and ahead of Portland, Ore., and Denver.

For every 100 Sacramentans who moved to the Bay Area last year, 145 Bay residents moved here, LinkedIn’s survey of largely professional workers found.

New home construction and sales, which typically account for a small slice of the home sales market, have ramped up around Sacramento, playing a larger role as some people who can’t find a resale home are choosing to buy a newly-constructed house instead.

But Sacramento, like California, still has a housing deficit. Construction stopped for nearly five years in the Great Recession and has never caught up. Material costs and supply chain issues during COVID-19 are making the catch-up job tougher.

Officials with the North State Building Industry Association said in a statement this week “the number of new homes actually being built remains well below current demand, let alone the number needed to begin attacking the shortfall in new homes that the region has experienced for many years.”

Can you buy a home in Sacramento?

New data last week from the Sacramento Association of Realtors shows that 84% of houses for sale last month in Sacramento County sold within 30 days. For the year, about half of all homes for sale in the region were under contract within 10 days.

Dillaway, from Marin County, who is living with his fiancee in a Roseville apartment, said he’s learned to offer 10% over the asking price and to show that he is pre-approved for a loan.

In some cases, the offers are way more than 10% higher than the asking price. Sandra Schraeder of Keller Williams Realty stood in line for an hour with clients to look at a 1,200-square-foot Elk Grove house recently that went on the market at $300,000 in an unusual online bid sales approach. The successful bidder paid $436,000, she said.

“Buyers are falling off the trees to buy; sellers are sitting cozy,“ Schraeder said.

The median house sales price in the region rose to $485,000 in January, according to Lundquist. That’s up from $420,000 slightly more than one year ago, and up from about $320,000 five years ago.

The recent median price of home sales in the two foothill counties, Placer and El Dorado, have now topped $500,000.

Woo, an attorney living in a one-bedroom midtown apartment with his girlfriend, is eager to buy despite those rising prices. But, he said, even if he hurries out to see a house, by the time his appointment arrives, he sometimes is left submitting a back-up offer because an initial sales deal is already underway.

He’s never bought a home before, so he doesn’t have anything to compare this market to. “It does seem like there are not a lot of options.” They are determined, he said. “We aren’t giving up. But we’re going to have to be patient. It’s still February. I’m hoping (for more inventory) in March.”

Buyers who might otherwise shy away from such a competitive market say they are in the hunt because they want to take advantage of extremely low mortgage interest rates. If or when those rates rise, house prices could plateau or even drop if it causes would-be buyers to back away.

A recent Sacramento Bee panel of real estate experts predicted, though, that prices are likely to continue rising at least through the middle of this year, and that Sacramento will remain a seller’s market throughout 2021.

Right time to sell in COVID?

Although the Sacramento real estate market is heavily tilted in favor of sellers, many would-be sellers have the shades drawn and door closed. They are not comfortable putting their home up right now.

Realtor Schraeder and others say some are deciding not to list their home yet because they realize they will have a hard time finding another house in the region to buy. It appears a higher percentage of sellers currently are people who plan to move out of the region and out of the state of California.

The hassles of the COVID-19 pandemic also appear to have caused some families to hunker down, Realtor Erin Stumpf of Coldwell Banker said. With children currently home schooling, it’s hard to repeatedly gather up the family and get them out of the house for hours so potential buyers can come in for tours.

The frenzy of buyers is, surprisingly, off-putting to some sellers as well. It’s nice to get multiple offers, Stumpf said, but it can be overwhelming to get a dozen or more, especially because terms of deals now are so varied that it’s hard to compare offers to determine which is best.

Selling a house also now involves collecting signed papers from visitors saying they do not have COVID-19 symptoms, arranging visits by appointment rather than open houses, and repeatedly cleaning door knobs and surfaces between visits.

“Sellers are a little intimidated by what is going on,” Stumpf said. She creates a spreadsheet of offers for sellers, so they can go through the pluses and minuses of each offer.

Sellers may decide to accept a lower bid if the bidder has a loan essentially lined up, is willing to waive any contingency based on the upcoming appraisal, and is willing to shorten the time frame for the home inspection as well as the escrow period.

Dawn Dais just sold her Roseville home in two days for $35,000 more than her asking price. But the sale turned out to be stressful. The day before the paperwork was to be signed, she learned she was exposed to COVID-19 via a family member who tested positive. She felt she had to tell the buyer, even though she has tested negative so far.

“I have to tell them. It’s a moral thing,” she said. “But you wonder, is that going to blow up the deal?”

She is fortunate. She has another family house to move into, but won’t have access to it until June. She’ll stay until then at an extended stay hotel. She sold now, though, because she realized it is a sellers’ market, “a unique moment to maximize what I got for this property.”

If the pandemic eases this spring, and interest rates remain low, more people may be willing to put their homes on the market, real estate experts say.

Pettit Gilwee, a Realtor with Lyon, said she has five homeowners who are likely to put their homes on the market in March after doing some painting and landscaping. “I think we’re going to see more inventory come March.”

Appraiser Lundquist, who does data analysis of real estate trends, says he has fingers crossed as well for a spring thaw in the market.

“The market typically really starts to heat up at this time of the year though with more listings, so hopefully at the least we will see a somewhat normal level of listings come,” Lundquist said. “Granted, this ‘normal’ number is simply not enough for today.”

This story was originally published February 17, 2021 at 5:00 AM.