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Working with appraisers during a pandemic

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Are appraisers still working? This is probably the question I’ve had most over the past week, so I wanted to unpack some thoughts.

1) Yes & No: Most appraisers are working and it seems like the bulk of appraisers working for lenders are still walking through the interior. There are definitely some appraisers who are not inspecting the interior though (myself included). Some sources say appraisers are deemed an “essential” service during the pandemic, though not everyone agrees. 

2) Exterior focus announced: Fannie Mae and various banks have announced a temporary emphasis on exterior-only and desktop appraisals. When hearing this it’s easy to think every future appraisal is going to be a “drive-by”, but that’s not the case. In fact, traditional appraisals are still going to be in play for various types of loans and my guess is they’ll be the product of choice as long as they’re available. There is lots of conversation too about appraisers technically focusing on the outside but also getting information about the inside of the home through photos and video. Here is a table Fannie Mae published on Monday show what is possible, but we’ll have to wait and see how it all unfolds in the local market. 

Keep in mind the lender sets the tone here and it’s not up to the appraiser to decide whether to do an exterior-only appraisal or not. However, an appraiser needs to believe a credible value can happen with a more limited scope of work, so appraisers won’t blindly say YES to an exterior-only appraisal if there’s not enough information. Lastly, just because a lender or AMC asks an appraiser to do something doesn’t mean the appraiser has to say yes.

3) Time: It’s going to take some time to see how this all shakes out. We’ll know much more in coming weeks. For instance, we haven’t heard from FHA yet.

4) Practical tips for real estate agents: It might help to take extra photos or video of a home before you list just in case it comes in handy for the appraiser. You might also consider being ready to talk with the appraiser about things such as layout, interior charm, age of improvements, quality of finish work, or anything you might understand more fully by actually walking through a home. If an appraiser is doing a desktop appraisal, I’m not certain the appraiser will call you or not, so you may want to include extra details in your MLS descriptions. This of course isn’t anything new because sharing property details is useful in any market. Please consider using my Appraiser Info Sheet to help tell the story of the property.

5) Private appraisals: If you are looking for a private appraisal, I can’t recommend enough being willing to color outside the lines. Would it be ideal to have the appraiser observe the interior in person? Yes. But during this pandemic it’s important to work with what we have and keep everyone safe. I have private clients who are working with me to use FaceTime to walk through a property (or the Google Duo app for an Android). I also have clients who have sent me 50+ photos of the interior and a very detailed written or verbal description of the property. Of course some appraisals for complex properties or geared toward court might need to wait.

6) Questions for appraisers: I’m not trying to ruffle feathers, but I think we’re at a place where it’s critical for appraisers to strongly consider whether they should be going into occupied homes. I have the utmost respect for peers, and that’s why I want to bring this up. So I ask, where is the line for us? At what point would you personally begin to pull back? How bad would it have to get? When is it deemed too risky for you and others? If you aren’t visiting your friends and family right now out of precaution, is it okay to go into homes of other people’s friends and family? I realize these questions are direct and there is also a cost to saying NO, but we have a serious situation going on right now. I have definitely lost business lately in light of saying NO to private clients, but that’s okay for this season. I don’t mention this to be combative and I hope to not be fielding angry emails all day. I love my peers and I’m concerned that we’re being asked to go inside homes right now. My strong opinion is we need to stop inspecting the interior of occupied homes. But put more lightly I’d say I think we’re at a place where appraisers need to show resistance to lenders for the sake of public health. Lastly, I realize not all areas of the country are the same in terms of COVID-19 cases (just in case you were ready to destroy me).

A few closing things.

Zoom session: If you want some background noise while quarantining, here’s a Zoom session I did yesterday hosted by KW Elk Grove. We talked about market stats, trends, and then fielded questions. It seemed like most questions were about how to see the current market and choosing comps. This is 100% off the cuff. Enjoy if you wish. Watch below or here.

New market update video: Here is a new market update video from two days ago. This is 20 minutes. Watch below or here.

