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Cost vs value, Johnny Cash, & an explosion of murals

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Last week was a heavy post, so this week I have something quick and light. I wanted to share a perfect cost vs value example and then look at a few murals – particularly the Johnny Cash mural in Downtown Sacramento.

Record price: This contemporary home in Sierra Oaks Vista just sold for $5M, which is the highest residential sale ever in Sacramento County. I know it surprises some that we haven’t seen loftier sales, but let’s remember Sacramento isn’t the Bay Area despite being close.

Cost vs value: This house cost ten million dollars to build, but the market only paid half that. This is a striking example that just because an owner spent money doesn’t mean buyers will. Keep in mind there were two previous listings below six million for nearly two years of market exposure, so this home wasn’t given away.

Big takeaway: Just because you spend a dollar doesn’t mean you’ll get a dollar back in value. Cost doesn’t always translate to value, and this is the perfect example. More on the myth of dollar for dollar here.

EXPLOSION OF MURALS

Many cities across the country are seeing an explosion of murals lately. In Sacramento there’s been a concerted effort to paint the town with an emphasis called Wide Open Walls. This isn’t just Midtown or Downtown either as art is starting to spread to other portions of the region. If you want to see local murals, here’s the most exhaustive mural map out there.

Johnny Cash: Artist Shepard Fairey unveiled a 15-story Johnny Cash mural last year. This mural commemorates the 50th anniversary of the At Folsom Prison album (which I have on vinyl), but it also highlights the need for prison reform. Thank you to local photographers Dan & Vicky for letting me use these images.

Johnny Cash mentions in MLS: If you didn’t know, Folsom is a city in Sacramento County, which means Johnny Cash recorded his album locally. As a side note, “Johnny Cash” is mentioned seventeen times in MLS listings. It would be cool if the mentions were due to Mr. Cash making the real estate market move, but that’s just not the case. In every instance the mentions have been associated with the Johnny Cash Walking Trail. Yes, there’s a walking trail on the outskirts of the prison property. 

A few other cool murals: Thanks to John Adair and Vicky for letting me use some of your mural pictures.

One more. This isn’t in Sacramento, but it’s one of my favorite murals. I snapped this photo in Downtown Los Angeles a couple years ago. It’s called Our Lady of DTLA. I like how it canvases the housing units instead of being located on some random alley like many murals.

I hope you enjoyed this. Have a wonderful 4th of July!

Questions: What do you think about all the murals? Do they add value or make any difference for a neighborhood?

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My blog is 10 years old today

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It’s been ten years. I started this blog on February 20, 2009. I can’t believe it. The real estate market was way different then and so was my life. I have two things on my mind today.

1) THANK YOU

I’m so grateful for this past decade. I’ve had a blast and I’ve learned so much from our conversations through the years. I know it sounds dramatic, but my business and life have changed. My kids are now teenagers, my beard has way too much gray for my age, and I feel like I’m now surrounded with a tribe of such supportive people. Our conversations have led to many opportunities, weekly presentations in real estate offices, and doing the type of work I want to be doing. Thank you for adding joy to my life (that sounded way too Marie Kondo).

2) THINGS I’VE LEARNED ABOUT BLOGGING (AND LIFE)

1) Progress is impossible without effort: It’s impossible to make progress if you don’t put yourself out there. In other words, I wouldn’t be at ten years today without my first lame post.

2) You can’t please everyone: It’s impossible.

3) It’s not easy to be brief: Yep. Sorry. Nothing more to say about that.

4) Consistency: One of the most important things is being consistent. This is true for blogging and it’s true for anyone trying to reach others with a message. People say to me all the time, “I could never do what you do because I’m too busy.” I get it. But here’s the thing. We’ll never get results unless we commit to being consistent – no matter how busy we get.

5) Relationships: Ten years ago I started this blog as a way to earn business, and that definitely happened. But most of all I earned friendships.

Thank you for hanging with me for these years.

BLOG BASH: Just a reminder my wife and I are hosting a party at Yolo Brewing on Saturday March 2nd. It’s an excuse to get together and you’re invited. It’s okay if we’ve never met too. I’ll be buying the first 100 beers. Details here.

