Sacramento region home prices just dropped. What does that mean for the rest of 2021?

Sacramento house prices dropped suddenly in July for the first time in more than a year, a dramatic shift that is prompting debate.

Has the region’s red-hot real estate price escalation finally hit the wall? Or is this just the regular mid-summer doldrums that typically hit the market when prices dip a bit before ultimately heading upward again in the new year?

The median price for a home sold in Sacramento County dropped slightly from a record high $520,000 in June to a still lofty $510,000 in July, according to the Sacramento Association of Realtors.

Similarly, early data indicate prices have leveled or dropped in July in the rest of the metropolitan area as well, in El Dorado, Placer and Yolo counties. Placer dropped from $675,000 to $640,000, according to the Sacramento Appraisal Blog.

That is the first bit of price backpedaling the local market has done since May 2020, in the early months of the COVID-19 pandemic, when the Sacramento County median sales price was just under $400,000.

Other new data suggest buyers no longer are champing at the bit to buy a house in Sacramento like they were earlier in the year.

The number of houses sold in Sacramento County in July dropped 9% from June. At the same time, the number of houses on the market by the end of the month was up 24%, increasing from less than 1,300 available for purchase in June to more than 1,600 in July.

The same goes for El Dorado, Placer and Yolo counties, real estate data analyst Ryan Lundquist said. Lundquist cautioned that even though the increase in houses for sale is big in percentage terms, it’s still small historically in total numbers.

“In my mind it’s premature to say the market has shifted directions,” Lundquist wrote in his Sacramento Appraisal Blog. “For now it’s most reasonable to say we are seeing what looks to be a normal seasonal slowing.”

Is the Sacramento real estate market cooling?

Dean Wehrli, a Sacramento-based analyst for John Burns Real Estate Consulting, said however a broader slowing of the market could be happening.

“The two factors – seasonality and the market changing – are very difficult to disentangle early on and the housing market is still very strong, but I think we are at the beginning of the market sort of normalizing,” he said in an email to The Bee. “Some new home communities have standing inventory – available homes that would have been instantly scooped up a couple of months ago – and phase to phase price increases are decreasing.”

The Sacramento County data also suggested buyers are no longer clamoring as much for larger homes, which had been a trend since the beginning of the coronavirus pandemic.

The Sacramento data appears to reflect a statewide trend this summer.

Economist Jordan Levine with the California Association of Realtors said he sees “evidence the market is starting to normalize” statewide, meaning that prices could continue to rise again later, but not at the breakneck speed seen over the past year.

“There are slightly more listings, and a slight pull back in buyer demand,” Levine said. “That will take some of the pressure off of prices, but again, from a supply standpoint, the market is tight. There is still a lot of upward pressure on prices.”

The North State Building Industry Association reported this week that sales of new homes were off notably in July from June, but remained robust by historical averages for past Julys.

“There continues to be a strong demand for new homes in the region as buyers look for homes that have been designed with today’s needs for space and flexibility in mind,” BIA head Michael Strech said in a press statement.

This story was originally published August 13, 2021 at 5:00 AM.