Happy New Year
As we turn the page on 2025 and begin a new year, let’s take a look back at our local real estate market and what we anticipate for the year ahead.
A Market in Transition
Last year brought some unexpected uncertainty among sellers, which resulted in 5,700 canceled listings in the four-county region. This was an increase of 22% over a normal year. Of those de-listed homes, 49% never reduced their price before canceling. In most cases, this indicates that sellers had a different impression of what the market would be like when they listed their home for sale.
The average days on market is currently 61, which is almost double what it was just six months ago, and a far cry from what sellers experienced during the pandemic era. If you were to list your home today, it’s reasonable to expect that we may not close on your sale until mid-spring. Is the market shifting? Yes.
What’s Driving the Shift
There are several key factors suggesting the market is preparing for a shift. One is the increase in days on market. When fewer buyers are active and sellers must wait longer for offers, the supply-and-demand balance begins to tip in favor of buyers. Why is this happening? There are several reasons, but affordability is certainly a major factor in our local market.
In 2001, 47% of the local population could afford to purchase a home. Today, that number is closer to 28%. Interestingly, even though the past three years have been challenging, with sales declining due to higher mortgage interest rates, prices have not seen a significant drop. However, with everything going on in the world, along with job uncertainty and broader economic concerns, economists are predicting that the spring season may bring 14% more homes to the market. This is good news for buyers, but it creates a more competitive environment for sellers.
We’re hopeful that lower interest rates could help offset this issue; however, current projections suggest we may not see many rate cuts in 2026. Welcome to the challenge of trying to follow a constantly shifting market.
Insurance: A Growing Wild Card
Another growing issue is insurance. Insurance companies are being increasingly cautious about the homes they insure, for understandable reasons. If you’ve had no issues with your coverage, consider yourself fortunate. What was once primarily a foothill concern has now become a statewide issue in California.
Homeowners may be asked to provide proof of permits for recent roof installations or required to remove trees that shade parts of the home. In the foothills, California FAIR Plan policies are up 21% from a year ago, and for some homeowners, this is their last available insurance option.
Additionally, homeowners should be cautious about filing claims for minor issues, such as fence repairs, as doing so could risk being dropped by their insurer. It sounds extreme, but it’s the reality in California today.
Who’s Buying in Today’s Market
You may also wonder who the buyers have been over the past few years. In 2025, 22% of buyers in El Dorado and Placer Counties were cash buyers, while 14% of buyers in Sacramento County purchased with cash. Of those sales, 56% of sellers reduced their prices for cash buyers.
There has been growing discussion about limiting institutional buyers in the housing market. Locally, between 2012 and 2013, Blackstone purchased a significant number of homes. That portfolio has since been acquired by Invitation Homes, and you will likely see their signs appearing as they begin to offload those properties into the resale market this year.
Condos and Affordability Challenges
Another segment facing challenges is the condo market. With uncertainty surrounding homeowners associations and rising, largely unregulated HOA dues, many buyers are hesitant to purchase in communities with unpredictable costs.
In some areas, monthly HOA dues exceed $600, which is simply not feasible for buyers seeking affordability. Expect the condo market to continue facing headwinds in 2026.
Will the Market Crash?
The big question I’m often asked is whether the market will crash. The answer is no. If we see the additional supply that’s being anticipated, it may place downward pressure on prices, but we are not heading toward a repeat of 2007.
Instead, we’re more likely to see a softer market similar to what we experienced in 2019, prior to the pandemic.
Looking Ahead to 2026
The most important thing to understand is that homes are no longer worth what they were during the peak pandemic years, when people were flocking to our region. It’s time to let go of 2021. While the market has been erratic since then, real estate remains a relatively stable long-term investment.
If you’re thinking about buying or selling, every neighborhood, and every home, is unique. If you or someone you know is looking for a hardworking Realtor, I’d love to help. Let’s get together and discuss your plans for 2026. It’s never too early to start the conversation.
May this new year find you looking forward
to many good things to come!
to many good things to come!
