Random Stuff

Becoming a real estate meme & the top and bottom of the market

January 18, 2022 By Ryan Lundquist 23 Comments

Do you ever feel like it’s going to be a good week? I’m definitely feeling that way as I finally got rid of a nagging cold that wouldn’t go away. I tested negative multiple times, so this really was a cold. But besides that, season four of Ozark is coming out on Friday, so I’m doing the happy dance. Anyway, here are a few things on my mind.

January public speaking gigs:

January 19: PCAR WCR
January 25: Residential Round-up 2022 (free)

FOUR THINGS ON MY MIND:

1) She became a meme: I was watching the 49ers and Cowboys play on Sunday and I knew right away this woman became a meme. In fact, during the game I tweeted this. To me this is a perfect expression to sum up buyers feeling exhausted in today’s housing market. Am I right? By the way, this isn’t a statement about the Cowboys, so please keep your hate mail.

A sad Dalls Cowboys fan used as a meme to say "Buyers in today's housing market"

2) Housing market temperature in one picture: I saw this picture the other day from Realtor Rico Rivera and I think it captures how competitive the market is right now. As I said last week, we just got done with the most aggressive housing market ever and we’ve started 2022 at a really competitive place. Anyway, real estate agents left their business cards on the kitchen counter and this property ended up having over 30 offers. What advice would you give to buyers about getting an offer accepted in a situation like this? I’d love to hear your take.

Graph of offers: By the way, getting 30 offers is wild, but thankfully it’s not common to have that many. However, it does happen. This visual shows the number of offers for the past 45 days of sales and how each property sold in relation to its original price. What do you see?

NOTE: Real estate friends, I appreciate when you input the correct number of offers in MLS because your data-entry matters for credible stats. My sense is we’re still getting an accurate reading about the overall trend, but I wish there weren’t as many zeros (obviously a sale had at least one offer).

3) Is it more aggressive at the top or bottom? I’ve been asked several times if the market is just as aggressive at higher prices compared to lower prices. What would you conclude by looking at stats? And what has your experience in the trenches shown you?

This table compares the percentage of cash sales, days on market, and the percentage of multiple offers by price range in Sacramento.

QUICK TRUTHS:

A) There is more cash at the highest prices.

B) There is more competition at lower prices as shown with more multiple offers and taking less time to sell. By the way, take under $300K with a grain of salt as there isn’t much in that range.

C) The higher the price, the longer it typically takes to sell.

In short, the market is freakishly competitive in EVERY single price range, but it’s technically more competitive at the bottom half of the market. There is more cash at the higher end, but that’s not a new trend because it’s been the case for years when I pull stats.

4) Since the bottom: Okay, last thing. If you wanted to compare the bottom of the market in 2012 with this past year, here’s some fresh stats for you. This is the annual median price each year (not adjusted for inflation).

A chart that shows the annual median price change in four counties in the sacramento region (compares 2012 with 2021)

I hope that was interesting. Thanks for being here.

Questions: What do you think of the meme? Any thoughts on the stats?

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My new sewer line adds huge value, right?

January 19, 2021 By Ryan Lundquist 33 Comments

A new sewer line. That’s what 2020 gave my family as a parting gift before the year closed. Yep, just before Christmas we had to replace our entire line at a whopping $13,688. I know that sounds crazy expensive, but we had four separate bids and went with the most reasonable one. In part it was so pricey because we had one hundred feet of line under eighty feet of concrete.

The good news is my house is worth $13,688 more now, right?

THE SHORT ANSWER: No.

THE LONGER ANSWER: Buyers expect things like sewer lines to be in working order, so they aren’t prone to pay a premium for a new one. Would some buyers pay a little something extra? Maybe. But I’m not holding my breath for much of a value add because buyers get more excited and swayed by the bling in a house rather than boring adult stuff like sewer pipes. After all, we don’t hear buyers say stuff like, “I want an open concept kitchen, hardwood flooring throughout, but I’m walking if the sewer line isn’t new.”

IF IT’S BROKEN: But if a sewer line is broken, that’s where it becomes more of a value issue since a traditional loan shouldn’t be able to fund without a functioning sewer line. Moreover, in most markets buyers would likely deduct for the expense and inconvenience of having to replace a line.

CLOSING ADVICE: Sellers, don’t expect buyers to pay dollar for dollar for every repair you do. Seriously, buyers expect certain things to be present and working. This is why they’re not going to look at my house and say, “Whoa, there’s a new sewer line? Let’s offer $13,688 more.” This is just how it works. And frankly if we were the buyers there’s no way we’d be paying cost either, right?

Anyway, here’s to indoor plumbing in 2021.

Thanks for being here.

Market update at SAR: I’m doing a big market update at SAR on January 21st from 10-11:00am. Sign up here.

Questions: Have you done any similar repairs recently? Have you ever seen a sewer line increase value? I’d love to hear your take.

