That awkward moment when the market changes

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  —————–

Big monthly market update post - sacramento appraisal blog - image purchased from 123rfTwo 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:

inventory - June 2016 - by home appraiser blog

CDOM in Sacramento County - by Sacramento Regional Appraisal Blog REOs and Short Sales in Sacramento - 1 inventory in sacramento county Since 2013 - part 2 - by sacramento appraisal blog

Cash & FHA sales in sacramento county

median price context in sacramento county price metrics since 2015 in sacramento county - look at all

june market in sacramento - by sacramento regional appraisal blog 2

layers of the market in sacramento county - by sacramento appraisal blog

Bottom of the Market in Sacramento

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:

sales volume 2015 vs 2016 in sacramento placer yolo el dorado county

sacramento region volume - FHA and conventional - by appraiser blog

days on market in placer sac el dorado yolo county by sacramento appraisal blog interest rates inventory median price in sacramento regional market by sacramento appraisal blog - market median price and inventory in sacramento regional market 2013 median price sacramento placer yolo el dorado county Regional Inventory - by Sacramento regional appraisal blog Regional market median price - by home appraiser blog

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:

days on market in placer county by sacramento appraisal blog months of housing inventory in placer county by sacramento appraisal blog number of listings in PLACER county - 2016 Placer County housing inventory - by home appraiser blog Placer County price and inventory - by sacramento appraisal blog Placer County sales volume - by sacramento appraisal blog

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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How school boundaries impact real estate values

The quality of a neighborhood school can make a huge difference with real estate values. Yeah, I know that’s a Captain Obvious statement, but let’s talk about that. Last week I was reminded yet again how powerful school boundaries can be, so I wanted to share an example of this concept and then kick around some ideas. I’d love to hear your take in the comments below.

school boundaries and real estate values - sacramento appraisal blog

Do you look at school ratings? While appraising something in the Didion school boundaries in the Pocket area of Sacramento, I looked up greatschools.org to find Didion had a rating of 8 while neighboring schools in the neighborhood had a rating of 3 and 4. Could there be a difference in value depending on which school your home feeds into? Maybe so.

Ratings from Great Schools and Real Estate - by Sacramento Appraiser Blog

Do school boundaries matter? Okay, so Didion clearly has a higher rating, but do we actually see properties sell for more? Agents regularly say there is a value premium, but is there really? I decided to create a quick visual by comparing similar-sized sales from the surrounding neighborhood with ones in Didion territory. What do you see?

Pocket and Didion Market Trends - by Sacramento Appraisal Blog 2

The black dots that represent Didion show us these homes tend to sell toward the top of the neighborhood market. This tells us buyers are clearly in tune with the school system in the neighborhood and they are clearly paying higher prices to be in this niche.

5 Things to Remember about Schools & Real Estate Value:

  1. Know the school boundaries: One of the fastest ways I’ve been able to obtain school boundaries is through GreatSchools.org. I type in the name of the school, click on the map, and then observe boundaries and even ratings of surrounding schools (just like the image above). Obviously the website could be wrong, but it’s a good start.
  2. Don’t trust MLS comments: Properties are sometimes identified incorrectly in MLS, which is why we have to double-check by looking up various websites or even calling the school district.
  3. Choose comps attending the same school: Since value can be different depending on the school, it’s important to choose comps that have the same school influence (if possible). Many times a tract subdivision only has one school, so that makes it easy when choosing comps. But in the case above there are several school options, which means if we aren’t in tune with the neighborhood market and the school system, we just might pick the wrong comps.
  4. Don’t adjust based on GreatSchools ratings: As much as I like GreatSchools.org, at the end of the day I wouldn’t make a value adjustment because Didion has an 8 rating and other nearby schools have a 3 or 4. After all, I don’t want to impose the idea that one area sells for more or less because of a rating. If there really is a value difference, I’ll likely be able to see that in the sales. Or better yet, I can just choose comps that go to the same school so I don’t even have to worry about figuring out a value difference.
  5. Communicate about the school: If you are an agent, spend an extra minute studying school boundaries so you know for sure what school(s) your home feeds into. Your knowledge can come in particularly handy too when talking with appraisers. If the school boundaries are a big deal for value, I recommend highlighting this when talking with appraisers (or using my Appraiser Info Sheet to do so). Appraisers, it’s easy to miss details like school boundaries, so it might be a good idea to bookmark a few sites to help quickly see boundaries and/or ratings.

