Green Haven Capital's Kevin Oto on why Sacramento demand is splitting into two very different markets at once
There is definitely hesitation among Sacramento-area buyers right now, but I don't think affordability alone explains what we're seeing. Many buyers can qualify and afford the payment. They're simply much more cautious about whether they're getting enough value to justify it, and that's creating what feels like two markets happening at the same time.
A well-priced, updated single-family home with a larger lot, desirable amenities or a strong school district can still sell quickly and draw multiple offers. Meanwhile, an overpriced home, especially one that needs work, can sit while buyers submit lower offers and sellers hold out for more. To me, that doesn't mean demand has disappeared. Buyers have become much more selective about where they're willing to deploy it.
Buyers will still compete for the right house
One of the interesting things I'm seeing is a buyer who is nervous about the overall market but becomes very decisive when the right property appears. They may spend weeks talking about rates, the economy and whether prices could decline, then a great house hits the market at the right price and suddenly we're discussing how to beat multiple offers.
Higher payments haven't eliminated demand. They've raised the standard a property has to meet before a buyer feels comfortable acting. That also means pricing matters more. Buyers increasingly seem willing to test sellers with lower offers when a home has been sitting, while many sellers are still anchored to what they believe their property should be worth. The result is a growing expectations gap, one that's playing out across the country as homebuyer demand hits a record low while seller inventory keeps widening, not just here in Sacramento.
New construction is competing for those buyers
Another major factor in Greater Sacramento is new construction. We have a significant amount of new-home development throughout communities such as Elk Grove, Roseville, Folsom and the surrounding areas, and I see more buyers considering new construction because builders are giving them something many resale sellers can't: financial incentives.
A resale seller might be reluctant to reduce the price by $20,000. A builder, on the other hand, may be willing to offer substantial closing-cost assistance, a rate buydown or special financing through its preferred lender, part of a pattern of builders leaning harder on price cuts and buydowns than resale sellers can match. For a payment-conscious buyer, that can be extremely powerful. A buyer may prefer an established neighborhood or a larger lot on a resale home, but when they compare that home at the prevailing market rate against a new home with a significantly lower promotional rate or substantial closing-cost incentive, the new construction payment can become difficult to ignore.
That's why resale sellers and their agents need to understand that they aren't necessarily competing only against the house down the street anymore. In some parts of Greater Sacramento, a region where pending home sales have climbed faster than almost anywhere else in the country, they're competing against builders with an incentive budget.
The opportunity is property specific
This is why broad statements about whether Sacramento is a buyer's or seller's market aren't particularly useful right now. A desirable home that is updated and priced correctly may still require a strong offer. A property that has been sitting for 45 or 60 days could give the buyer an opportunity to negotiate price, seller credits or both. And a new construction community may present an entirely different opportunity because the builder is motivated to move inventory and can use financing incentives to make the monthly payment more attractive. The strategy has to change with the property.
As a mortgage broker, that's where I think our role has become more important. It's not enough to quote a rate and tell someone what they qualify for. We should be helping buyers compare the economics of each opportunity. Would a $15,000 seller credit help more than a $15,000 price reduction? Should that money cover closing costs, preserve the buyer's cash or buy down the rate? How does a builder incentive compare with the resale home the buyer actually prefers? Those are the conversations that can turn hesitation into clarity without pressuring someone to buy.
Buyer confidence may be lower today, but the demand hasn't disappeared. The buyers are still there. They're just making sellers, builders, agents and lenders work harder to earn their business.