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Condos, halfpipes, & cooling 2-4 units

October 26, 2020 By Ryan Lundquist 37 Comments

I have two compelling trends to share today, but fist let’s talk about a concrete halfpipe at an investor flip. I’d love to hear your take in the comments.

An investor friend just bought a house in Auburn with a halfpipe in the backyard. I’ll admit the middle school skater kid in me is stoked while the middle-aged man in me wants to relive my glory days… But what should Erin do as a flipper? Should she keep it or rip it out? Is this an asset or a liability?

This is a fun conversation, but there is a serious element here because investors come across interesting things all the time and have to make real-life decisions like this. So put your real estate cap on and let me know what you think in the comments.

Check out Erin’s Instagram (thanks for letting me share).

TWO TRENDS TO WATCH:

1) Condo sales are down 14.1% this year: I mentioned last month that condos haven’t been as popular and here’s a brand new visual to show what I mean. In short, buyers have been more focused on detached homes, which likely stems from wanting more space, privacy, and a larger backyard during the pandemic. Of course in the background low rates are a big factor because they give buyers more purchasing power (and thus shape what they can buy).

2) The cooling 2-4 unit market in Midtown: The single family market has been showing huge price increases in the Sacramento region, but the 2-4 unit market in Midtown isn’t the same temperature. When looking at the graph below do you see a flattening of prices lately? Does this surprise you?

This is something to watch and we have to keep rent control and eviction moratoriums on the suspect list when trying to understand this softer trend. Yet one of the bigger issues is these units have had massive price growth in recent years while rent growth has been slowing lately. Thus at some point when investors crunch the numbers it doesn’t make sense to pay more. For reference there isn’t an oversupply of listings in this market and demand is still strong.

Keep in mind other portions of Sacramento with lower-priced 2-4 units have still been showing an increase. These other areas have rent control too, which helps me think the flattening in Midtown is more related to flirting with a price ceiling.

Anyway, I’m thinking out loud and we need more time to see the trend. By the way, thanks to Brian McMartin and Franco Garcia for having conversations with me this week about this sub-market. I really value hearing what others are seeing out there as I run stats and interpret them.

Big point 1: The market isn’t the same everywhere.

Big point 2: Don’t take the trend in Midtown and project it on other 2-4 unit properties in the region. See point #1.

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

Questions: Should the halfpipe stay or go? Why? Any thoughts about the two trends I shared? I’d love to hear your take.

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Crazy contracts & condos are less popular

September 22, 2020 By Ryan Lundquist 17 Comments

I have two things on my mind today. Let’s talk about condos and then some of the crazy contracts we’re seeing happen right now. Then I have lots of visuals for those who are interested.

CONDOS ARE NOT ALL THE RAGE:

It looks like condos aren’t so popular these days. During the pandemic buyers have been saying no thanks and instead focusing on homes with more space. No matter how you look at it there are fewer condo sales happening, and that’s telling. If you’re not local, what’s happening in your area?

MARKET NOT COLD: One thing I want to clarify is just because condos haven’t been as popular doesn’t mean the condo market is dull or cold. Inventory is still sparse among condos, so don’t expect to get the deal of a century. In fact, there is not an oversupply of listings among condos at this time. Inventory is really tight.

CRAZY CONTRACTS:

It’s common these days to see the appraisal contingency removed and many buyers are even offering to pay above the appraised value (if it comes in lower than the contract price). Anyway, I’ve been getting lots of questions about this, so here are some thoughts:

1) Value is not found in the contract: The reality is value is found in the comps – not the contract. Technically the terms in the contract shouldn’t matter because the only thing that counts is comparable data. Of course I realize some appraisers are swayed by the contract, and that’s unfortunate. Ultimately if you find yourself worried about the terms, I’d recommend focusing instead on communicating well with the appraiser because the comps are the bigger factor.

2) Offering above the appraisal: When I see a contract that states the buyer will pay above the appraised value by a certain amount if the appraisal comes in lower, the practical part of me wonders if the buyer actually thinks it’s not worth what was offered. But since my job is to be objective, my curiosity about the buyer doesn’t mean anything for the appraisal. The bottom line is I cannot let that influence my perception of market value. Besides, offering to pay more might not be about the buyer’s perception of value at all. Instead it could be a strategy to get an offer accepted. And most of all, the comps are what matters – not what an individual buyer thinks about value.

3) Hiding information: I was asked recently if it would be OK to only give the appraiser the purchase contract without an addendum that had further terms. Look, I’m not a lawyer or broker, but from my perspective I’d ask that you please give the appraiser the entire contract instead of holding something back for whatever reason. In my mind when this happens it seems like the goal is to try to influence the outcome of the appraisal, and that doesn’t smell right. Let’s keep it transparent.

Anyway, this is a loaded topic. Lots of emotions. What are your thoughts? Any stories to share? Please do so in the comments.

MARKET UPDATE VIDEO: Here’s my latest market update where I unpack glowing rebound stats. Watch below (or here).