Sacramento real estate cool down: ‘We’ve said goodbye to the most aggressive market ever’
Sacramento’s real estate market is finally taking a breath.
For the first time in nearly two years, the number of homes for sale in the market has surpassed one month’s worth of inventory. Median prices are still going up slightly, but price reductions on individual homes for sale are becoming far more common. Sellers are beginning to realize they no longer have the upper hand and will need to negotiate with buyers.
“I think we’re in a place where we’ve legitimately shifted and we’ve said goodbye to the most aggressive market ever,” Sacramento appraiser and real estate market analyst Ryan Lundquist said.
Local real estate experts expect the market to continue its modest pace through the summer and into the fall. Homes could attract fewer offers on average and more houses will have price reductions. Sellers will likely have to adapt to get into contract, agreeing to more credits, covering the costs of home repairs and helping with closing costs, especially if mortgage rates continue to go up.
“Buyers will continue to buy and sellers will continue to sell, but at what pace will be very interesting to watch,” said Erin Stumpf, president of the Sacramento Association of Realtors. “We’ll still see activity in the market, it just won’t be as brisk as it was.”
A market slowdown this time of year is normal, as graduations and vacations occupy the attention of house hunters. The new pace just seems striking compared to the early part of 2022, which was defined by historic price increases and intense bidding wars.
“We got so used to things being so frenzied in the market that we forgot what normal was like,” Stumpf said. “There’s a little more balance now.”
Some of that balance has come with a significant cost. With inflation continuing to rise and the stock market taking a beating, mortgage rates keep climbing. That means the typical payment for the median priced home in Sacramento is hundreds of dollars more per month today than it was just a few months ago.
“What happens with rates makes a big difference in the market,” Lundquist said.
Sacramento-area realtor Kelly Pleasant said he’s seeing some homes remain on the market for “30 to 40 or even 50 days,” an unimaginable length of time earlier this year. He’s also seeing “more price reductions than I’ve seen in a long time.” He recently reduced the asking price on one home after it sat on the market for three weeks and another after two weeks.
That’s meant having difficult conversations with sellers, who look at what homes were selling for three months ago and are expecting the same level of return.
“Now we have to look at pending sales to look at where we should be pricing homes,” he said. “What we’re seeing today is very different from what we were seeing just 45 days ago. We were going 100 miles per hour the last two years. Now we’re going 70 or 75.”
According to Lundquist’s data, 9.24% of homes sold in May had a price reduction. In March, that figure stood at 6.47%. More than one-third of homes on the market the first week of June had a price reduction, according to Lundquist.
Stumpf and Pleasant both noted that despite the spiking mortgage rates, many people in the market will still find it’s a good time to buy a home. Sacramento remains relatively affordable compared to most coastal regions. Renting isn’t a guaranteed bargain, as rents continue to spike. And mortgage rates will eventually stabilize and fall back down, meaning refinancing will be an option.
“You still have people on the fence who are worried about the (stock) market and rates,” Pleasant said. “On the other hand, you can actually get a house for a reasonable price. Buyers are able to have a little more leverage. They’re able to get more of what they’re looking for in their comfort level – and they had been out of their comfort level for the last three years.”
This story was originally published June 15, 2022 at 5:00 AM.