Fresh daily visuals: During this pandemic I’ve upped my stats game and I’m finding new ways to visualize how the market is moving. Here are four images I’m updating every single day. If you have ideas for images too, I’m open ears. Remember, it’s tempting to focus on prices, but we see change happen first in the listings and pendings.

I hope this was interesting or helpful. Thanks for being here.

Questions: If you work in real estate, what types of appraisals are you seeing happen? If you are an appraiser, what’s your take on interior inspections?

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Buying an island, uncertainty, & pendings

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If you’ve ever wanted to buy an island to feel like a king or queen, here’s your chance. This just might be perfect for social distancing too, right?

I wanted to start out on a light note today because news has been so heavy lately. Anyway, this 18-acre parcel is located in Stockton, CA and it’s listed for sale at $40,000. I’m guessing it’s going to get bid up, but we’ll see. The listing says the zoning is AG40 and you can use it for boating, camping, fishing, etc… Photos shared with permission by Realtor Monte Morris. WATCH video here.

I jokingly verbally offered $500 for this island, but I was laughed off. Haha.

Quick advice about land: If you ever do buy a big (or small) chunk of land, be sure you call the city or county to verify what zoning allows for the particular parcel. What can you do with it? Or in real estate terms, what is the highest and best use? I would definitely not rely on the zoning listed in Tax Records either as that might not be correct. I would 100% find out details such as allowable uses, whether it is buildable, how often it is underwater, etc…

Okay, now to market stuff.

Uncertainty in 2020: I put out a new video called Uncertainty in Real Estate to talk through recent trends and all the uncertainty we’re feeling right now. I unpack where we’ve been in 2020 and some of the things to consider right now during the COVID-19 pandemic. It’s about 30 minutes, so maybe listen in the background while working (or self-quarantining). Start the video at 12:00 if you want to get to more focused pandemic thoughts.

A new pending visual: Here is a new graph I’m going to be updating as often as I can. Do you like it? This visual only goes through the 12th of March so it doesn’t capture this past weekend yet. My sense is we need to wait about a week or maybe more until all data are present before trying to see the trend. Otherwise if we post too soon it can actually be misleading.

The market is still alive: Over the past weekend we saw strong pendings in the Sacramento Region. Pendings were just about the same as the previous weekend, but down slightly. I heard lots of stories about multiple offers too and technically 55% of all pendings had more than one offer according to MLS stats. As of today MLS shows 192 pending sales in the region compared to 210 the previous weekend. When I made this graph yesterday MLS showed 178 pendings, but I didn’t feel like updating this chart again. Yeah, call me lazy. For now pending sales have been higher in 2020 compared to last year, but the x-factor is what happens from this point forward.

UPDATED:

SPIKE IN CANCELLED LISTINGS: I just ran cancellations and it looks like there has been a spike in recent days. This is something to watch. Keep in mind some sellers will absolutely be taking their homes off the market. Some won’t. I wouldn’t make this the primary data point for what the market is doing, but it is a telling factor. Stay tuned. I’ll have more visuals soon. Per MLS “Cancellation of a listing means that the listing agreement is cancelled”. 3:00pm 3/18/2020

SPIKE IN HOLD STATUS: There has been a huge spike in properties on “hold” in MLS. This status basically means homes are removed from the market and they can be placed back Per MLS “Hold means that the listing contract is still valid, but the seller has requested that the marketing be temporarily suspended.” 3:45pm 3/18/2020

I hope that was interesting or helpful.

Questions: Would you buy this island? What are you seeing out there in the market right now?

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The blazing hot market & uncertainty

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The market has been white hot, but there is also lots of uncertainty right now too. Let’s talk about this and take a deep dive into the latest stats for those interested. I’d love to hear your take in the comments.

A few things I want to mention:

1) Layers: There are many layers that make the housing market move and sometimes unexpected things happen. Who would have thought we’d be talking about rates at 3% or a virus?

2) Dumpster fire: Social media is like a raging dumpster fire right now in light of coronavirus posts. It’s been unreal, so I’ve had to distance myself from scrolling too much. Can you relate?

