An open letter about celebrity flipping seminars

Dear Public,

Last week I got an invite to a celebrity flipping seminar. That’s right, I can go learn how to flip houses from Tarek & Christina, the stars of HGTV’s Flip or Flop. Being that this is the second celebrity event to come to town this year, let’s talk about some of the dangers of these events and the real temperature of the flipping market. Please note: I’m not angry. I’m not a hater. I’m not jealous. I only want to give thoughtful commentary for the sake of others.

Celebrity flipping event HGTV Sacramento Appraisal Blog

Some things to know about these events:

  1. The reality stars won’t be there: This may come as a surprise, but the stars are not likely going to be there unless you consider a video appearance as being present.
  2. The goal is to make money off you: The event is designed to whet your appetite only to invite you to go deeper by paying for courses. From the reading I’ve done it sounds like the next step costs $1,000 to $2,000, but some students end up spending far more over time ($5000+ easily). The event will feel good and you’ll probably be inspired, but make no mistake the real goal is to get you to open your wallet.
  3. Flipping formulas don’t work everywhere: There is no such thing as a flipping model that will work in every location and every type of housing market in the United States, yet this event is being hosted in many cities and states. Moreover, it may be wise to be cautious about listening to a company coming from the outside, knowing far less about the local market, and using a celebrity’s star power to talk about flipping.
  4. It’s no longer a foreclosure market: The market used to be full of bank-owned properties, so it used to be much easier to buy low-priced homes to make a quick buck. For example, in 2009 over 70% of all sales in Sacramento County were bank-owned, but now that number is 3%.
  5. Experienced investors are struggling to find good deals: This event touts attendees will “gain insider access to private pre-auction real estate inventories.” Keep in mind even seasoned investors are struggling to find good deals right now because housing inventory is sparse and the foreclosure market dried up. Just last week I talked with an investor who was once easily in the top 10 in my market a few years ago, but is having a hard time finding deals lately. This doesn’t mean flipping is impossible, but it’s currently a really competitive market. That might be good to know before forking out thousands of dollars so you can “retire rich”, right?
  6. More skill is required: Today’s market in flipping is much different than it used to be. A friend on Twitter said it perfectly: “The anybody flip market has dried up. It’s a contractors-special flip market now. Serious add-value needed.” I agree with this as today’s flippers often need to add square footage, add a second bath, maybe do a more substantial kitchen remodel, etc… It’s often not just a matter of picking up a property, putting on some “lipstick”, and re-listing it. The rules have simply changed since the “foreclosure flood” ended. In short, it takes more skill to flip in today’s market.

My advice? Be careful. We all want financial freedom, but you could easily spend thousands of dollars on these seminars to obtain “secret flipping knowledge” (that you can probably get for free). If you want to get into flipping I suggest meeting investors in your local market and scouring the forums on BiggerPockets.com for free flipping advice.

I hope this was helpful.

Sincerely,

Ryan

Questions: What is your favorite HGTV show? Did I leave anything out? What point resonates with you the most? If you’ve attended an event like this, was it valuable? If you are currently flipping properties, what advice would you give to a newbie? Any suggestions for places to meet local investors?

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10 sentences to describe Sacramento’s regional housing market

Have you ever attended a presentation and thought, “Wow, there wasn’t any reason why that needed to be an hour. The speaker could have said everything in 15 minutes.” This is why speaking is an art form. It takes real skill and time to hone a presentation, yet still pack the same punch in a shorter amount of time. The same holds true for writing. Twice a month I have two big market posts, but today instead of writing paragraphs below each graph, I’m simply sharing an image and then one sentence. Here are 10 sentences to describe Sacramento’s regional housing market (and Placer County). Any thoughts? Enjoy.

GRAPHS

SACRAMENTO’S REGIONAL MARKET

1) The median price has been the same for 5 months in a row ($310,000).

median price and inventory in sacramento placer yolo el dorado county

2) Housing inventory increased last month to 2.72 months (inventory isn’t the same at every price level).

months of housing inventory in region by sacramento appraisal blog

3) It took an average of 45 days to sell a house last month.

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

4) Sales volume is down about 9% this year compared to last year.

SALES volume in sacramento region - by home appraiser blog

5) There have been 36% less cash sales in 2014 compared to last year.

cash sales and volume in sacramento region - by home appraiser blog

6) The number of listings increased again last month.

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

PLACER COUNTY

7) The median price has been fairly flat in Placer County ($386K).

Placer County median price and inventory - by home appraiser blog

8) Inventory is hovering just below 3 months in Placer County.

Placer County housing inventory - by home appraiser blog

months of housing inventory in placer county by sacramento appraisal blog

9) It took an average of 47 days to sell a home last month in Placer County.

days on market in placer county by sacramento appraisal blog

10) Sales volume is at fairly normal levels in Placer County.

