You can’t do a short sale if you’re tall

We’re seeing more distress in the housing market. It hasn’t been a tidal wave of carnage like the online doom narrative often suggests, but there are changes happening, so let’s talk about underwater mortgages, short sales, and delinquencies. Today, I have some really interesting data that I’ve not shared before, and I hope you get something out of this post. 

UPCOMING SPEAKING GIGS:

7/8/26 NorCal REI Meetup (RSVP here)
7/13/26 LPT Realty Zoom 
8/6/26 PCAR Auburn
8/25/26 Elk Grove MLS Meeting 8:30am
9/1/26 ROG Talks
10/2/26 PCAR Rocklin
10/21/26 Coldwell Banker Sierra Oaks / EDH

NOTE: I’m not intending to be mean-spirited about short sales. I’m making a dad joke, which is a play on words. These stats represent people who are struggling. Let’s always remember that.

HOW MANY OWNERS ARE UNDERWATER ON THEIR MORTGAGE? 

Some markets across the country have experienced sharper price declines, so they have 7-10%+ of homes being “underwater” so to speak (home is worth less than the mortgage amount). In most of California, the percentages are very modest around 1% or lower. Nationally, about 1.5% of mortgages are underwater according to ICE Mortgage Technology. Image from ResiClub (click here for an interactive map).

SACRAMENTO MORTGAGES UNDERWATER

Locally, about 0.8% of all mortgages have negative equity according to ICE Mortgage Technology. Here’s a look at how various years contribute to the overall percentage, and it’s not a surprise that homes sold after 2022 are contributing greatly here. Overall, this is very minor, but we are seeing some growth as it was 0.5% in April 2025. Click here to view 100 metros. 

NOT A DISTRESSED MARKET, BUT WE’RE SEEING MORE DISTRESS

A good way to describe the trend is we don’t have a distressed market, but we’re seeing more distress. In other words, we’re no longer at pandemic lows, and we’re starting to see an uptick in delinquencies, foreclosures, and short sales. This is to be expected as we weren’t going to stay low forever. I find the housing doom side of things inflames this growth while the rosy real estate club ignores it. My advice? Take this in, but stay grounded. Stats from HUD. 

FHA IS STRUGGLING MORE THAN OTHER LOAN TYPES

FHA is more delinquent than other types of loans, but it’s important to recognize FHA is about 15% of all loans in the United States. Locally, FHA loans have been about 10% of the regional market lately, though there are some neighborhoods in Sacramento County where FHA is over 30% of all transactions. Stats: MBA. 

IT’S NOT A MARKET OF LOW-PRICED FORECLOSURES

In today’s market, there just aren’t that many distressed sales, so buyers need to adjust expectations. There is strong attention on homes that check all the boxes and low-priced fixers, so it can be surprising how competitive it feels for certain properties. This is where I think there is a disconnect between the actual market and the online narrative. 

WHY ARE FHA BORROWERS DELINQUENT? 

If you work in real estate, know what people are going through and be available to assist some who are carrying too much weight right now. The one category I removed was national emergency since it’s been incredibly minimal in recent time. I made this visual from HUD data.

WHERE HAVE FHA BUYERS PURCHASED?

I thought it would be interesting to look at the top locations for FHA purchases since 2022. This is based on reported financing in MLS. Roseville might surprise some since Placer County doesn’t have too much FHA, but keep in mind Roseville has many more sales than Citrus Heights and Rancho Cordova. So, if I did this as a percentage of FHA sales, Roseville definitely wouldn’t be in the second position. There were over 8,300 single family detached sales in Roseville since 2022, but Citrus Heights and Rancho Cordova only had about 3,000 each. Can you see why Roseville makes this list since it has significantly more sales? For perspective, FHA only represents 6.2% of sales since 2022 in Roseville, but it’s 17.9% of sales in Citrus Heights. Anyway, I hope you dig this list. 

SHORT SALES ARE GROWING

Short sales are not much of a factor in the market today, but it’s something we want to keep on the radar because we are seeing some growth. I do expect to see more short sales ahead since prices have been so flat or down.  The visual below represents January to June every year. I find people either minimize the growth or they zoom in to get sensational. 

BE CAREFUL OF SENSATIONALISM

We could say there were 31% more short sales between 2025 and 2026, and while that’s technically true, we’re only talking about twelve sales. When dealing with small numbers, be careful of sensationalism. Or we could say we’ve seen over 1,500% growth since 2022 in short sales in the Sacramento region. Again, true, but very sensational. I’m not saying this to minimize any growth. All I’m saying is we want to look at both percentage and number change in real estate so we can understand the trend AND credibly convey what is happening. My advice? Be realistic about the stats, cultivate objectivity, and ignore people who inflame real estate stats with sensational percentages based on tiny numbers. These people are likely spinning a narrative, so be careful about getting sucked in. 

HOW IS FHA SPREAD THROUGHOUT THE REGION?

Here’s a breakdown of FHA purchase volume in the Sacramento region since 2022. By far, Sacramento County has the bulk of volume at a whopping 72% of purchases. 

Anyway, I hope that was helpful. Thanks for being here. 

Question: What sort of conversations are you having right now with your sphere about economic carnage, short sales, etc…? What did I miss? Anything else you would add?

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