I hope this was helpful.

Questions: What is point #6? Did I miss anything? Do you have any other tips for finding out about school boundaries? Any stories about buying a house and paying more or less because of the school? I’d love to hear.

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My last blog post of 2015

It’s been a wonderful year. Has it been for you too? I hope so. I wanted to thank you sincerely for taking time out of your day to read my blog. I hope it’s added some value to your life or business somehow, or maybe it’s helped you navigate the real estate road a bit better. Sometimes when I tell people how much I love blogging they think I have no life. But in truth this blog is about building relationships with readers (you), and that means the world to me. I appreciate the amazing people I’ve been able to meet over the past 7 years since this whole thing began. Thank you for hanging in there with me for another year.

Two Weeks: For the next two weeks I’ll be lying low with family, which means I’ll be taking the rest of the year off (I like the way that sounds). Honestly, this has been a very successful year in terms of business, personal goals, and relationships. Yet I find myself tired and emotionally done with 2015. Can you relate? I’m ready to close this chapter, get refreshed, and open a new chapter in 2016. So these next two weeks I’ll be enjoying walks on the beach, thinking about appraisals, building a few wood projects, catching the new Star Wars movie (no spoilers please), drinking as much coffee as possible, and savoring time with my lovely wife and sons. I’ll look forward to connecting with everyone again the first week of January.

Merry Christmas from Lundquist Appraisal Company

I took this photo at the Capitol building in Sacramento a couple of weeks ago. If you’re local, I highly recommend grabbing a hot drink and heading over to enjoy the tree while it is still there.

From my family to yours, Happy Holidays and Merry Christmas!!

Question: What are you going to be doing for these next two weeks? Any plans with family or friends?

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Packing a market punch in Sacramento

It’s easy to say things like, “The market is on fire” or “Buyers are hungry out there”. Yet I find vague statements don’t pack much of a punch. It’s far more powerful when we get specific. For instance, did you know sales volume is up almost 10% this year so far? Or FHA buyers were 28% of all sales this past quarter in Sacramento County? Those stats carry some weight and bring me pause.

sacramento appraisal blog - image purchased and used with permission from 123rf dot com

Goal of the Big Monthly Post: The goal of this big market update is to help highlight what the market is doing and help us describe it a bit better. If you’re local, absorb what is here and share some of the talking points below with your contacts. If you’re out of town, I’d love to hear about your market also. Email subscribers, I recommend reading this post on the blog instead of email.

Two ways to read this post:

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

One Paragraph to Describe the Sacramento Market: The first half of 2015 is now over, and all year buyers have expressed a huge appetite for the market. Sales volume is up about 10% in the region, and pendings have routinely been 20%+ higher each month this whole year. Sales volume in June was actually higher than it’s been in about three years. More sales has led to inventory declining, though it’s important to note more listings have definitely been hitting the market (and there have been more price reductions too). While many properties are generating multiple offers and selling very quickly, buyers are also finicky about pulling the trigger on anything that is not well-priced or with an adverse location or condition. Some sellers are severely overpricing their homes too. The median price stayed about the same last month compared to the previous month. One of the biggest factors shaping this market is the power of FHA buyers who now represent 23% of all sales in 2015 in the Sacramento region (and 27.5% of all sales last month in Sacramento County). The byproduct of more FHA buyers is stiff competition at the lower end and higher offers too (this makes overall housing stats look more impressive). As housing inventory presumably begins to increase over the next few months (as it did last year), watch out for price reductions, unrealistic expectations from sellers, and buyers gaining more power.

