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The waking market, pulling stats like a boss, & the year in review

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The market went to sleep for the holidays and it’s just starting to wake up. Let’s talk about that along with pulling stats like a boss. Then I have a huge market update and review for those interested. 

No sales to support higher values: In a normal January the market is in a weird spot. It’s coming out of hibernation from the holidays, and even though buyers eventually start offering higher prices, the most recent sales might not support higher contracts. In other words, sales from November and December might actually be much lower than what buyers are willing to pay in later January and February because the market has begun to awaken out of a lull. The reality is we might not see any upward value movement in sales stats until March, but the upward trend will begin to happen in January and February before we see it in the stats. Data lags the trend. I remind myself of this every year.

Getting practical: In coming time as the market presumably heats up I recommend looking for a pattern of pending sales (probably higher), watching for properties spending less time on the market, and study what prices normally do this time of year in your area. In many locations prices tend to pick up where they left off in the late summer before they faded during the fall.

Game-changing stats: Paying attention to numbers has literally changed my career, so I wanted to give some tips for how to begin pulling stats for a city, county, neighborhood… Here’s a chart you can use to track price changes and a few other key elements (DOWNLOAD here). I highly recommend carving out a few minutes each month to track some of these basics. Then of course find relevant ways to share the numbers with your clients and contacts.

Here’s a video where I talk through how to use the chart as well as mistakes to avoid. It’s about 10 minutes. Click below (or here) and watch in FULL screen:

–——-——- Big monthly market update (it’s long on purpose) ———–——-

Prices have been softening in Sacramento, but it hasn’t been painfully dull like some fall seasons. Overall prices in the region sloughed last month (not a surprise), it took six days longer to sell, and the year closed out with price metrics being about 8-10% higher than December 2016. The number of listings really took a nosedive last month, but that’s what happens since people don’t list in November and December unless they really have to sell. Listings should increase over the next couple months as the market heats up for the spring. I know hungry buyers feel like inventory won’t be coming, but it’ll happen.

Quick insight: Housing inventory is sparse, but one good thing is inventory seems like it went a little more sideways last year instead of declining sharply. On a positive note, the market ended with the lowest number of foreclosures and short sales in the past decade. This isn’t a shocker, but it’s still a sign of healing after the “bubble” burst more than ten years ago. Prices in 2017 increased about the same as they did the past couple years. Lastly, sales volume has been steady for a few years, and that shows the market has found a rhythm.

Recap of 2017 in Sacramento:

I could write more, but let’s get visual instead.

DOWNLOAD 75 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

SACRAMENTO COUNTY (more graphs & stats here):

Sacramento County Stats:

  1. The median price is currently $350,000. It’s about the same as last month & down 0.5% from summer.
  2. The median price is 11.1% higher than the same time last year.
  3. Sales volume in December was 5.6% lower this year than 2016. There were 1392 single family detached sales last month.
  4. It took an average of 36 days to sell a home last month (one year ago it was taking 3 days longer).
  5. The median days on market last month was 21 days.
  6. It took 3 more days to sell in Dec. compared to November (median days).
  7. FHA sales were 20.5% of all sales last month in the county.
  8. Only 0.7% of sales last month were bank-owned & 0.2% were short sales.
  9. The avg price per sq ft was about $221, which declined last month (9.6% higher than last year).
  10. The avg sales price softened about 1.5% last month and is $379,962. This is 10.5% higher than last year.
  11. Cash sales were 13% of all sales last month.

SACRAMENTO REGION (more graphs & stats here):

Sacramento Region Stats:

  1. The median price is $385,000. It softened nearly 1% last month.  
  2. The median price is 10% higher than the same time last year.
  3. Sales volume in December was down 4.7% this year. There were 2202 single family detached sales last month.
  4. It took an average of 42 days to sell a home last month (one year ago it was taking 2 days longer).
  5. The median days on market last month was 24 days, which means properties are selling really quickly.
  6. The median days on market increased by 5 days last month, which shows a slowing in the market.  
  7. FHA sales were 17.5% of all sales last month.
  8. Only 1.6% of sales last month were bank-owned & 0.9% were short sales.
  9. The avg price per sq ft was about $225, which decreased 2% last month (8.4% higher than last year).
  10. The avg sales price decreased 2.5% last month and is 9.1% higher than last year.
  11. Cash sales were 14% of all sales last month.

PLACER COUNTY (more graphs & stats here):

Placer County Stats

  1. The median price is $450,000 and decreased slightly last month.
  2. The median price is 6.1% higher than the same time last year.
  3. Sales volume in December was 3.6% lower than 2016. There were 450 single family detached sales.
  4. It took an average of 48 days to sell a home last month (one year ago it was taking 1 less day to sell).
  5. The median days on market last month was 28 days, which means properties are selling really quickly.
  6. The median days on market increased 9 days last month (don’t read too much into that). 
  7. FHA sales were 12.6% of all sales.
  8. There were only 4 bank-owned sales last month and only 7 short sales.
  9. The avg price per sq ft was $228, which softened about 3% last month (5.7% higher than last year).
  10. The avg sales price is currently $510,174. This is 8% higher than last year.
  11. Cash sales were 14.9% of all sales last month.

