High demand persists in the Sacramento real estate market

What is the real estate market doing? That’s not always a quick 10-second answer you can give someone while standing in line at Starbucks. Yet here’s the scoop: Demand is very high, values are up, and inventory is down. We are seeing exactly what we would expect to see in a Spring market, and I’d like to invite you to unpack the market with me in this post so you can share specific trends with your clients.

buyers are ready to pull the trigger - image purchased by sacramento appraisal blog and used with permission

One Paragraph to Explain the Market: The market is having a normal Spring so far. Prices are up, sales volume is increasing, and housing inventory is down. Buyers are hungry out there, which is seen with pendings being 25% higher in the regional market in March 2015 compared to March 2014. Cash sales continue to decline in volume, while FHA buyers are gaining a greater share of the market. Short sales and bank-owned sales are still hovering at very low levels, though there was a slight uptick in volume this past quarter (nothing to sound the alarm about). It took an average of 51 days to sell a house in the region last month, which is 4 days longer than it took last year (thus while the market feels hot, we can also see the market is slowing down too). Well-priced listings are going quickly and experiencing multiple offers, but properties with adverse locations and/or a lack of upgrades are tending to sit on the market. There is a huge demand for quality inventory, yet at the same time the market is price sensitive since buyers are showing discretion. Many neighborhoods over these past few months experienced a seasonal increase in value (not all areas though). Remember in coming time that inventory historically sees a huge increase from April onward, and that can very easily change the tone of the market.

NOTE: This post is longer since it is my big monthly market update. I am experimenting with more graphs and less text. Do you miss the numbers and bullet points? I’d love some feedback.

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

DOWNLOAD 62 graphs HERE for free (zip file): Please download all 62 graphs here as a zip file (or send me an email). Use them for study, for your newsletter, or even some on your blog. See my sharing policy for 5 ways to share.

SACRAMENTO REGION (Sac, Placer, Yolo, El Dorado):

median price and inventory in sacramento placer yolo el dorado county

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

months of housing inventory in region by sacramento appraisal blog

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

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

SACRAMENTO COUNTY:

Median price and inventory since 2012 by sacramento appraisal blog price metrics since 2014 in sacramento county

cash in sacramento county

fha and cash in sacramento county - by sacramento appraisal blog

Volume and cash since 2009 - by Sacramento Appraisal Blog

reo and short sales in sacramento county

months of housing inventory by sacramento appraisal blog

CDOM in Sacramento County - by Sacramento Appraisal Blog

sales volume through feb 2015 in sacramento county

sales volume in march in Sacramento County since 2001

PLACER COUNTY:

Placer County median price and inventory - by home appraiser blog

days on market in placer county by sacramento appraisal blog months of housing inventory in placer county by sacramento appraisal blog

Placer County median price since 2012 - by home appraiser blog

Placer County sales volume - by sacramento appraisal blog

interest rates inventory median price in placer county by sacramento appraisal blog

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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5 trends to watch in Sacramento’s flattening real estate market

Let’s take a wider view of real estate today. I shared by big monthly post last week about Sacramento County, but what is regional market doing when we consider multiple counties surrounding Sacramento? Let’s look at five quick trends below.

Taking a wide view of real estate - image purchased by sacramento appraisal blog

Two ways to read this post:

  1. Briefly scan the 5 talking points and graphs below in 1 minute.
  2. Take a few minutes to digest the graphs and commentary.

Enjoy and let me know what you think.

free market trend graphs from sacramento appraisal blog

THE SACRAMENTO REGION:

1) Prices have been flat for 4 months:

median price sacramento placer yolo el dorado county

The median price has been the same for four months in the Sacramento Region, which is why so many in the real estate community have been talking about a flat market. As you can see on the graph, values cool off when inventory increases.

But Trendgraphix says… Trendgraphix shows the median price increased over the past few months from $310,000 to $315,000 for the Sacramento Region, but they seem to have pulled their sales data too early. When running stats in MLS for the past four months, the median price is clearly stable at $310,000 for each respective month. This is not to bash Trendgraphix at all because I am an enormous fan of their work. I only wanted to point out the importance of waiting long enough to publish stats, and how publishing even a few days too early can make a big difference.

