Stepping on the real estate scale (at the right time of day)

Values are starting to decline. The market is sliding. Price reductions are increasing. This is exactly what we start to hear around August as the market has transitioned from spring to summer. But is the market really crashing? It could be, but sometimes the issue is simple in that we’re not weighing the market in the right context. Today let’s look at a helpful scale analogy and then unpack the Sacramento market in depth (for those interested). Any thoughts?

42512389 - white scale on a wooden table top view, fitness and weight loss concept

A Scale Analogy: Imagine being on a diet and stepping on a scale in the morning before breakfast and then again at night after eating all day. What would happen? Well, it’s going to look like you gained some weight during the day because the body is light and empty in the morning and naturally heavier at night after a day of eating. Unless you want to punish yourself with thoughts of weight gain, the key for using a scale would be to weigh yourself every day around the same time so you are comparing the same context each day. Otherwise when comparing one context (morning) with a different context (night), it might look like you gained weight when you might have actually lost some.

The Big Point: In real estate we have to consider what it looks like to weigh the market. Often at this time of year we start hearing things like, “Values are starting to tank”, when in reality the market may simply be softening for the season. The problem is we don’t see the softening though because we’re stepping on the scale at the wrong time of day so to speak. For example, if we compare stats from June to July, it looks like the market is declining in value since stats have sagged. Yet if we step back and weigh the market in context by comparing June/July 2016 data vs June/July 2015 data, we see stats also sagged last year. Bingo! This helps us see it’s normal for the market to soften up at this time of year (of course it could be declining, but that’s a different post). In short, if we want to get better at seeing the market it’s critical to compare the latest month of data with the same month last year. Otherwise it’s very easy to start making market claims when the truth is we just might be misreading the trend. If you want to use bigger chunks of data like quarters, that’s fine too. Just compare the past quarter today with the same time period last year. You can also look at many years of data to get an even better sense of seasonal trends.

—-—–—– And here’s my big monthly 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 62 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.

Slowing Market (Quick Summary): The hot spring season is definitely transitioning to a slower market. What do I mean? It’s taking slightly longer to sell today compared to last month, the median price and average sales price declined from the previous month, inventory saw a 20% increase from June (it’s still really low though), and price reductions have been more common. Yet at the same time the market is actually stronger this year as it was taking 4 days longer to sell last year and price metrics are a good 7-10% higher this year too. Overall the market feels fairly “hot” under $300,000, but there has been notable price resistance at higher price levels. These days well-priced properties are going quickly, but otherwise buyers can smell a high price from a mile away – and they’re not biting. It’s easy to think the market is starting to turn or tank, but it’s normal for the market to soften at this time of year. Unless we begin to see otherwise, right now it looks like we are seeing what seems like the start of a typical seasonal downtrend.

Presidential Election & the Market: We’re hearing lots of talk about how the market is strong because it’s a presidential year, but let’s remember the market is doing what it is doing as a result of years of unfolding trends. The presidential election doesn’t all of a sudden trump (no pun intended) the factors that have been driving the market for years and have caused the market to be where it is today. For context, values in Sacramento were increasing rapidly in 2004, utterly tanking in despair in 2008, recovering in 2012 (due to cash investors and 4% rates), and now the market is figuring out how to be normal after modest value increases this spring. Sure, there could be some impact because it’s a presidential year, but let’s defuse the hype and not overstate it. Take a look at the stats and graphs below and see if you can discern any real difference because this year is a presidential year.

Sacramento County:

  1. The median price is 100% higher than it was in early 2012.
  2. There were only 4 sales under $100K last month (single family detached).
  3. Sales volume has been about the same this year compared to last year.
  4. FHA volume is down about 8% this year compared to 2015.
  5. FHA sales were 26% of all sales last month.
  6. Cash sales were only 12% of all sales last month.
  7. It took an average of 27 days to sell a home last month, which is 2 days more than the previous month (and 4 less days compared to last year).
  8. REOs were only 2% of all sales last month and short sales were 2.7%.
  9. There is only 1.69 months of housing supply in Sacramento County, which is 11% lower than it was last year at the same time.
  10. The median price declined by 2.7% last month and the average sales price also declined, though both are 10% higher than they were last year at the same time.

Some of my Favorite Graphs this Month:

Median price since 2013 in sacramento county

price metrics since 2015 in sacramento county - look at all

inventory - July 2016 - by home appraiser blog

CDOM in Sacramento County - by Sacramento Regional Appraisal Blog

Bottom of the Market in Sacramento

inventory in sacramento county Since 2011 - by sacramento appraisal blog

seasonal market in sacramento county sales volume 6

Interest Rates Since 2001 layers of the market in sacramento county - by sacramento appraisal blog

SACRAMENTO REGIONAL MARKET:

  1. The median price is 97% higher than it was in early 2012.
  2. It took 1 day longer to sell last month compared to June (but 4 less days compared to July 2015).
  3. Sales volume is about the same as it was last year at the same time.
  4. Cash sales were 14% of all sales last month.
  5. Cash sales volume is 6% lower this year than last year.
  6. FHA sales were 22% of all sales last month.
  7. FHA sales volume is down nearly 8% this year so far.
  8. There is 1.96 months of housing supply in the region right now, which is just about the same as last year during this time.
  9. The median price, average sales price, and avg price per sq ft all declined last month from June, though they’re all up 7-8% from last year.
  10. REOs were only 2% of all sales last month and short sales were the same.

