Sacramento in USA Today

By Noelle Knox, USA TODAY
Here's an alarming fact about Sacramento's housing market: About one of every five existing homes on the market is a "short sale." That means the home is worth less than the value of the mortgage, and the lender is willing to accept less than full repayment of the loan to avoid foreclosure, says Tracey Saizan, president of the Sacramento Association of Realtors.

That, in turn, puts pressure on the remaining 80% of sellers, who have equity in their homes, to cut prices. The median price in the state capital, one of the most overheated metro areas during the real estate boom, fell 4.3% in December compared with December 2005.

"Sellers are having to give concessions and cut prices," Saizan says. "It's all about making the house show the best it can and aggressive pricing."

Though there's only a 4.3-month supply of homes for sale — a bit lower than the long-term average — that figure doesn't include the 3.5-month stock of unsold new homes that are also on the market, especially in some suburbs.

New-home sales in the fourth quarter were up nearly 57%, but that was compared with a dismal quarter at the end of 2005, according to The Gregory Group, a new home information and consulting firm. The median new home price fell 4.7% to $434,990, which doesn't take account of all the free goodies that builders are giving away, such as kitchen upgrades.

Still, builders are now seeing a decline in the number of buyers who are canceling their purchase contracts. "There is a sense that we are going through the tunnel, and the light at the other end is sunshine, not another train heading at us," says Greg Paquin of The Gregory Group.