SACRAMENTO, Calif. — As the spring home-buying season gets under way, bidding wars are breaking out on Sacramento’s tree-lined streets.
People trying to land a house while prices and interest rates remain relatively low suddenly find few choices – and considerable competition.
There were fewer than 1,100 active home listings in Sacramento County and West Sacramento in February, according to the Sacramento Association of Realtors.
That is less than a month of inventory, meaning it would take that long to sell all the houses. A healthy real estate market has about a six-month supply of homes for sale. Three months or less is considered a seller’s market. A month’s supply is almost unheard of.
“It’s the ultimate seller’s market,” said Chris Little, president of the local Realtors’ association.
The lack of homes on the market is leading to multiple offers, fast sales and offers above the asking price in some of the region’s more desirable neighborhoods.
Real estate tracker Zillow estimated this week that area prices rose by more than 15 percent in February compared with the same month a year ago.
It’s frustrating for buyers, great for sellers, but unlikely to last, experts said. Eventually supply will catch up and slow the surge in prices.
“I think we’ll see a gradual uptick, a natural movement of people, and then hopefully it will continue to build as people feel more confident,” Little said.
For now, however, a variety of factors are creating a bottleneck in the supply pipeline. Builders, who have only recently started to ramp up, could take months to get new homes built.
At the same time, more than 150,000 homeowners in the region still owe more on their mortgages than their homes are worth – making it difficult for them to sell without taking a loss. Others are worried about their jobs or finding a replacement house. Many are waiting for prices to rise further.
The number of listings has increased only slightly this month compared with February, said TrendGraphix, a Sacramento-based real estate information service. Yet experts say the supply constraints will gradually ease, adding more homes to the market and curtailing upward pressure on prices.
It’s as simple as the law of supply and demand.
“As we elicit more and more supply response, the rate of price increase will moderate. There’s no question about that,” said Stuart Gabriel, director of the UCLA Ziman Center for Real Estate. But, he added, “I think in the short run, there will be nice upward movement of prices in Sacramento.”
Sellers have been finding that out first-hand.