DOWNLOAD 75 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: What are you seeing out there in the market? Anything I missed? I’d love to hear your take.

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Speed bumps, neighbors, & real estate logic

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Are speed bumps a big deal for value? That’s what a friend asked me, and since she gave me permission to share her situation with a neighbor, I hoped we could chat. If someone asked you, how would you respond?

The situation: My friend said, “We live on a busy-ish street with lots of kids walking to and from school, and neighbors are talking about requesting speed bumps to slow cars down. One neighbor who is against this says, “adding speed bumps will decrease the value of a home by 20%.” What do you think of that?”

My response: I’ve got a few things on my mind.

1) Making value claims: Whenever someone makes a value claim, my market antennas go up. What is 20% based on? Is it just an arbitrary number? Or is it based on market research? A study? Does it even seem realistic? These are questions we have to ask to have an informed conversation.

2) It’s busy already: Speed bumps are usually installed because the street is busy and has traffic issues, so there might actually already be a negative impact on value because of the busy street. To be clear I’m not saying speed bumps cannot potentially negatively impact value, but let’s not forget the busy street in the first place, which could be the bigger issue for value.

3) Crunching numbers with logic: Thinking logically is actually one of the best things we can do when having value discussions with neighbors. Sometimes we just need to step back from our ideas and start talking numbers. For instance, if homes are selling for $400,000, and your neighbor is correct about a 20% reduction in value, would these homes really sell for $320,000 if speed bumps were installed? Does that sound reasonable? Does it seem logical for buyers to make a reduction that large based on what you know about the neighborhood market? Moreover, if your neighbor listed his house for sale, would the list price be anywhere close to 20% less if there were speed bumps?

4) The noise factor: To be fair your neighbor is smart to think critically about this issue because we have to consider what speed bumps will do for traffic, the feel of the street, and noise. I recall talking with a city planner once who said neighbors would complain about a busy street and request speed bumps, but after they were installed the same neighbors would complain about the noise of the bumps when cars were speeding over them. Could noise be an issue?

Anyway, that’s how I answered my friend. If you notice, I didn’t make a specific value claim on purpose because as an appraiser I can’t just make stuff up without really supporting the value I say exists. Sorry if that’s frustrating, but for me the big takeaway here is actually how important it is to sometimes step back from our ideas and think critically about value issues. At the same time I’m hoping to open up some conversation, so I would absolutely love to hear your take.

Questions: How do you think speed bumps might impact value? Big deal or no biggie? Do you think it’s possible to measure the impact of speed bumps? Why or why not? What is #5? Did I miss something?

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Being okay with saying NO in real estate

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I said NO this week to an appraisal and I wanted to share about it. This might seem like a random post, and maybe it’s just a reminder for me, but I hope there are some takeaways. Any thoughts? I’d love to hear your take.

Here’s a conversation I had:

Loan Officer: Can you appraise a triplex fixer and bring a screw gun to the boarded property so you can get in? We need an “as is” value (note: picture above is not the triplex).

Me: Sorry, but I’m not willing to take a screw gun. I’m handy with tools, but that’s too much liability for me. 

Loan Officer: I understand. Can you do an “as is” drive-by appraisal instead?

Me: Honestly, it’s a huge liability to do a “drive-by” on a multi-unit property. I care about my license too. I wouldn’t know the size of each unit, condition, or even bed / bath count. Besides, you just told me it’s a fixer, which means it’s even more important to see how bad it is. I’d have to make big assumptions without knowing these things, and that’s not something I’m willing to do.

Loan Officer: Thanks. I don’t want to put you in a situation you’re not comfortable with. 

I have conversations like this quite a bit. People don’t usually have ill-intentions, and I don’t think the loan officer did either. The truth is though despite someone’s innocent request, it doesn’t mean it’s a good situation for me. 

THREE THINGS:

1) Saying NO is okay: Sometimes the most professional thing to do is say NO instead of taking on something with too much liability or embarking on a situation that might actually be unsafe. In this case I was concerned about safety because of squatters and not knowing what I might find inside a house like this. I’ve inspected quite a few boarded homes, but I don’t remove the boards or go alone to these properties. Also, what if I didn’t properly close things up? Would any future damage be my fault?

