10 quick things to know about Sacramento’s housing market

Competitive. Normal-ish. Price sensitive. These are all words that describe Sacramento’s housing market right now. Let’s take a look at some of the latest trends so we can better understand and explain how the market is unfolding.

Two ways to read this post:

  1. Scan the highlighted text and graphs quickly.
  2. Grab a cup of coffee and spend a few minutes digesting what is here.

If you want an email with all graphs in this post for free, fill out the form below:

free graphs by sacramento appraisal blog

1) Prices have seen a normal-ish seasonal uptick:

price metrics in sacramento county

The market is showing a fairly normal and steady seasonal uptick in price. Whether you look at median price, average sales price, or average price per sq ft, there has been an increase in recent months. The market has seen about a 4% increase in prices over the past four months, yet at the same time many are describing the market as fairly flat since some neighborhoods are not seeing much of an uptick at all. Remember that just because county-wide stats show a 4% recent increase does not necessarily translate into 4% value increase for each property.

2) Houses are taking about one week longer to sell:

CDOM in Sacramento County - by Sacramento Appraisal Blog From April to May, sales took about one week longer to sell in Sacramento County. In contrast, Placer County and the Region showed very little change in cumulative days on market. Generally speaking, the more expensive the property, the longer it is taking to sell. Overall, the market is price sensitive, which means if properties are not priced correctly, they are sitting. Expect this trend to continue so long as inventory increases in coming months.

3) Inventory increased only slightly from April to May:

median price and inventory since 2008 - by sacramento appraisal blog

Housing inventory increased from 1.80 months to 2.0 months in Sacramento County from April to May 2014. Inventory is still very low, which is making competition aggressive in certain price ranges.

4) Not every price range is showing the same trend:

months of housing inventory by sacramento appraisal blog

number of listings in sacramento - by home appraiser blog

Different price ranges experience different trends. This is clearly seen since inventory isn’t the same at every price level.The market is very competitive under $300,000 right now, but anything above $750,000 is far less competitive. There was little change from last month for properties under $500,000, though above $750K saw some increases. Take the 24 months of inventory above $1,000,000 with a grain of salt since there were only 3 sales in this price range last month, but there are 20 or so pendings right now. Ultimately this million-dollar stat is skewed, but it’s still safe to accurately say there is one year or more worth of houses for sale above $1,000,000 in Sacramento County.

5) Volume is down by 15% from last year, but similar to last month:

sales volume in Sacramento County

Sales volume is down compared to last year, but sales in May were about the same compared to April. In the next few days as more sales are entered into MLS, I suspect sales volume for May will increase beyond volume in April. After a very sluggish start to the year in terms of sales, it’s nice to have two consecutive months of more than 1400 sales. Of course volume is still significantly lower than previous years, and that is something to continue to watch over time.

6) Cash sales have been declining for one year now:

Cash sales since 2009 in Sacramento County by sacramento appraisal blog

Cash sales used to represent closer to 35% of all sales in the county just one year ago, but now they’re only 19.5% of all sales (for April & May 2014). Cash investors were a very significant driver for the market, but now the market is no longer being driven by cash.

7) FHA & conventional sales are both showing increases:

FHA and cash sales in Sacramento County by sacramento appraisal blog FHA and cash sales since 2009 in Sacramento County by sacramento appraisal blogWhen cash investors took their foot off the gas pedal one year ago, it got much easier for FHA and conventional buyers to get into contract. The market is still very competitive since inventory is low, but owner occupant buyers have much more of a fighting chance these days.

8) Distressed sales continue to be sparse:

REOs and Short Sales in Sacramento County REOs and Short Sales Percentage and Volume in Sacramento County

Both short sales and REOs have decreased dramatically in recent years and are definitely not driving the market. Banks are tending to spend more time and money fixing up their REOs, while short sales are often still priced aggressively low. REOs have shown a slight uptick recently (especially considering the most recent “quarter” is only comprised of two months of sales. This isn’t anything to write home over per se, but something to watch over time to see how it evolves.

9) Interest rates decreased slightly last month:

interest rates by sacramento appraisal blog

Interest rates showed a slight decrease over the past month, and that is something that will help prices be slightly more affordable. In light of massive price increases over the past couple of years, affordability is becoming a challenge for many buyers.

10) “Layers” to watch over the next two quarters:

layers of the market since 2008 sacramento county - by sacramento appraisal blog

layers of the market since 2001 sacramento county - by sacramento appraisal blog Median price & unemployment in Sacramento County

The real estate market has many “layers” that impact value. Last year the market was heavily influenced by interest rates, cash investors and incredibly low inventory, but things have shifted in 2014. Right now some of the main drivers to watch over these next two quarters are the job market, interest rates, inventory and affordability. Local real estate can no longer be so heavily driven by outside cash investors, which means it will be more sensitive to the health and strength of the local economy. Prices increased over the past two years, but not because people are making more money. How does that strike you?

Summary: Our market has slowed down quite a bit from last year. The market is still competitive, but it is very price sensitive. Real estate is still “hot”, but it is definitely cooler than last year in that days on market has increased, inventory doubled, interest rates are higher than they were, and cash investors are much less of a factor. By the way, I’ll share more Placer County and regional trends in a few days.

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Questions: How else would you describe the market? I’d love to hear your take.

