Placer County real estate market is ‘on steroids’ as buyers try to beat rising interest rates

Placer County’s real estate market is booming, and despite rising interest rates, data show it isn’t showing signs of letting up just yet.

In fact, buyers might be jumping in get ahead of further interest rate hikes.

“I think the big issue is that rates have increased and buyers have rushed to the market,” said Ryan Lundquist, certified residential appraiser and author of Sacramento Appraisal Blog. “There’s a fear of missing out vibe that’s clearly taking place at the present moment.”

The median home price in Placer county increased by 15.8% since 2021, or nearly $100,000 in just a year, according to Multiple Listing Service data. The average price of a home sale in January 2022 was over $744,000. By February, that price had risen to $750,000.

The average home price across Sacramento, Yolo, Placer and El Dorado counties increased also more than 15% since last year, bringing the average price from $485,000 in 2021 to nearly $560,000 in 2022.

Interest rates on mortgages have changed significantly in the last six months rising from 3% last year to more than 4%.

“Our market is very sensitive to rate changes, there is a reaction in the market when rates rise,” Lundquist said.

The rush to the market has resulted in even faster sales in Placer County, and properties frequently selling over asking price across the region.

The average number of days on the market dropped from 24 last year to 20 days in February 2022 in Placer County. That’s a contrast to the larger Sacramento region, where the average number of days homes are on the market increased over the same time frame.

An ongoing shortage of supply is motivating buyers to bid aggressively. For the last two years, the market has been operating on extremely low supply as fewer and fewer homeowners are putting their properties up for sale, and buyers are motivated to move on the few homes for sale.

“It’s really, really aggressive out there. It’s one of those things buyers have to go in knowing,” Lundquist said.

At the beginning of 2022, early data from real estate sales seemed to suggest that the market was showing signs of slowing, but by the end of February that turned out not to be the case.

While there were fewer multiple offers compared to last year, buyers were making bolder offers.

“Sixty-seven percent had multiple offers, and last year it was 70%, but technically the competition is more fierce because bid are more aggressive this year,” Lundquist said. “. . . The average amount was almost $7,500 over last February, this year it’s about twice that number.

If buyers paid nearly $16,000 over asking, it just shows that its a market on steroids.”

When will the market finally slow down?

It’ll take time to tell, Lundquist said, pointing to 2018 where interest rates near 5% caused the housing market to slow significantly.

It’s not something that’s sustainable forever,” he said. “I think it’s a good thing for rates to rise to get us out of this mess.”

This story was originally published March 4, 2022 at 3:00 AM.