In Part I of this article I talked about the sharp decline in average prices over the last year in Sacramento County, and how demand has risen dramatically in April in response.

In this article I want to revisit a theme that I first wrote about in March, that the different types of properties for sale effectively constitute Sacramento’s Two Real Estate Markets.

A Seller’s Market In Sacramento?

One of the Sacramento County real estate markets is the foreclosure market, and this market is behaving like a hot seller’s market.  Because the price of foreclosures is low compared to other homes, we very commonly see multiple offers, and offers over asking price.  The average discount for foreclosures is 2.3 % off of list price, while for non-foreclosures the average discount is 3.8% off of list price.  (Note that closing costs and other “non-price” concessions do not appear in these figures).

In April, 63.3% of all homes that sold were bank owned foreclosures.  Looking at the number of foreclosures now in inventory, there are only 2.7 months of inventory — which is extremely low.  By comparison, for homes that are not in foreclosure at all, there are eight months of inventory, and for Short Sales, (which I hate because they’re neither short nor sales), there are 38.8 months of inventory.

The Market Overall

I would characterize the real estate market in Sacramento as follows:

• Overall
  The overall market in Sacramento County is behaving like a buyer’s market.  Overall inventory is about 9.2 months.
• Non-Distressed Homes
  The market for homes that are neither being sold short nor being sold by banks (privately owned homes that aren’t in foreclosure) is a buyer’s market, with eight months of inventory.
• Short Sales
  The market for short sales is weak and tenuous at best.   There is an absurdly fat 38.8 months of inventory, meaning there’s a less than 5% chance that any given short sale will close in a given month.  Calling it a buyer’s market is charitable.  Since you don’t know if a given short sale will even get approved, it’s probably more appropriate to characterize the short sale market as a pseudo-market.
• Foreclosures
  The foreclosure market in Sacramento County is a hot seller’s market.  At 2.7 months of inventory, the inventory figures are comfortably below the 6-month demarcation line that traditionally separates a buyer’s market from a seller’s market.  Multiple offers are common, and the discounts from list price are typically quite low (because the discounts from the “average” (including non-REO) market value are already quite high).

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