DOWNLOAD 64 graphs HERE (zip file): Please download all graphs in this post (and more) here as a zip file (or send me an email). Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share.

Sacramento County Market Trends for June 2015:

  1. The median price at $290,500 is 7.5% higher than one year ago (June 2014).
  2. It took an average of 30 days to sell a house last month (35 in May).
  3. Cash sales were 16% of all sales during Q2 2015 (31% in 2013).
  4. Short sales were only 5.1% of all sales in Q2 2015.
  5. REOs were only 5.3% of all sales in Q2 2015.
  6. FHA sales were 27.9% of all sales in Sacramento County in Q2 2015.
  7. Sales volume is 17.5% higher this June compared to last June.
  8. There is 1.6 months of housing inventory (2.1 months last June).
  9. The average price per sq ft is 186 (8% higher than last June).
  10. The average sales price is $323,082 (9.8% higher than last year).

price metrics since 2014 in sacramento county

inventory - June 2015 - by home appraiser blog

REOs and short sales in sacramento county - by sacramento appraisal blog

CDOM in Sacramento County - by Sacramento Appraisal Blog

cash sales - sacramento appraisal blog

cash and fha under since 2009 - sacramento appraisal blog

sales volume in Sacramento County

Median price and inventory since 2011 by sacramento appraisal blog

Sacramento Regional Trends for June 2015 (Sac, Placer, Yolo, El Dorado):

  1. Sales volume was up 17% in June 2015 compared to June 2014.
  2. Sales volume for the year is up 9.6% compared with 2014.
  3. The median price at $332,250 is 7.1% higher than one year ago (June 2014).
  4. FHA sales are up 31% this year so far.
  5. Cash sales were roughly 16% of all sales last month.
  6. It took an average of 33 days to sell a house last month (37 days in May).
  7. FHA sales were 23.7% of all sales in the region last month.
  8. There is 1.85 months of housing inventory (1.92 months in May 2015).
  9. The average sales price is $370,013 (7.9% higher than last year).
  10. It took 4 less days to sell a house this June compared to June 2014.

median price and inventory in sacramento placer yolo el dorado county

volume cash and conventional in region by sacramento appraisal blog

months of housing inventory in region by sacramento appraisal blog

days on market in placer sac el dorado yolo county by sacramento appraisal blog

median price and inventory in sacramento regional market

interest rates inventory median price in sacramento regional market by sacramento appraisal blog

Placer County Market Trends for June 2015:

  1. The median price in Placer County is $401,000.
  2. The median price is 5.5% higher than one year ago (June 2014).
  3. It took 36 days on average to sell a house last month.
  4. Cash sales were 14% of all sales last month.
  5. FHA sales were 17.8% of all sales in Placer County last month.
  6. Sales volume was 31% higher this May compared to last May.
  7. Sales volume is up 18% in 2015 compared to last year.
  8. There is 1.88 months of housing inventory (2.76 months last June).
  9. The average price per sq ft is is 200 (up from 184 last June).
  10. The average sales price is $454,643 (8% higher than June 2014).

Placer County sales volume - by sacramento appraisal blog

months of housing inventory in placer county by sacramento appraisal blog

days on market in placer county by sacramento appraisal bloginterest rates inventory median price in placer county by sacramento appraisal blog

Placer County median price since 2012 - by home appraiser blog

Placer County median price and inventory - by home appraiser blog

I hope this was helpful. Thank you so much for being here.

DOWNLOAD 64 graphs HERE (zip file): Please download all graphs in this post (and more) here as a zip file (or send me an email). Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share.

Home Office Progress: I’ve been sharing some progress on my new home office. It’s been so much fun to build and now customize. Last week I finished some cork boards and hung crown moulding. Yes, I know I need to upgrade my chair (coming soon) and have multiple monitors (coming soon).

my home office

Questions: How do you think sellers and buyers are feeling about the market right now? What are you seeing out there?

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