Sacramento’s real estate market is like an ‘action movie.’ How buyers are adjusting
Sacramento continued to be one of the hottest home sales markets in the country in June as buyers bid against each other to land a limited number of houses amid fast-rising and record-high prices.
Overall home values in the four-county Sacramento, El Dorado, Placer and Yolo region have jumped 21% in the last year, a steeper increase than all but a few metropolitan areas, according to an index calculated this week by national real estate brokerage and data analyst Zillow.
Austin led the way nationally with a stunning 37% leap from June 2020. Home values in the Texas capital are still some $50,000 lower on average than Sacramento, though.
Other big increases in overall estimated home values: Phoenix increased 26% in the last year as of June. Salt Lake City median prices rose 24%. San Diego’s jumped 23%. Riverside increased 22%. Seattle and Tampa, Fla. both increased 21%.
Zillow’s index puts the average value of houses in the Sacramento four-county metropolitan area at $531,000. That index represents an estimate of a broad range of values in the area, excluding the lowest- and highest-valued homes. It is a different measure than the median sales price of currently selling homes. Median sales prices in Sacramento jumped as well again in June to record highs.
Nationally, house values are up 15% this June from June of 2020, a sign that the housing market is a key player in the worrisome inflationary moment American consumers are facing.
“No one has ever seen this. We are watching a movie we have never seen before,” said Realtor Kelly Pleasant of Pleasant Real Estate Group in Sacramento. “It’s an action movie, action-packed for sure.”
Although Sacramento home values are high by national standards, the region sits in an unusual spot in high-priced California, near much higher-priced areas, that makes it a hot market and possibly a more stable one as well in the long run if the national real estate market stalls or takes a tumble.
“We have a unique situation with the Bay Area and other parts of the state,” said Realtor Leanna Halldorf of Halldorf Homes and Guide Real Estate. “We are considered to have reasonable prices for California.”
Zillow’s house value index for San Francisco stands at $1.3 million. In San Jose, it’s $1.4 million. Those are the highest values in the country among the 50 metro areas Zillow analyzed. Migrants from those areas to greater Sacramento are a part of the reason for rising prices here.
While rising values may sit well with many people who already own homes, price increases have become increasingly worrisome for those struggling to finance a purchase, especially first-time buyers who do not already have equity in a house.
Who can afford a Sacramento home?
The percentage of Sacramento households who can afford to buy the median-priced home in the region has dropped from 47% last year to 41% in the first three months of this year, according to a California Association of Realtors’ analysis.
“A lot of these prices are based on fear of being priced out of the market,” Pleasant said. Historically low mortgage rates are helping fuel that drive. “This market isn’t for the faint of heart.”
Another key problem has been lack of houses for sale.
“With my buyers, the problem hasn’t been affordability, since mortgage rates came down, it’s that we don’t have enough inventory, and not enough starter homes,” said Yuri Ramirez-Villanueva of EXP Realty.
But there have been very slight signs of a softening market over the past two months in Sacramento, data and anecdotal evidence show.
Homes still get multiple offers, just not as many as late last year and early this year, Sacramento housing data analyst Ryan Lundquist reports. The number of homes on the market has increased as well, but is still much lower than recent years. Although three out of four homes are selling for more than the initial asking price, that percentage is a bit lower than it was this spring. And while houses are being snapped up quickly, sales are not quite as fast as a few months ago.
Faced with a competitive market, some buyers have made adjustments, including being less likely to jump for a house that doesn’t quite measure up to the asking price.
“Buyers are getting more finicky,” Halldorf said.
Buyers made and then rescinded four offers above the asking price recently on a client’s house that needed some work, she said. She suspects those buyers were making multiple offers on houses at the same time. She is having the seller take the home off the market, do some work, then put it back on at the same price. “Three months ago, that might not have made sense,” she said. “Now it does.”
Lundquist said the slight slowing of the market right now looks like the typical summer slowdown the market experiences annually. While the escalating prices cause some to worry about a bursting of the bubble, “stats right now don’t support a crash and burn narrative,” Lundquist wrote recently in his Sacramento real estate blog.
“In a normal year we’d expect for the housing market to crest around this time and begin a seasonal descent for the rest of the year. So it’s no surprise to see the market slowing right now.”
Home builders reported they sense a slight softening of the market for new homes, although the North State Building Industry Association reported June sales were higher than any other June in the last decade, other than 2020.
“Demand for new homes in the Sacramento region remains extremely strong but it appears that sales are beginning to settle into a more normal seasonal pattern, unlike the sharp jump that occurred during the second half of 2020,” BIA chairman Michael La Fortune said in a press statement.
This story was originally published July 23, 2021 at 5:00 AM.