Is There a Real Estate Bubble in Sacramento?

The only real estate bubble in Sacramento is from this little girl in her kitchen sink.

The first wrong conclusion to which many people spring when they hear median home prices in Sacramento have increased to $305,000 is that we are heading toward a real estate bubble in Sacramento. There is no bubble in Sacramento on my horizon, and I watch the market like a hawk. Don’t just take it from me, a Sacramento Realtor, whose business it is to put a positive spin on negative crap. Listen to other experts. Not a single respectable real estate analyst predicts a real estate bubble in Sacramento.

You have to look at what got us to that point 10 years ago. We had very different market conditions then. More than 10,000 homes were available for sale, versus the piddly 2,540 we have today. Our median sales price was $374,000 in August of 2005 vs $305,000 today, according to CoreLogic. And mortgages were easily obtainable, especially the 80 / 20 combo loans with zero down. Today, even a preapproval letter is little guarantee a buyer is qualified to buy a home. Mortgage guidelines are very strict. Rates are super low.

You might not even find out a buyer is rejected until the file gets into underwriting. There is a lot that can go wrong in underwriting. On top of which, many buyers today pay cash, believe it or not. Cash does not produce crash.

People who predict a real estate bubble in Sacramento are simply speculating, talking out loud, wondering about the fate of the universe, although the Chicken Littles are often uniquely unqualified to render such an opinion. We have a seller’s market in Sacramento. It’s to the point that I made a recommendation to an elderly seller yesterday, which I rarely recommend because I never want to eliminate even one potential home buyer from bidding. Yet, I suggested we schedule 6 days for showings and to discuss offers on the 7th day. That will produce more than enough buyers for her home in Tahoe Park.

We don’t need 2 dozen buyers all offering the same thing. There is only so far we can move on price. It’s a tough market without sufficient inventory, but it’s certainly no real estate bubble in sacramento.