Question: What is one thing that is different about your life since 2009?

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Being neutral, price per square foot, and the Governor’s new digs

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I have a few things on my mind. Let’s talk about me being asked to recruit for a brokerage (really), price per sq ft, and the Governor’s new digs.

1) WHY I SAID “NO”:

A brokerage recently asked me if I would help them recruit agents. The idea was I could use my influence to attract agents to a certain brand and then get a commission for each person I recruited.

I said NO, and my answer will always be NO. I probably don’t even need to mention this, but I want to communicate clearly. As an appraiser I won’t take sides. I’m neutral in my work, but my independence also extends in the way I interact with the real estate community. This is why you’ll see me speaking in many different places and real estate offices. I’m here to educate, not advocate. The truth is if I said yes I would’ve instantly destroyed my credibility.

2) PRICE PER SQ FT:

Here’s a look at price per sq ft trends in a few local areas. I plan to share more graphs like this throughout the year if people like them. Does anyone want to see a video tutorial for how to make these? Let me know. What do you see?

Two Takeaways:

1) RANGE: There’s always a price per sq ft range, which means there’s never just one price per sq ft figure that applies to every property in a neighborhood. Sellers often want to hijack a price per sq ft figure from a sale down the street, but that’s one of the quickest ways to overprice. My advice? Pay attention to price per sq ft, but most of all ask yourself what the comps are selling for. That’s exactly what appraisers are going to do.

2) OUTLIERS: There are clear outliers. As an FYI, usually the highest price per sq ft figures end up representing the smallest-sized homes or over-the-top unique properties.

3) THE GOVERNOR’S NEW DIGS: 

Gavin Newsom is the new governor of California and he just bought a $3.7M house in Fair Oaks. This price point isn’t much in many areas of the country, but it’s actually the fifth highest residential sale ever in Sacramento County. This home is said to have over 12,000 sq ft and it’s located on 8 acres. It’s near the American River, but not on the river. Now two of the top five sales in the county have a connection to a governor (the other was the mansion Ronald Reagan started to build in Carmichael in the 1970s).

Here’s a picture I took of the front gate this week, and here’s a video from a previous listing if you wish to see the home. Not too shabby, right?

Value thought: In the future we’ll have to consider whether there will be a price premium or not for this home because a governor owned the property.

CLASS I’M TEACHING: I’m teaching my favorite class at SAR called How to Think Like an Appraiser on January 31st from 9-12pm. We’ll dig deep into comps and adjustments (and have some fun). I’d love to have you come out.

I hope this was helpful or interesting.

Questions: Would you pay more if a governor previously owned the home? What do you think of my recruiting story? I’d love to hear your take.

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The real estate left behind after a fire

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Last month the Town of Paradise, CA was destroyed during the Camp Fire. The flames showed no mercy as they took lives and leveled nearly 14,000 homes. The devastation is simply unreal and hard to fathom.

Today I wanted to do a Q&A about the aftermath of this fire and what’s happening in the surrounding real estate market as a result. It’s sobering to know there are tens of thousands of people trying to figure out what to do and where to live, which is why this is important to talk about. I asked Parke Noble with California Appraisals to answer some questions since he’s a sharp guy based about 15 miles from Paradise. We didn’t talk about post-disaster appraisals because a different interview covered that, but I hope you find some insight here. And for reference, the Town of Paradise is about 90 or so minutes from Sacramento.

Ryan: I guess this is a heavy start, but what was it like to witness the Camp Fire? I know Chico is about 15-20 miles away.

Parke: I live in Chico, so my direct immediate exposure to the tragedy of the Camp Fire was from a distance; I can’t begin to imagine the chaos that those who witnessed the devastation experienced. And I can’t fathom the heartbreak that they continue to experience now that access restrictions for the Town of Paradise and the communities of Magalia and Concow have been lifted. Please keep in mind that although “open”, the Town of Paradise access is intended for those directly affected.

Ryan: Do you think people are going to rebuild in Paradise? Why or why not?