3) Keeping my blog name: This won’t become the COVID-19 Appraisal Blog, but we’ll talk about the virus as needed as it relates to housing. No fear. No hype. Objective thoughts and analysis. Ultimately it’s important to have honest housing conversations and consider things that could affect the future.

4) Be at peace: I’m profoundly aware of the need to remain calm and have a sense of peace, but I’m also aware that probably won’t happen by accident. This might seem odd to mention, but I want to encourage everyone to find ways to cultivate peace right now in uncertain times. If you need ideas too, reach out. This is way more important than anything else I talk about, which is why I’m mentioning it.

Anyway, that’s what’s on my mind. Now for those interested let’s take a deep dive into local housing trends.

—–——– Big local market update (long on purpose) —–——–

This post is designed to skim or digest slowly.

THE SHORT VERSION:

  • Prices are back to summer
  • Has coronavirus affected the market?
  • Watching for a coronavirus effect
  • Lack of confidence
  • More competitive at lower prices
  • More multiple offers
  • The market is accelerating
  • Mortgage rates & Debbie Downer
  • You still have to price it right
  • Sales volume is lackluster
  • Back to the nominal peak
  • More visuals for surrounding counties

DOWNLOAD 90 visuals: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

THE LONGER VERSION:

Back to summer: The median price in Sacramento County jumped $20,000 from January to February. I know that sounds sensational to see a $5.3% increase, but keep in mind the median price was $385,000 at the height of summer last year, so the bigger story is we basically got back to where summer was plus a few percent. It’s pretty common by March or so to see the median price back to where it was during summer, but in a more aggressive year this can happen in February. On paper the market is glowing, but the big elephant in the room is the coronavirus, so let’s talk about it.

Has coronavirus affected the market? Someone called me yesterday and asked if coronavirus has affected the housing market. I wrote about this last week and I basically told the guy we don’t have any real data yet. So far in Sacramento this year the market has felt competitive and any threat of an outbreak has seemed to be hampered by the sexiness of low mortgage rates. However, we haven’t really had many COVID-19 cases manifest locally and people haven’t been too concerned. Though this week social media began to panic and it seems like we’ve reached an inflection point as events get cancelled, people are practicing social distancing, and familiar faces like Tom Hanks have the virus. In short, it seems like many people have shifted to take this more seriously and in terms of real estate that’s something that could easily affect buyer and seller behavior in coming time. I realize a focus on real estate right now seems trivial when talking about a pandemic, but that’s what my blog does. In short, let’s pay closer attention to the stats in coming weeks especially.

Watching for a coronavirus effect:  If we’re looking at recent sales, it likely won’t show us an effect of the coronavirus because sales tell us what the market used to be like when properties got into contract 30 to 60 days ago. If we begin to see an impact it’s going to start with what buyers and sellers are thinking right now, which will translate into what they do. Thus it’s important to listen for seller and buyer sentiment and to watch whether sellers are listing their homes and whether buyers step aside with a “wait and see” stance. More specifically, I recommend watching the number of new listings hitting the market, expired listings, price reductions, the number of sales happening, days on market, the number of pendings, number of multiple offers, credits being offered, etc… It’s tempting to look at prices as a gauge for any COVID-19 effect, but prices are the last place a trend shows up.

Lack of confidence: The big deal happening right now is consumers are losing confidence. On one hand the stock market doesn’t technically mean much for most buyers trying to qualify for a mortgage because their income isn’t based on Wall Street. But losing money in a 401K over time can certainly lead to less confidence about making other big financial decisions. So far the housing market has felt hyper-competitive this year locally because of low rates, but that can change quickly depending on how consumers feel about the economy, job market, and of course health. I know, housing is a need, so it’s different than choosing whether to eat out right now or not. But it’s also true buyers and sellers don’t always feel the need at every moment to pursue buying and selling. Like I said last week, markets don’t like uncertainty, so infusing more uncertainty into the economy and housing market is a big deal for how the market feels and what the market does. In all of this we’d be wise to avoid hype and sensational ideas. Let’s look to data to inform our perception of what is actually happening.