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5 things to know about appraisers choosing comps

What makes a good “comp” for an appraiser? Are there certain guidelines appraisers have to follow when choosing comparable sales? Let me share with you five principles to know about stemming from the Fannie Mae Seller’s Guide (pages 597-598). This can help you understand some of the guidelines appraisers use when choosing comps, as well as give you some direction in case you are planning to share sales sales data (comps) with the appraiser during the inspection.

how to choose comps - sacramento appraisal blog

5 things to know about comps straight from Fannie Mae

  1. Bare Minimum: Appraisers must use at least 3 closed sales as comps.
  2. One Year: Comps need to have sold within the past 12 months, though an appraiser can make an exception if there is a good reason to use older sales (custom home, no truly recent competitive sales, etc…).
  3. Subject as Comp Four: The subject property can be used as a 4th comp if it sold recently. This might seem strange, but I’ve done this before when sales were extremely limited.
  4. No 90-day Rule: Appraisers do not have to use sales in the past 90 days. If there are better comparable sales (but older), the appraiser can certainly use those instead of using less similar newer ones. In fact, when speaking of comp selection, Fannie Mae gives the following example: “It may be appropriate for the appraiser to use a nine month old sale with a time adjustment rather than a one month old sale that requires multiple adjustments.” Of course many lenders do have a 90-day comp guideline, which makes it seem like appraisers need to use this guideline, but it’s really not a Fannie Mae rule.
  5. No One-Mile Radius: There is no such thing as a one-mile radius from Fannie Mae. Many lenders want appraisers to stay within a one-mile radius for comps in a suburban area, but that is NOT a Fannie Mae requirement. Appraisers should use the most competitive sales available. Bottom line. The question then becomes, “how far should an appraiser go for comps?”, but the better question is, “where should an appraiser go for comps?” Sometimes tracking down the best available comparisons means staying within a few streets, while other times it might mean traveling multiple miles away. A one-mile radius can actually be a dangerous way to search for comparable sales anyway because you could easily have many different markets within one mile (this is why I use the polygon search in MLS). When appraisers or real estate agents use the wrong sales for comparison, it’s easy to have an off-base value or price. If you want to gauge comparability, ask yourself the following: Would a buyer likely purchase this “comp” if the subject property was not available? Is this “comp” located in the same neighborhood or a truly competitive neighborhood? Do you think other people in the market would consider your sales as comparable to the subject property?

A quick video on the “one-mile radius” I shot a while back. Watch below (or here):

Private appraisals may be different: Fannie Mae and lender rules do not apply to private appraisals for divorce, estate planning, tax grievances, pre-listing, etc… Some of the guidelines are reasonable of course in that appraisers ought to use the best sales available, but otherwise appraisers do not wear the lender’s leash for private appraisal work. For instance, I had over a dozen divorce appraisals last month, and my reports didn’t have to explain to a lender why some sales were outside of a 90-day time period. I simply used the best sales to help illustrate the market. Bottom line.

Question: Any stories, insight or questions? Please comment below.

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A radio interview with a Sacramento appraiser on Money 105.5 FM

Money 105.5 in Sacramento - Interview with AppraiserI did a radio interview last week on Money 105.5 FM in Sacramento, so I wanted to share. My part of the interview is a good 30 or so minutes, so it’s perfect for some background noise while working. They asked me about how I became an appraiser, blogging, how I recovered after nearly all my clients went out of business after the real estate bust in 2005, market trends in Sacramento, overbuilt homes, low appraisals, etc… The entire interview is contained below, but my segment starts at 10:18, which is where the video will start when you push the play button. Thank you Antonio Lopez of Summit Funding for the invite. Listen below (or here). Enjoy.

Thanks for listening.

Radio interview with Antonio Lopez Ryan Lundquist Carolyn Ewing

CHALKBOARD GIVEAWAY: Remember there are just a few days left in my repurposed real estate sign giveaway. All you need to do to enter is leave a comment on this post or share the post online.

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The big and little story of inventory in Sacramento

Do you want to see the market? Let’s look at some specific price ranges in a few local counties. I know many readers are outside of Sacramento, so I’m curious if these trends are anything like your market. Overall inventory declined this past month, which is common during Spring. Properties are still selling quickly, though definitely not as fast as last year.

Quick: I suggest scrolling down to your primary county and taking a minute to digest the latest trends. Or check out my video with commentary here or below.

Sacramento County:

number of listings in sacramento - May 2014 - by home appraiser blog

months of housing inventory by sacramento appraisal blog

days on market for april 2014 by sacramento appraisal blog

Talking Point: Inventory is very thin in Sacramento County right now and properties under $300,000 are tending to sell more quickly than higher-priced listings. Remember too there are many more listings and sales in Sacramento County each month compared to many surrounding counties.

Placer County:

number of listings in PLACER county - May 2014 - by home appraiser blog

months of housing inventory in placer county by sacramento appraisal blog

days on market for placer county by sacramento appraisal blog

Talking Point: Inventory is a tad higher in Placer County compared to Sacramento County, though it is still very low. There really isn’t much for sale under $300,000 when looking at the entire market. High dollar homes are definitely taking longer to sell than the lower half of the market (which is normal).

Sacramento Region:

number of listings in Placer Sacramento Yolo El Dorado county - May 2014 - by home appraiser blog

months of housing inventory in sacramento region by sacramento appraisal blog

days on market for sacramento region by sacramento appraisal blog

Talking Point: The higher the price, the longer it took to sell last month (generally speaking). Listings below $200,000 are definitely shrinking. Have you noticed how the quality of homes available at the low end has really changed over these past months? Options for first-time buyers to get into a good quality home under $200,000 have definitely diminished lately.

My Video: Check out my commentary on housing inventory below (or click here):

More Placer County by Request: I’ll be sharing a bit more Placer County trends in light of many requests. I’ll also be taking a wider focus at times to discuss the overall market in Sacramento, Placer, Yolo & El Dorado County. Graphs will always be clearly labeled. Sound good?

Question: What stands out to you from above?

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