Seller beware: The major sign buyers are retreating from Sacramento’s real estate market

Sacramento’s pandemic real estate market was among the hottest in the nation, defined by wild bidding wars and historic price increases.

How things have changed.

New data from national and local real estate analysts show homebuyers are becoming far more patient in the region, leaving an increasing number of sellers with no choice but to reduce their asking prices.

A new report from national real estate firm Redfin shows roughly 44% of homes for sale in the region in May had a price reduction, the fifth-highest rate in the country. In May 2021, just 21% of homes on the Sacramento market saw a price reduction.

Sacramento wasn’t the only pandemic destination with a hefty amount of price reductions last month. Hot spots such as Salt Lake City, Boise, Idaho, and Denver are also seeing a high rate of sellers drop their asking price, according to Redfin’s data.

Ryan Lundquist, a Sacramento real estate appraiser and market expert, released similar findings this week. His numbers showed roughly 40% of the homes for sale this week in the four-county region had a price drop. Lundquist pointed out it’s typical to see a spike in price reductions this time of year, but that the number of reductions this week was twice what it was at the same time last year.

Prices are being chopped at all home values, according to Lundquist. Nearly 3% of the homes with a reduction had a price chop of between $100,000 and $200,000. Most homes had price cuts of between $5,000 and $25,000.

Lundquist’s theory: sellers are focusing too much on what the market was doing just a few months ago, when it was common to get multiple bids within hours of a home hitting the market.

“Lots of sellers are stuck in hot headlines from the past, which is causing sellers to list way too high. But demand has shifted. The market has changed,” he wrote on his Sacramento Appraisal Blog.

Among the new dynamics changing the market are spiking mortgage rates and increased inventory. The monthly payment on the median-priced home in the Sacramento region has gone up several hundred dollars this year due to skyrocketing rates. That’s also contributed to more homes remaining on the market and less competition.

Those factors lead Lundquist to believe we’ll see more price reductions in the weeks ahead.

“We are poised to see more price reductions until sellers start getting a better grasp of pricing,” he wrote. “It just takes time to get used to a different market and for now sellers aren’t up to speed.”

Community data for the Sacramento region show that the typical home sold for below the list price in 30 ZIP codes in the area in May. The most competitive ZIP codes were in vacation hot spots of the Sierra Nevada, Davis and Granite Bay.

This story was originally published June 29, 2022 at 5:00 AM.