Okay, back to some stats.

More competitive at lower prices: Buyers know this. It’s been hard to get into contract lately – especially at lower prices where the market is more aggressive. Let me show you this with a bunch of yellow dots representing the sales price to original list price ratio. If you’re not familiar with this metric, when a property sells at 100% it means it sold at exactly the price it was listed. Likewise when the ratio is 103% it’s a sign a home sold three percent higher than the list price. Anyway, when looking at all February sales there are more properties selling above 100% at lower prices. This tells us homes are getting bid up more at lower prices. Duh, thanks Captain Obvious. I know this isn’t a surprise, but it’s fascinating to see visually. Here’s a big takeaway though. NOT everything is selling for more than the list price – even at lower prices. I know it doesn’t seem that way in the trenches of escrows, but there is no denying this reality when looking at the stats.

More multiple offers this year: This has been the most aggressive beginning of the year in several years. Technically the market saw 27% more multiple offers this year compared to last year at the same time.

The market is accelerating: For a long while I’ve been talking about how the market is slowing because that’s what the stats were showing, but I’m changing my tune because the market is accelerating again. Here are two images to consider. When we look at the median price in the region based on the previous twelve months, price growth has clearly tapered. It’s like you’re driving on the freeway and you take your foot off the gas pedal. You’re still moving forward, but you’re not going as fast. But when we look at the past 90 days in each respective year it’s obvious the market is starting to accelerate again.

SLOWING TREND:

SPEEDING UP LATELY:

Mortgage rates & Debbie Downer: This year the market has felt dramatically different than last year and the culprit is low mortgage rates. Having rates between 3 to 3.5% has been like injecting a steroid into the housing market because it’s made things super competitive. For some it’s helped create more affordability or at least incentive to get into the game, but this also artificially inflates prices and it’s not sustainable. I know I sound like Debbie Downer, but such low rates are a bit like injecting Cortisone into a bad hip. It feels good for a while until it wears off.

You still have to price it right: It’s tempting to think the market is so aggressive that you can price however you want. Nope. It’s still a price-sensitive sellers’ market. Even though it feels crazy right now due to low rates, buyers are still in tune with prices and not willing to offer any price out of desperation. Case-in-point: Here is what just about every neighborhood looks like. The longer a home is on the market, the further it tends to sell from its original price. It seems in most areas bidding wars happen in the first seven days and if the market is not biting at your price you better give serious consideration to doing a price reduction. If the market is speaking, it’s time to listen.

Sales volume is lackluster: Prices have been glowing and we’re seeing multiple offers, but sales volume is lackluster. On in more positive terms we could say the number of sales is pretty normal – but definitely on the lower side of normal. In the region we seem to have a new rhythm these past two years of 26,000 sales, but that’s clearly down from 28,000 in previous years (see image). Some say more new homes is the reason, but new construction hasn’t been that robust. Moreover, sales volume started to suffer as soon as mortgage rates shot up in 2018, so to me lower volume has more to do with buyers backing off (and affordability). With that said, we’ve been seeing fewer listings this year especially, so over time this can lead to fewer sales too.

Back to the nominal peak: The median price is officially back to where it was at the peak of the market in 2005. This honestly doesn’t mean anything because there isn’t any formula for the market where a “pop” or change happens when reaching a certain price level. But as a guy watching data closely for so many years, the numbers geek in me has been waiting a long time to see this happen. But again, it doesn’t mean anything. Technically when comparing value today with a date in the past it’s important to factor in how the value of the dollar has changed over time. If we use an inflation calculator the value of the dollar in 2005 at $395,000 would actually be worth $520,000 today. This is seriously anal and most people could care less about this technical conversation, but I wanted to mention it because it’s worth knowing. Also, I’ll hopefully avoid persecution on Twitter from the economics community. For me there is a practical takeaway here though because you’ll not hear me say stuff like, “Values are back to 2005”. Nope. Technically they’re not. But the nominal price is back to 2005, so that’s why I say things like, “Prices metrics are back to where they used to be.”