2) Developing a credible value: If we can’t get enough information to produce a credible value, it might be best to not render a value. Sometimes the most professional thing we can say is, “I’d love to help, but in order to serve you I’m going to need __________________. If that cannot happen, then I cannot give you a value.” There is nothing wrong with walking away when we don’t have enough information or a client is asking us to do something we’re not comfortable with. This happens not only to appraisers, but also to agents who are asked to do BPOs on custom homes on acreage (without seeing them or knowing anything about them). Or in other cases we get asked to give a value to something even though we don’t have any clue on the cost to cure a mold problem or some other major thing. Yes, there are times when we need to make assumptions and disclaimers. I understand that and I do it all the time in the right situations. I’m just saying if there are bigger unknowns that could radically sway value, then we might need more information instead of assumptions. 

3) Be honest about limitations: There are times when we have to say, “I’m not qualified to take this on”, “I think my colleague might be a better fit (and I can partner with him/her),” or, “I’ve never worked on a property like this before, but here are the steps I’ll take to be sure I become competent.” I know, there are people who think they can value anything. I love the passion, but everyone has limitations, and being aware of that is an okay thing. And if you didn’t get the Liam Neeson quote, it’s from the movie Taken.

Well, that’s what’s on my mind today. I hope it was useful. Who knows, maybe you’ll be inspired this week or next to say NO to something that’s really not a good fit for you. And that’s okay. Heck, it’s actually a good thing.

Questions: When have you said NO to something? Why do you say NO to certain things? What advice would you give to someone who never says NO in real estate? I’d love to hear your take.

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Is the market so “hot” that we won’t have a slow fall this year?

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Values are going to keep going up. The market is so “hot” we’re not going to have a fall slowdown this year. I’ve heard this sentiment quite a bit lately and I’ve even thought it myself. Yet today let’s remember five things about the fall season. Then for those interested we’ll dive deeply into the latest Sacramento trends.

5 things to remember about the fall market:

1) A general truth: Unless we have reason to believe there won’t be a slower fall season, let’s believe there will be one because it’s normal for real estate to have seasons.

2) The typical signs are happening: When the market starts to slow we usually see certain symptoms, and we’re seeing those right now. Inventory has increased slightly, sales volume is starting to slough, and prices in the region dipped a bit last month. Yet Sacramento County stats are nothing but glowing, which makes it hard to believe a slowing could happen.

3) Slow vs. slowing: The market is NOT slow, but we’re seeing slowing. That’s a big distinction for many markets in the country right now. In reality it almost sounds offensive to say the market is slowing when we have multiple offers and bidding wars, but things right now don’t feel quite as aggressive as they did in April and May. We’re seeing slightly more price reductions, slightly less offers, and buyers more frequently not accepting counter offers like they did a few months ago. I know, this isn’t true in every transaction. All I’m saying is we are generally seeing more symptoms of a slowing market (but it’s NOT slow).

4) Not always dull: Sometimes the fall months can be really dull, but other times not so much. Thus even though the stats sag at the end of the year, it doesn’t always feel like the market is dragging. My guess is the fall softening this year will not feel as dull because of how low inventory is right now.

5) Rare: It’s rare to not have a seasonal market. The only time I can think of us not having a fall slowdown in recent years was in 2012 when investment funds and flippers were gutting the market. Values simply kept going up, and investors basically trumped the seasonal market that year.

I hope that was helpful or interesting. Any thoughts?

–——-——- Big monthly market update (it’s long on purpose) ———–——-

Glowing and slowing. That’s a good way to sum up the market. The stats are generally glowing, but we’re starting to see subtle signs of a seasonal slowing. Price stats in Sacramento County increased by about 1% last month and they’re up 8-10% from last year (that doesn’t mean actual values are up that much in every neighborhood and price range). Though if we look closely, especially in the region as a whole, prices dipped by 1% last month, inventory is up slightly, and sales volume sloughed off last month (which isn’t a surprise). Properties have been selling very quickly still in only 9 median days in Sacramento County and 11 in the region. For perspective, on average it was taking about a week longer to sell a home last year. The market actually tends to normally show a slowness in days on market between June and July, but we didn’t see that this year, which is a reminder the market feels a bit more aggressive right now compared to last year. Overall housing inventory increased last month, but the bigger story is it’s down about 14% in the region from last year. Despite all the glorious stats, the market is still price sensitive, which means buyers aren’t willing to pull the trigger at any price (did you hear that sellers?). Oh, and by the way, the median price in Sacramento County is now 10% from the peak in 2005. I could go on and on with words, but let me share some graphs to show the market visually.

DOWNLOAD 65 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

Sacramento County graphs this month (more graphs & stats here):

Sacramento Regional graphs this month (more graphs & stats here):

Placer County graphs this month (more graphs & stats here):

DOWNLOAD 65 graphs (and stats) HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: What signs of glowing or slowing are you seeing? Do you think we’ll have a fall market? Did I miss anything? I’d love to hear your take.

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