Inside the record-breaking roller coaster ride that was Sacramento real estate in 2022
The Sacramento region’s real estate market began 2022 on a tear.
Homes were selling for $100,000 or more above the asking price. Median values climbed at an historic rate, hitting an all-time high in the spring. Overwhelmed buyers were dragged into intense bidding wars as sellers sat back and enjoyed the ride.
Those days, just six or seven months ago, feel like ancient history.
Driven largely by a spike in mortgage rates, the region’s real estate market slowed down considerably in the second half of 2022. Local and national experts describe what happened as a cool down and a necessary correction after two years of unsustainable price growth and competition.
“It was super hot and then really dull,” said Sacramento real estate appraiser and market analyst Ryan Lundquist. “The market was on fire like we’ve never seen before during the first quarter and then it felt like it was falling off a cliff. It was really aggressive both ways.”
After more than a decade of median price increases, values are finally dropping in the Sacramento and California real estate markets. A majority of California counties saw year-over-year price declines in November. In the four-county Sacramento region, the median price dropped 1.6% between November 2021 and this year, according to Lundquist’s data.
What makes the drop even more stunning was that the steepest losses occurred within just a six-month window. After setting a record median price of $625,000 in May, prices had plummeted 12% in the Sacramento region by November, Lundquist reported. Every other meaningful metric saw a dramatic change this year, according to Lundquist and data from the California Association of Realtors:
- Homes are spending an average of 40 days on the market, compared to just 13 days in May.
- The number of sales in Sacramento fell by 41% between May and November.
- Overall home sales are down 48% in California compared to last year.
Roughly two-thirds of homes sold above the list price in February. Last month that figure was 17%.
- Sacramento’s drop in median price since the May peak is the seventh-largest decline in the nation.
Jordan Levine, vice president and chief economist of the California Association of Realtors, described what we saw in 2022 as a “rebalancing.”
“Yes, the numbers are down, but they were also up an incredible amount the last couple of years,” he said. “We’re coming down from 12-year highs.”
So what happened?
“We got hit with those mortgage rate hikes and everyone got the wind knocked out of them,” said Sacramento realtor Yuri Ramirez-Villanueva.
Mortgage rates started 2022 hovering around 3%. With the war in Ukraine and inflation creating economic uncertainty, rates eclipsed 5% in mid-April. By November, the average fixed mortgage rate on a 30-year loan had gone above 7%.
Even with a recent dip in average rates, home buyers are spending hundreds of dollars more on monthly payments today than they were at the start of the year. The decline in median home prices has helped, but not nearly enough to regain all that lost buying power.
“It was rough because for buyers to get into a house last year with so much competition, we were hoping maybe this year would be a little better,” Ramirez-Villanueva said. “Then it was, ‘Wait, what’s happening? We’re paying $200 more (per month) and then the next week it was $300 more. And we’re still making the same amount at our job.’”
As the year dragged on, more potential home buyers found themselves on the losing end.
At the end of 2021, nearly 40% of the families in Sacramento and Placer counties could afford the median-priced home. By summer, that figure had dipped to well below 30%. Affordability numbers have improved slightly in recent weeks, but are nowhere near where they should be, experts said.
“You could see a little bit of optimism on the horizon,” Lundquist said, “but we’re going to stay in a valley before we see more affordability.”
This story was originally published December 30, 2022 at 5:00 AM.