I could write more, but let’s get visual instead.

Thanks for respecting my content: Please don’t copy my post verbatim or alter the images in any way. I will always show respect for your original work and give you full credit, so I ask for that same courtesy. Here are 5 ways to share my content.

Please enjoy more images now.

SACRAMENTO REGION (more graphs here):

SACRAMENTO COUNTY (more graphs here):

 

PLACER COUNTY (more graphs here):

 

EL DORADO COUNTY (more graphs here):

DOWNLOAD 90 visuals: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: What stands out to you about the market right now? What else would you add? What are you hearing about coronavirus?

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Coronavirus & the housing market

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The world probably doesn’t need another coronavirus real estate post, but here we are. Over the past week I’ve had countless conversations on the topic so I wanted to share some thoughts. How might the coronavirus affect the housing market? Here are some things to keep in mind.

Things to consider about the coronavirus & real estate:

1) Uncertainty: Markets don’t tend to like uncertainty. It’s been true in the stock market over the past week and it’s true in real estate also.

2) Severity matters: If this virus doesn’t spread much there might not be much effect on the housing market. But if it begins to spread in mass it’s easy to imagine sellers postponing listing their homes and buyers choosing to sit on the sidelines. Ultimately as we consider the immediate future there’s a huge difference between having a handful of coronavirus cases versus a devastating outbreak like the movie Contagion (probably not a helpful film to watch right now). Keep in mind if we’re dealing with something that ends up being very temporary it’s not likely to have a lasting effect.

3) Consumer behavior: One of the most relevant things to consider is whether the coronavirus starts to affect consumer behavior and confidence. No matter what you think about this whole thing, if people begin to postpone or halt financial decisions, that’s when it can begin to matter more for the economy and housing market. Let’s remember many buyers are already struggling with a feeling of hesitancy about the market, so for some the coronavirus could end up magnifying that feeling. Are consumers going to dine out fewer times? Will they stop buying stuff? Will they sit on the sidelines of the real estate market to wait and see what happens? We’re at the beginning stages of this and we’ll have answers to these questions over time. Obviously if there was a massive outbreak though it wouldn’t be a surprise to see the housing market stall or decline. In case you wanted to follow consumer confidence closely, here is a source tracking it daily (found via Len Kiefer):

4) Swine Flu & Ebola: Someone asked if I had any market stats from previous decades when we dealt with SARS, Ebola, or Swine Flu. No, I don’t. The struggle with these examples is we didn’t have a local epidemic, so there wasn’t any real impact on the market. 

5) The economy: One of the more gloomy elements to watch is the Chinese economy as well as our own. Some writers are talking about the potential for a worldwide recession in light of how tied the world is to China. That’s a sensational idea bound to get lots of attention. Is it real? We’ll see what happens.

6) Rates doing the limbo: In the midst of this we’re seeing mortgage rates drop and some are saying they’ll continue to dip. I’ve even heard claims they could drop below 3%. That would be insane!! So if anything it’s possible we could still have a very competitive real estate market in the immediate future. As a side note, it’s actually been an aggressive start to the year in terms of price growth in Sacramento and I’ll have more thoughts on that next week. For now buyers and sellers seem more focused on low rates than the coronavirus, but let’s keep watching because that could change.

7) Sifting data: Hopefully this will all blow over and we won’t have any worst-case-scenarios play out. If you want to watch real estate data though, be sure to pay attention to the number of listings and sales volume – not just prices. Remember, prices are the last place we see change show up even though it’s usually the first place we look. In other words, we see a market shifting first in consumer sentiment, what is happening with listings, whether homes are selling, and then eventually down the road with price changes. So like I always say, the trend happens before we see it in the prices.

8) Peace: On a personal note, I hope you find peace in coming time no matter what happens in the future. If you’re feeling stressed by all these conversations, maybe get intentional about filtering information and finding ways to add peace into your life.

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

Questions: What are you talking about in coronavirus conversations lately? What are buyers and sellers saying? Anything to add? What did I miss?

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