2) Inventory is steadily increasing in the Sacramento Region:

months of housing inventory in region by sacramento appraisal blog

Housing inventory has been increasing and is helping fuel a greater sense of confidence among buyers (they’ve become more picky too), as well as many price reductions. Housing inventory increased from 2.50 months to 2.64 months over the course of the past month. Inventory is still not very high, but many sellers seem to have an unrealistic mindset about what their properties are worth, which is only leading to inevitable price reductions. Moreover, we are seeing weaker demand than in years past in light of less cash investors playing the market. My advice? Consider pricing according to the most recent competitive listings, that is, ones that are actually getting into contract (as opposed to the highest sale in the neighborhood three months ago).

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

The graph above is a slightly different way to look at inventory. As you can see, the bulk of listings are between 200-400K, but there are quite a few from 400-750K too. Remember, not every price range, neighborhood, or property type is experiencing the same exact trend.

3) It took 2 days longer to sell a home last month:

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

In July it took three days longer to sell a home, and last month it took days longer. When days on market increases, it’s a sign the market is slowing down. Yet at the same time this is a very normal trend because the hot buying season does fade away as summer closes. Generally speaking, the higher the price, the longer it is taking to sell.

4) Sales volume is down 10% in 2014 compared to 2013:

SALES volume in sacramento region - by home appraiser blog

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

Sales volume is down by slightly more than 10% this year compared to last year, and less sales is definitely one of the factors helping to cool the housing market. Less sales has led to increased inventory and a transfer of power from sellers to buyers.

5) Cash is down by 37% this year in the Sacramento Region:

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

I mentioned already that the sales volume is down by 10%, but the X-factor for lower volume is really less cash sales. There have only been about 50 more non-cash sales in 2014 compared to 2013, but almost 2000 less cash sales this year. Having this many fewer sales has made certain months in the year feel sluggish, and it’s certainly contributed to the flattening trend we’ve seen over the past several months.

BONUS MATERIAL: PLACER COUNTY

Placer County median price and inventory - by home appraiser blog

median price in placer county and sacramento county by sacramento appraisal blog

Uptick, but still flat in Placer County: Placer County saw an uptick in median price last month, but it’s not really anything to write home about. One month of data does not mean the market is now increasing after being flat. Moreover, when talking with real estate agents, Placer County is very similar to Sacramento County in that the market is very price sensitive. If it’s not priced right, it’s going to sit.

Placer County housing inventory - by home appraiser blog

months of housing inventory in placer county by sacramento appraisal blog

Inventory in Placer County increased last month: Monthly inventory saw an increase last month from 2.72 months to 2.91 months. This effectively means there are 2.91 months worth of houses for sale in Placer County right now. Generally speaking, the higher the price, the more inventory there is.

days on market in placer county by sacramento appraisal blogIt’s taking two days longer to sell compared to last month: On average it is taking 47 days to sell a home in Placer County compared with 45 days last month. For context it is taking 40 days in Sacramento County and 42 days in the entire region. There were only 2 sales under $100,000, so disregard the 97 days listed above.

Placer County sales volume - by sacramento appraisal blog

Sales volume was fairly similar to last month: Sales volume was similar to last month, and is overall approaching more normal levels (though volume is still down slightly from 2013).

Sharing Trends? It’s a huge joy to put together these graphs each month, and I hope they’re helpful for you and your contacts. If you want to share graphs online or in your newsletter, please see my sharing policy. I hope you reach out for the graphs I didn’t post here too as I’d love to make those available to you. Fill out the form above or send me an email.

Thank you for being here.

Question: How else would you describe the market? I’d love to hear your take no matter what your level of interest or knowledge is about the housing market.

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

The Sacramento market in 30 seconds or 3 minutes

Are you ready? It’s time again for a monthly beefy play-by-play of the Sacramento real estate market. There are many things to talk about, but fortunately there are two options for reading this post:

  1. 30 Seconds: Briefly scan the graphs below in 30 seconds.
  2. Three Minutes: Take a few minutes to digest the graphs and commentary.

Enjoy. By the way, should I keep doing this format? Is it helpful or too much?

housing supply and median sales price by sacramento appraisal blog

Warning – Traditional Economics at Work: As inventory has increased, the median sales price has decreased. It’s always a bit normal to see values cool off during colder months, but it’s also a function of basic economics. When supply increases, prices tend to go down. Let’s look at a closer view below.

housing supply and median sales price trend graph by sacramento appraisal blog

A Closer Look at Price & Inventory: The median price in Sacramento County for November 2013 was about $245,500, which is down from a high of $253,000 a few months ago. Housing inventory is now at 2.5 months, which is a dramatic change from being at a one-month supply for nearly one year until about six months ago when inventory began an upward trek.

absorption rate sacramento county - november 2013

How Fast are Listings Being Absorbed? The absorption rate is basically how fast current listings are being sold or pended each month. It’s an inverse of the months of inventory really, so this rate declines as inventory increases. Right now the absorption rate is 40.4%, which means that roughly 40% of all listings entered “pending” status on MLS or closed escrow last month. All you need to do to figure out the monthly absorption rate is divide the number of sales over the past month by the number of current listings. By the way, here is a quick tutorial on how to calculate housing inventory in case it’s useful (YouTube video).

