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Sacramento’s 2022 Real Estate Market

Sacramento’s real estate market was a wild, record-breaking ride in 2021. What do experts expect for home buyers in 2022?

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Double digit price increases. A dozen or more bidders on homes. Entire neighborhoods with little more than a handful of houses for sale.

Sacramento’s real estate market was a wild, record-breaking ride in 2021.

Even as the pandemic dragged through its second calendar year, the real estate market in Sacramento, Yolo, Placer and El Dorado counties reached new heights.

Sacramento appraiser and housing market analyst Ryan Lundquist said the region saw its “largest price gains ever,” with the median price increasing by $90,000 or roughly 20% over the previous year (the median dollar increase was a record, but the region has seen higher percentage increases in the past 20 years).

More than three quarters of homes had multiple bidders – likely another record, Lundquist said. And buyers paid above asking prices throughout the year, a trend he called “sensational.”

“One of the most chaotic markets we’ve ever seen,” Lundquist said.

Just how chaotic? The evidence is everywhere.

Another year of price increases in Sacramento

The Sacramento region just finished its 10th straight year of price growth as the market continues to put the devastating Great Recession far behind. That winning streak is part of what made the price increases last year so remarkable.

Year-over-year increases had started to slow and then – boom – took off in 2021. That’s even with many buyers hesitant to visit open houses and a regional unemployment rate that remains above pre-pandemic levels.

“It’s almost like the car was slowing down and then the gas pedal was pushed,” Lundquist said. “It’s just bonkers.”

The median home price in the four-county region stood at $550,000 at the end of 2021, according to Lundquist’s data. Placer County had the biggest leaps over the previous year: fueled largely by hot destinations in its western suburban communities, the county had a 21% increase in the median price to $640,000.

Sacramento County’s median price stands at $500,000. Even adjusted for inflation, that total is right at the record high for Sacramento.

El Dorado County, another top destination for buyers seeking more space and open air, hit a new median of $640,000. And Yolo County’s median price stands at $565,000.

The good news if you’re looking to sell – and some rough news if you’re thinking of buying: “Every area has its ceiling and I don’t think we’ve reached ours yet,” said Kelly Pleasant, a prominent Sacramento-area Realtor.

The new neighbors

The Bay Area migration to Sacramento certainly isn’t new. But research shows the exodus from pricey coastal regions to inland areas such as Sacramento, Spokane, Wash., and Boise, Idaho has picked up speed during the pandemic.

While Sacramento is seeing historically high values, the region is still affordable relative to San Francisco, San Jose and much of Southern California. And our median prices went up at a far higher rate than the Bay Area or California median.

“Where the market stands now is it had just an astonishing rate of home price appreciation last year,” said Jeff Tucker, a senior economist at national real estate firm Zillow. “It really seemed to catch a tailwind of demand from people moving out of the Bay Area: a lot of first-time buyers and those looking for bigger homes.”

Whereas a Sacramento resident looking to move might have sticker shock at the prices being demanded, the opposite is true for those fleeing the coast. Pleasant said a common response from Bay Area residents who see asking prices for homes here is, “That’s it?”

“Bay Area buyers moving to Sacramento – that’s not new but it accelerated during the pandemic,” said Erin Stumpf, president of the Sacramento Association of Realtors. “The shackles are off in terms of where Bay Area employers will allow employees to work remotely and we do still have that pressure of this being the low-price area relative to what’s around it.”

Lundquist isn’t quick to blame the Bay Area for all of our real estate problems. He pointed out Sacramento isn’t an outlier when it comes to major price increases (Sacramento didn’t even make the top 10 of a recent Zillow analysis of the nation’s “hot” markets for 2022).

“Every market has their enemy,” Lundquist said.

Few homes for sale, lots of competition

Stumpf said one of the key factors driving the price increases is a lack of available homes on the market.

There is about 2.5 weeks of inventory on the market today; that means it would take less than three weeks for every home on the market in the Sacramento area to sell. A more balanced inventory would last between two and four months. At the bottom of the Great Recession, that figure was closer to 15 months.

Tucker, the Zillow economist, said available inventory late last year was roughly one-third lower than it was before the pandemic. Why does inventory matter? “If there’s not a similar listing down the block, sellers don’t feel much competitive pressure,” he said.

The lack of supply – along with low mortgage rates – helped fuel an ultra-competitive environment. Stumpf said it’s not unusual to get more than 10 bidders on homes in the $400,000s and $500,000s.

And Lundquist said we’re seeing homes get scooped up in record time. The average time for a home to get into contract was 17 days; half the homes for sale go into contract in a week or less, he said. Even in recent years, as the market gained steam, most homes were staying on the market for more than a month.

Million Dollar Listing Sacramento

It’s unlikely the popular Bravo television series will come to Sacramento. Still, we’re seeing more high-price homes sold here than ever before.

Last year, 7% of homes in the market sold for above $1 million. That totaled about 2,000 homes. The year before, 1,025 homes sold for north of $1 million, Lundquist said.

A review of Zillow listings last week showed more than 200 homes currently on the market in the region with a listing price above $1 million. Many were in the communities ringing Folsom Lake. But seven-figure homes are also for sale in Rio Linda, Land Park, West Sacramento and Arden Arcade.

At the other end of the price spectrum, just 0.27% of sales last year were banked-owned, Lundquist said. That’s a sign, he said, of “a market that’s healthy.” It also means the “low-price fixers are gone.”

In the first quarter of 2009, 85% of sales in the region were foreclosures or short sales.

This story was originally published January 14, 2022 at 5:00 AM.