Short sales in the Sacramento region are up 31% this year. Here's the same fact stated another way: there were twelve more of them than last year. Both versions are true. Only one of them makes a scary headline.

That pairing comes from Ryan Lundquist at the Sacramento Appraisal Blog, in his July post on underwater mortgages, delinquencies, and short sales — titled, with a dad joke he immediately apologizes for, "You can't do a short sale if you're tall." Behind the pun is some of the most careful distress data anyone publishes on this region, and his one-line summary is the right frame: we don't have "a distressed market," but "we're seeing more distress." From the agent's side of the table, we'd co-sign that — and add some street-level context the regional numbers can't show.

What the Distress Data Actually Shows

Three findings from Lundquist's distress breakdown stand out:

  • About 0.8% of Sacramento-area mortgages are underwater — meaning the home is worth less than what's owed — per the ICE Mortgage Technology data he cites. That's below the national figure of roughly 1.5%, though it has grown from 0.5% in April 2025. Most of the growth traces to homes bought after 2022, which makes sense: buy near the price peak with a small down payment, watch prices go flat, and there's not much cushion left.
  • Delinquencies, foreclosures, and short sales are all rising — from pandemic-era lows. Those lows were never going to hold. Forbearance programs and 20%-a-year appreciation made distress nearly impossible for a stretch, so some normalization was always coming.
  • There still aren't many distressed sales to actually buy. Anyone waiting for a flood of cheap foreclosures is getting a trickle, and the low-priced fixers that do hit the market draw a crowd.

The Percentage Trap

The most useful part of the post has nothing to do with real estate mechanics — it's a lesson in reading statistics. Lundquist points out you could honestly report that Sacramento short sales grew "over 1,500%" since 2022. You could also honestly report the 31% year-over-year jump. Both figures describe a change of a few dozen transactions in a region where Roseville alone has closed more than 8,300 single-family homes since 2022.

His advice to people in the industry is to report the percentage and the raw count together, and to be wary of anyone who inflames "sensational percentages based on tiny numbers" — those people, as he puts it, are likely spinning a narrative. Our version of that advice for buyers and sellers: whenever a housing statistic scares you, ask what the raw number is. If a video says short sales exploded and the raw number is twelve, you've learned more about the video than the market.

Where FHA Concentration Matters — and Where It Doesn't

The section we found most useful as agents covers FHA loans. Nationally, FHA borrowers are more delinquent than other loan types. Locally, FHA has been about 10% of the market — but it isn't spread evenly. Sacramento County accounts for roughly 72% of the region's FHA purchase volume since 2022, and in some Sacramento County neighborhoods FHA is over 30% of transactions.

Lundquist adds a sharp caveat about raw counts here too: Roseville ranks near the top for FHA purchases by volume, but only because Roseville closes a lot of everything — FHA is just 6.2% of its sales, versus 17.9% in Citrus Heights.

Here's what we'd add from working these streets. The FHA-heavy, entry-level areas — think Citrus Heights, Rancho Cordova, Rosemont — hold two truths at once. Yes, they have the deepest pool of recent low-down-payment buyers, so if the economy softens, payment stress will concentrate there first. But they also have the strongest first-time-buyer demand in the region: a well-priced, move-in-ready home under $500,000 can still draw multiple offers. Distress and demand are concentrated on the same blocks. If more short sales do materialize, they'll likely show up in these areas — and get met by waiting buyers. That's a shock absorber, and it's one of several reasons this doesn't rhyme with 2008.

If You're Hoping to Score a Cheap Foreclosure

Reset your expectations. The foreclosure wave has been predicted every year since rates jumped, and the actual distressed inventory remains thin. Meanwhile, the low-priced fixer you're picturing is the most-watched listing type in the region.

What works better in this market: hunting listings that have sat a few weeks and gone stale, negotiating repairs and credits during inspection, and shopping the pockets where sellers have lost leverage. If a genuine short sale or REO does fit your search, fine — just know it comes with longer timelines and lender approval, and it's rarely the bargain the listing price implies. Search Sacramento homes for sale and we'll flag the realistic opportunities, whatever their label.

If You're the One Carrying the Weight

Lundquist closes with a reminder we want to echo: these statistics represent people, and his ask of the industry is to know what people are going through and be available to help. So here's the practical version, if your payment has started slipping:

  • Call your servicer early. Forbearance and loan modification options exist, and they work better before you're months behind.
  • Use the free help. A HUD-approved housing counselor costs nothing, and the CFPB's help-for-homeowners hub lays out your options in plain language.
  • Find out what your home is actually worth. With only about 0.8% of local mortgages underwater, most owners who feel stuck still have equity — which means a normal sale, at a decent price, may be on the table. Get a real valuation of your home before assuming the worst.
  • If you truly owe more than the home is worth, a short sale is a real option, and Peter has guided clients through them. The single biggest factor in how these turn out is how early the conversation starts — so talk to us early, even if you're not sure yet what you want to do.

This is general information, not legal or financial advice; for a distressed situation, loop in a qualified professional.

The Bottom Line

More distress, but a long way from a distressed market: underwater mortgages under 1% locally, short sales measured in dozens, and entry-level demand still strong enough to absorb what does surface. That's a trend worth watching — Lundquist says he expects more short sales ahead given flat prices, and we agree — without being a reason to panic-sell or to camp out waiting for foreclosure bargains. Read the Sacramento Appraisal Blog yourself; it's the most honest data work in this region, and this post is a model for how to talk about uncomfortable numbers without spin.

Want a straight answer about your block, your equity, or your options? Search Sacramento homes for sale, get a real valuation of your home, or contact us.

Or call us directly: (916) 739-2424

The Peter Parker Team | DRE# 01257844 | eXp Realty DRE# 01878277
Market data referenced from the Sacramento Appraisal Blog (July 2, 2026) and is approximate as of mid-2026. Market conditions change frequently; verify current figures before making a decision. This is general information, not financial or legal advice.