Some of my Favorite Regional Graphs:

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 sacramento region volume - FHA and conventional - by appraiser blog

PLACER COUNTY:

  1. Today’s median price is 72% higher than it was in early 2012.
  2. It took 3 more days to sell a house last month than the previous month (but 4 less days than last year at the same time).
  3. Sales volume was down about 11% in July 2016 compared to last July and is down slightly for the year about 3%.
  4. Both FHA sales and cash sales were each 15% of all sales last month.
  5. There is 2.25 months of housing supply in Placer County right now, which is up very slightly from last year at the same time (but up 30% from last month).
  6. The median price increased about 1% from the previous month, but for a better context it’s up 10% from last year at the same time.
  7. The average price per sq ft was $216 last month (was $202 last year at the same time).
  8. The average sales price was $480K last month (up about 11% from last year).
  9. Bank owned sales were only 1% of all sales last month.
  10. Short sales were 0.07% of sales last month.

Some of my Favorite Placer County Graphs:

days on market in placer county by sacramento appraisal blog interest rates inventory median price 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 62 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: Did I miss anything? Any other market insight you’d like to add? I’d love to hear your take.

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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.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

7 goals for the real estate community this year (as illustrated by Star Wars)

Here we go. It’s a brand new year. A blank slate. What will your life and business look like in 2016? I know we all have plans for the year ahead, so as January begins I wanted to pitch in some thoughts on potential goals for the real estate community. These are meant to be fun, helpful, and provocative, so take them for what they’re worth. I snapped some photos of Star Wars actions figures to help tell the story too. I’d love to hear your take in the comments below.

1)  Say Something Different About The Market:

strorm troopers - by sacramento appraisal blog

If you’re in the habit of saying the same thing about the market all year, consider studying the market carefully and adjusting what you say throughout the year. It’s easy for both agents and appraisers to fall into the trap of using the same stale phrases, but getting more specific about the way the market behaves tends to build credibility with clients.

2)  Make it About Connections on Social Media:

storm troopers on facebook - sacramento appraisal blog

Let’s be honest. One of the sins of the real estate community is too much self-promotion, and this comes across loudly on most social media platforms. It’s easy to treat Facebook, Twitter, and other spaces like the yellow pages where we simply broadcast our services. Yet social media is all about building connections and creating conversations. Think about how you can add value to people’s lives this year online while avoiding nauseating self-promotion. Maybe take a look at what you said last year too. Have people been engaging with what you are saying? If not, maybe it’s time to mix things up or get back to a focus on relationships.

3)  Speak Graciously About Neighborhoods:

sacramento appraisal blog - star wars blog post

This might feel a bit touchy to say, but I can’t tell you how many times I hear things like, “I would never live in this neighborhood,” or “I don’t know why anyone would ever buy here.” It’s easy in the real estate community to gloss over statements like this, but the truth is they come across a bit arrogant because they demean neighborhoods and residents. Why is that person buying there? Probably because that’s what the person can afford. Let’s respect that and find ways to speak graciously about places people call home (even if we really don’t like the area). I’m not saying to be fake, but only to find ways to speak more positively about communities instead of ragging on them. Remember, your next client might want to buy in one of these neighborhoods.

4)  Learn How to Make Quick Market Graphs:

Looking at market graphs strorm troopers - sacramento appraisal blog

If you don’t know how to make graphs, why not make that a goal this year? It sounds like a scary thing to learn, but it’s very doable (seriously), and frankly it’s a skill that can help propel your business and understanding of real estate to the next level. I have a brief tutorial here, but send me an email too for some other suggestions.

5)  Remember to Say “CO” instead of “CO2” Detector:

CO alarms in appraisal reports - star wars - sacramento appraisal blog

When it comes to talking about carbon monoxide detectors, this is an easy mistake to make, yet still very important to nail for the sake of sounding professional. Remember, “CO” stands for “Carbon Monoxide” (a dangerous gas), but “CO2” stands for “Carbon Dioxide” (what comes out of our mouths when we breathe). Here are 5 ways to remember the difference in case it’s relevant.

6)  Be Generous:

being generous in real estate - sacramento appraisal blog

A generous person is a rare find. Be known this year for altruism, compassion, and responding in care when people need something. Not only does it feel great to live a life focused on others, but it’s actually really good for business. People want to work with others who are great at what they do AND generous.

7)  Be Prepared for Real Estate “Bubble” Conversations:

the force - by sacramento appraisal blog

Values have risen dramatically in recent years, and many consumers are wondering about a real estate “bubble”. Whether we are in a bubble or not, it’s important for the real estate community to expect and navigate this conversation well. How will you answer your client’s questions this year when “bubbly” conversations arise? In case it’s helpful, here are some quick points to shine some perspective on the topic.

Interview with Channel 13: By the way, here is an interview I did with Channel 13 in Sacramento a few weeks ago. Check it out if you’d like below or HERE.

Happy New Year! May this be a wonderful and rich year of life and business.

Questions: Which one did you like best? What are a couple of your big or little goals this year? By the way, did you see the new Star Wars?

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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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