Appraisal

Have you ever met someone who looked really good on the outside, but the inside was a different story? That’s sort of like the housing market right now. Sales stats look super attractive, but if we really consider listings and other metrics we begin to see a different story. The market is slowing. Since it’s not always easy to explain that, here are a few analogies to help describe how important it is to look beyond just sales to gauge the temperature of the market. Then for those interested, let’s take a deep look at Sacramento trends. Any thoughts?

Examples to explain the market when it begins to slow:

1. First Date: A first date is all about putting your best foot forward, and that’s exactly why we usually need more than just one good date to make up our mind about someone (gotta be sure the person is not psycho). The same thing happens with real estate. Shining sales stats are like a first date because they lure us in and make us feel good. But we can’t really judge an entire market just by the sales. We need to consider listings and other metrics too.
2. Taking the Temperature in the Shade: If you take the temperature in the shade in the summer, you’re going to get a much different reading. The same thing happens in real estate where we can get the wrong temperature of the market if we only focus on sales instead of listings and other factors.
3. Judging by one Tweet: These days it’s easy to judge a person by one tweet instead of looking at their wider body of work (their life). The same thing happens in real estate when we only look at sales instead of listings and other stats. If our vision is too narrow, we might not see what the market is actually doing.
4. Pregnancy Test: I asked my author wife for an analogy and she said the market is like a pregnancy test (I wouldn’t ever have thought of that). You can technically be pregnant but an over-the-counter test won’t tell you that for a couple of weeks. Similarly, the market may have changed, but we may not see a price difference in sales for a month or two. But the change is definitely there when we look at listings and other metrics.
5. Pokemon: I’m just kidding. I won’t go there.

In a small way, I hope this was helpful. It’s very powerful to explain the market in different ways. Any other analogies to share?

—————– For those interested, here is my big market update  —————–

Two ways to read the BIG POST:

1. Scan the talking points and graphs quickly.
2. Grab a cup of coffee and spend time digesting what is here.

DOWNLOAD 80+ graphs HERE: Please download all graphs in this post (and more) here as a zip file. Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Quick Market Summary: On paper the market has been hot. We’ve seen all the normal stuff like price increases, slightly higher sales volume in 2016, and sparse housing inventory. If you didn’t know, the median price in Sacramento County is 105% higher than it was in 2012 and 16% lower than the peak in 2005. Distressed sales actually reached their lowest level since 2009 last quarter too. Cash sales volume has been hovering at a normal level while FHA sales volume has been declining. Overall the market is still really competitive, but it’s starting to turn. Keep in mind it’s common for real estate to lose some steam around mid-Summer. While the sales stats don’t show it yet, we see a slower market with the sales-to-list price ratio declining last month from the previous month, it took the same amount of average days to sell for the past two months in the region, and there has been a slightly more optimistic tone among real estate professionals about buyers getting into contract. While it felt utterly hopeless to get an offer accepted a few months ago in certain price ranges, it is starting to feel slightly more hopeful based on feedback from agents. Moreover, it seems like there has been growing price resistance lately (particularly at the higher end of the market). The market has been price sensitive all year as buyers are not fooled by absurdly high prices, but the sensitivity seems more heightened right now.

Sacramento County:

1. FHA volume has been about 24% of the market (it was nearly 27% of the market last year at the same time).
2. Cash volume is roughly the same as it was last year at the same time (around 16% of the market).
3. It took an average of 25 days to sell a home last month, which is 2 days less than the previous month (and 5 less days compared to last year).
4. REOs were only 2.9% of all sales last quarter (lowest level in years).
5. Sales volume is up very slightly Q2 2016 compared to Q2 2015.
6. There is only 1.38 months of housing supply in Sacramento County, which is 14% lower than it was last year at the same time.
7. The median price increased by 3.5% last month.
8. The median price is 13% higher than the same time last year.
9. The avg price per sq ft increased by 1.4% last month.
10. The avg price per sq ft is 9.7% higher than the same time last year.

Some of my Favorite Graphs this Month:

SACRAMENTO REGIONAL MARKET:

1. It took the same amount of time to sell last month as it did the previous month (though 3 less days to sell this June compared to last June).
2. Sales volume is up slightly in 2016 compared to 2015.
3. Cash volume is about the same this year (16% of the market for Q2).
4. FHA volume is down 7.5% so far this year in the region.
5. The sales to list price ratio was 98% in the region last month.
6. There is 1.6 months of housing supply in the region right now, which is 13.5% lower than it was last year at the same time.
7. The median price increased 3.6% last month from the previous month.
8. The median price is 11% higher than the same time last year.
9. The avg price per sq ft increased by nearly 1% last month.
10. The avg price per sq ft is 8.9% higher than the same time last year.

Some of my Favorite Regional Graphs:

PLACER COUNTY:

1. It took 4 less days to sell a house last month than the previous month (and 3 less days than last year at the same time).
2. Sales volume was up about 1% in June 2016 compared to last June and is down slightly for the year (about 2%).
3. FHA sales were 17% of all sales last month and cash sales were 13% of all sales last month.
4. There is 1.7 months of housing supply in Placer County right now.
5. Housing inventory is 8.5% lower than it was last year at the same time.
6. The median price increased 0.5% from the previous month and is up 7% from last year at the same time.
7. The average price per sq ft was $212 last month (was $200 last year at the same time).
8. The average price per sq ft is up 1.4% from the previous month and 6% from last year at the same time.
9. Bank owned sales were only 1% of all sales last month.
10. Short sales were 1.9% of sales last month.

Some of my Favorite Placer County Graphs:

DOWNLOAD 80+ graphs HERE: Please download all graphs in this post (and more) here as a zip file. Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Question: Any other market insight you’d like to add? I’d love to hear your take.

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