Placer County sales volume - by sacramento appraisal blog

wright-reportThe Wright Report: By the way, I contributed a few thoughts to The Wright Report, which is the most exhaustive local real estate report I know of. If you need some resourceful bathroom reading, I suggest downloading it. You can read it carefully or maybe take a quick stroll through the graphs. I’m honored to pitch in a few thoughts, but that’s not why I’m sharing it. I really like what Joel Wright puts together, and it’s a great service to the real estate community. When we understand the market and how it’s moving, it’s good for business and for our clients. Download and enjoy.

Sharing Trends with your Clients? If you want to share graphs online or in your newsletter, please see my sharing policy. Thank you for sharing.

Questions: Do you like the format for this post? I’d love to hear your feedback. How else would you describe the market?

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Neighborhood market trends & my wife’s 2nd book

We tend to get a different perspective of real estate when we look at market data in specific areas – as opposed to county or state-wide trends. Let’s glance at some local neighborhoods and property types to glean a bit of market insight.

Plastic-Polly-by-Jenny-LundquistFamily Announcement: Before diving deep into real estate though, I’d like to share some personal news. I am very proud to announce that my wife’s second book, Plastic Polly, hits the shelves tomorrow in book stores and online. She was published again by Simon & Schuster with her second middle-grade novel. Check out her website to learn more, or if you’re local I’d be honored if you would celebrate her book launch with us on this coming Saturday at Barnes & Noble in Citrus Heights from 1-3pm (click here for details).

Thanks for sharing the joy. Now on to some market trends:

All Midtown and Downtown Sales 900-1200 GLA - by Sacramento Appraisal Blog

Midtown Market: Here is a graph of all sales in Midtown/Downtown Sacramento with a living area between 900 to 1200 square feet. It’s amazing to see how the market has unfolded.

All duplex sales in Midtown and Downtown Sacramento

Downtown Duplexes: The duplex market in Midtown/Downtown has really followed the same trend as the single family market above. As you can see, property values showed an obvious decline from the peak, and have been stabilizing over the past couple of years (and flirting with an uptick lately).

All Duplex Sales in East Sacramento since 1998 - by Sacramento Appraisal Blog

East Sac Duplex Market: The same story can be told with duplexes in East Sacramento. There can be huge price differences between a standard ho-hum duplex and something really special (like the recent $900,000 sale that was an incredible two houses on one lot).

La Riviera Neighborhood Sacramento 2-story Sales - past 4 years - by Sacramento Appraisal Blog

Biggest House in the Neighborhood: When looking at all 2-story sales over the past four years in the La Riviera neighborhood of Sacramento, there are very few houses above 2000 square feet. In fact, the most common size for a 2-story unit is anywhere from 1600-1850 square feet. Here’s the thing. Since buyers tend to expect to find a 2-story house at about 1800 square feet, there tends to be a very small premium (sometimes none) for a house that is even larger in size by 400 square feet. This reminds us that price per square foot is not constant, but fluid. Know the expectations of the neighborhood and don’t build something too big that will suffer economic loss over time.

White Rock Neighborhood Sales in Rancho Cordova - by Sacramento Appraisal Blog

Post-Bubble Burst Bifurcation: A graph like this helps tell a compelling story in a neighborhood where 3 bed / 1 bath properties are most competitive to other 3/1 sales. The 3/1 sales are mostly all closer to 1000 square feet in the White Rock neighborhood of Rancho Cordova, and it’s pretty clear that most sales are under $150,000 besides one recent totally remodeled flipped property. Isn’t it interesting to see how tightly packed sales were before the “bubble” burst, yet now sales are spread apart further because of lower-end distressed sales (foreclosures and short sales) and higher-end flipped sales? This is a perfect example of bifurcation, which basically means the market is segmented into different price levels. The wild part is there are a couple flips listed around $160-170K right now. Is that reasonable or not? We’ll see. I talked with the agent of a recent sale that was one of the higher sales in the neighborhood. She said the buyer ended up offering $15,000 over list price to secure the contract. Ultimately the buyer thought the property was priced about $10,000 too low, but figured the added $5,000 would secure the deal (it worked). Is this now a good comp? Is this sale a good representation of the market?

McKeon Condo Subdivision in 95841 Zip Code - Sacramento Appraisal Blog

A Bell Curve & Condos: This graph is of a McKeon condo neighborhood in the 95841 zip code called Madison Villa Estates. It’s incredible to see the resemblance to a bell curve (or Christmas tree). The most recent highest sale in the subdivision over the past couple years is around $65,000 (renovated). There is currently a very average non-updated listing at $75,000. On one hand the market is appreciating, so we’d expect to see higher listings. Yet on the other hand, is this a reasonable price for the current neighborhood market? That’s the question appraisers are asking quite a bit. It’s important to weigh the reality of increasing values as well as the fact that some buyers are overpaying for properties.

Question: What are you seeing out there in the market right now? Any insight from the graphs or into the neighborhoods above? Feel free to share below.

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook