For the last 2 years, it seems like we all keep asking, how much higher can the market get??? The growth has not been sustainable or healthy despite how many real estate posts said the market is 🔥🔥🔥. On overage homes gain about 1-3% in value a year, yet we have been seeing that kind of growth in just one month for several months in a row. There are two major reasons for this 1. Our demand has been far greater than our supply and 2. Interest rates were low giving buyers more buying power. Our supply has started to increase but we are still very behind in the number of homes available for the number of buyers. The interest rate increase has also had an impact on this. Due to rates going from the 3% range to the 5% range in just a couple of months, a lot of buyers have been priced out of the market or forced to lower their budget to a price point where there simply are no houses. Some buyers also backed off because of overall inflation and decided to wait to see what happens.
Even with the rate increases home values still appreciated in the month of May but home sales came down. We did have a slight dip in our home values from March to April which is when we had a large rate increase but we also had an increase in home sales. We are starting to see an increase in price reductions, but it’s not because home prices are coming down, it’s because sellers have not caught up with the shift in the market and are pricing their homes too high. It’s not an indication of a market crash, although that seems to be a popular opinion online.
Median Single Family Home prices in the Sacramento Region (Sacramento, Placer, El Dorado, and Yolo Counties*)
Feb to March $591,000 to $620,000 which is a 4.9% increase
March to April $620,000 to $617,000 which is a .5% decrease
April to May $617,000 to $625,000 which is a 1.3% increase
Home Sales
Jan – 1,609
Feb – 1,721
March – 2,285
April – 2,391
May – 2,198
Although price is a huge factor in what the market is doing, there are several others we need to pay attention to, especially for those looking to sell in this market. I very much saw this with a listing that hit the market at the end of April. In Jan I had a listing that got more attention than the seller or I excepted; over 100 open house attendees, 39 offers, and sold for $75,000 over the list price. Fast forward to an April listing and we had 10 people at the open house, 3 offers (2 under list price), and sold for $5,000 over list price. This is proof we are returning to a more “normal” or balanced market. It’s still a seller’s market, but buyers are starting to have more options and the ability to be pickier about what they want and how much they offer.
With high prices and higher interest rates, buyers want more for their mortgage payments and I don’t blame them. They don’t want a complete fixer-upper or a home that needs a new major component like a roof, HVAC, etc. Their expectations have changed and sellers need to be aware. If you plan to list your home you need to understand that more listings and fewer buyers mean that buyers have more options so your house needs to be in good condition, properly prepped, and decorated or staged better than the neighbor selling down the street. You should also be prepared for it to take longer for your home to receive an offer. Although homes are still getting into contract quickly, we went from homes being on the market for as little as 24 hours to them needing to be on the market for 2 weekends before they get offers. We also went from homes getting 10-15 offers to 1-3 offers. This is still by all means a seller’s market, we are just starting to see the shift our market truly needs.
If you’re looking for a bidding war, a buyer to waive all their contingencies and pay over appraised value, or that unicorn Bay Area cash buyer you are setting yourself up for disappointment with these false expectations. Does this still happen? Yes, but it wasn’t happening as much as you were probably lead to believe and it’s happening even less now. Do you know what else has changed? Concessions to buyers. Concessions are credits given to buyers for their closing costs or repairs. This is not happening with every home sale, but it is something that is becoming more common and something for a seller to be aware of. If your looking to list your home and the agent you hired doesn’t go over what’s common in your area for concessions ask them! All you see online is what something sold for, you don’t get to see how much money was given to a buyer in exchange for that sales price. Only agents can see this in the MLS where houses are listed and this is very important for sellers to understand.
Proper pricing is more important than ever. I will say it again for the people in the back, PROPER PRICING IS MORE IMPORTANT THAN EVER! Even a slightly overpriced home might get you no showings. Can you price high and lower the price if your home isn’t getting any action? Yes, but that comes with a price, literally. Buyers are standing by waiting for price reductions and once they start they know they have the upper hand and are more likely to offer an even lower price, ask for something in return like appliances, repair credit, or closing costs, or will wait to see just how low you will go and how long your home will sit. Lowering the price can be seen as a desperate act to get your home sold and that is the last thing you want as a seller. The longer the home sits on the market or the more price reductions you do can also make buyers think there is something wrong with the home. I actually have buyers text me these very questions as soon as a price reduction happens. What’s wrong with the house, and how low can we offer?!? It’s great when this happens when I am working with buyers and I actually look for these opportunities, it’s not great when you are a seller and looking at a certain bottom line.
We are no longer in a market where you can see that your neighbor with a model match home to yours sold for $560,000 and price yours at $570,000 or higher. Sellers need to look at list prices, how many days on market, how many offers, price reductions, and concessions then determine a price. You also need to be prepared for price reductions after a certain number of days on the market if you are not getting showings or offers. Remember, buyers and the market determine the sales price of your home, not what your neighbor sold for 3 months ago or what YOU think it’s worth. The market has started to shift and you should base the sale of your home on what’s happening now.
Current Market Stats as of May 31, 2022 for Single Family Homes in the Sacramento Region (Sacramento, Placer, El Dorado, and Yolo Counties*)
Median Price $625,000
Average Price $714,395
Cash Sales 15.48%
Median Days on Market 7
Average Days on Market 13
Bank Owned Sales 4
Short Sales 0
*Statistics are for Single Family Homes listed and sold through the MLS and partially provided by Ryan Lundquist Author of Sacramento Appraisal Blog.