Parke: With regard to rebuild options, it has been my experience that less than 50% of those who lost their home intend to rebuild. Although the reasons are numerous, the primary concern has focused on the fact that as an aged demographic many survivors have indicated that they don’t want to spend the requisite time that it’s going to take to rebuild. They’re either attempting to secure a “turn key” option in neighboring communities or moving out of area altogether. Additional factors include a lack of qualified contractors and the fact that as a ridge community another fire could possibly occur in the future. On top of this we have to remember the lack of infrastructure in Paradise; no services. There is apprehension for those that do choose to rebuild. What if the town doesn’t “come back” and you’re left with a house without infrastructure?

Ryan: We’ve been reading reports about housing inventory being depleted in Chico because of the massive amount of Camp Fire refugees. Is that true?

Parke: Single family residential inventory in Chico has been dramatically impacted since the November 8th Camp Fire. Per CRMLS data, detached single family residential active listings numbered 252 on November 7th. As of December 4th that number had dropped to 91 offerings (-36%). That number had increased to 106 active listings as of December 19th.

Ryan: What do you see happening with prices in Chico right now? Is the market as aggressive as people are making it out to be?

Parke: Prices across every market segment have experienced substantial demand and consequently higher median resale prices. The current Chico market indicates sales 5-25%+ above list price. List price average increased +10% from November to December. Sale price average has increased 9% from November to December and days to sell declined from an average of 54 days in November to 19 days in December. As an example, a listing at $485,000 sold for $612,000 in three days with multiple offers. Ongoing sales above list are the market norm right now. 

Ryan: How long do you think this type of activity can keep up in the market? 

Parke: The current Chico market dynamic is vastly different from anything experienced in the past and was virtually an immediate impact with the sudden loss of about 14,000 homes in the Camp Fire. It’s unlike the consistent, sustained price creep and gradual inflation experienced in Chico in 2006-2007. This type of sudden market hyperinflation will continue as long as demand supports the small inventory. As a side note to ask appraiser peers: How will the sales during this period of artificial inflation be handled as comparables when these current conveyances don’t qualify as standard, arm’s length transactions?

Ryan: What advice would you give to sellers and buyers in Chico?

Parke: Depending on what side of the transaction you’re on, you’re either quite happy with the value increases or extremely discouraged. As with any market anomaly, there are parties looking to capitalize. Numerous active listings saw increases in asking price after November 8th. And the increases were absorbed by a desperate market willing to bear. Any advice for a seller and/or buyer would virtually be a moot point; the entire current market is a deviation from an outlier in an anomaly…..

Ryan: How would you go about valuing a property in Paradise right now?

Parke: Valuations in Paradise will be for vacant parcels. I can’t imagine attempting to demonstrate the influences/effects of such vast devastation on those residential structures left standing. An adequate data set does not exist at this time.

Ryan: You’re a numbers guy, so what numbers (or data) do you plan to watch over time to help you understand the market?

Parke: I’ll continue to track inventory, list-to-sale ratios, sale price averages, days on market, etc. Time will be required to collect and analyze.  

Ryan: Thank you so much for doing the interview. You killed it and I appreciate your time and insight.

Parke’s Bio: Parke Noble has been serving Northern California since 1997. Experience includes appraising single family residences, multi-family residential (2-4) units, in addition to condominium, PUD, manufactured housing, proposed construction, and FHA/HUD roster work. Additional experience in narrative reports, highest and best use studies and HUD Rent Comparability Study (RCS). Service area within Butte County. Parke is a graduate of Chico State University and he is originally from Sacramento.

I hope this was helpful or interesting.

Video Market Update: I made a Sacramento market update video yesterday to walk through numbers and talk through some trends. Enjoy if you wish.

Last Post of 2018: Merry Christmas and Happy Holidays from my family to yours. I’ll be taking the next week off and I’ll see you again in 2019. On a serious note, thank you so much for enhancing my life this year. I’m truly grateful to be connected and I’m honored you came with me on this blogging journey in 2018. It was a fun ride for me, and I hope it was for you too. 

Questions: What stood out to you most about what Parke said? Anything else to add? Also, do you have suggestions for where to donate to help Paradise residents? I’d love to hear your take.

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