Foreclosures and Short Sales 2009 to 2013 in Sacramento County - by Sacramento Appraisal Blog

Same Old Distressed News: Foreclosure sales used to dominate the market, but now they’re only hovering at about 5% of all sales in Sacramento County. Short sales have persisted to decline and only represent about 10% of all sales so far this quarter.

Foreclosures and short sales in Sacramento County - by Sacramento Appraisal Blog

The Difference of Five Years: It’s incredible to see that in five years the market has gone from being 84% distressed to roughly 16% distressed. Isn’t that an amazing stat?

cash and FHA sales in Sacramento County - by Sacramento Appraisal Blog

Trading Places in the Market: Cash sales have seen a hefty 14% decline over the past few quarters, and this is creating more space for FHA and conventional buyers to actually get offers accepted. On a personal note it means I’ve been doing quite a few FHA appraisals. An increase in inventory also means buyers can be more picky, which is also why we’re seeing sellers beginning to offer closing costs again as an incentive to “seal the deal”. This is no longer a “price it however you want” market.

cash and FHA under 200K in Sacramento County - by Sacramento Appraisal Blog

Changes at the Lower End: The market under $200,000 was basically gutted by cash investors over the past year, but FHA is gaining ground again as you can see in the graph above.

cash sales under 200K in Sacramento County - by Sacramento Appraisal Blog

A Return to the Bottom: Right now cash sales are at a level close to when the market hit bottom in early 2012 for under $200,000 and even before for the entire county. This is significant because investors swooped in when values bottomed out in the first quarter of 2012 and were one of the big factors for helping create the latest real estate boom. The exponential increases in value were primarily driven by investors, low interest rates and low inventory. Rates are still really low, but things are clearly changing in the cash and inventory department.

Sacramento real estate market stats through 2013 - by sacramento appraisal blog

A Different Market: A chart like this helps to show that the market is now different from even six months ago. Cash is down and conventional and FHA are up. This is true for the entire county, and it’s also true for the lower end of the market under $200,000. Some believe that FHA has not been increasing because of mandated mortgage insurance, but that is simply not true.

sacramento real estate market trend graph closer look by sacramento appraisal blog

The Forces of the Market: Real estate is not just about supply and demand. There are some many “layers” of the market that help create or impact value. As you can see, a decline of interest rates, improving job market and increase of housing supply tends to impact price over time.

sacramento real estate market trend graph by sacramento appraisal blog

A Busy Graph Worth Digesting: Here is a panoramic view of the same trends above, but with ten more years of data. I know this is a VERY busy graph, but it’s also really telling. Spend a minute digesting what is going on here.

unemployment rate US CA Sacramento by sacramento appraisal blog

The Word on Jobs: Sacramento and California both saw an exponential increase in joblessness after the previous real estate “bubble” burst. Both the state and county since have been slowing getting back to levels more consistent with the rest of the nation.

jobs and median sales price by sacramento appraisal blog

unemployment rate and median sales price trend graph by sacramento appraisal blog

Specifics on Jobs: Unemployment in Sacramento County has been declining since the summer of 2010. Currently the unemployment rate as of October 2013 is 8.4%. It’s still definitely not where we’d like it to be closer to 5%, but at least it’s not still 13% like it was, right? This graph pairs jobs with the median price. Jobs are a layer of value in the market that can impact the overall direction of values, but they are really only one layer. Ultimately the Sacramento real estate market will be healthier and stronger when the local economy improves and it’s easier to find good jobs. Bottom line.

Video of Trends: If you’d rather watch or listen to my interpretation of the market, check out the video above (or here). Feel free to share this video on your blog of social media too.

Share the Graphs: As always, you can use these images unaltered in your newsletter, on social media sites or blog posts (just link back). See my sharing policy for more details.

Question: Any thoughts, insight or stories to share? I’d love to hear your take.

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

How much cash is in the Sacramento market?

Any casual follower of real estate has probably heard how cash has been dominant in the Sacramento market lately. But how much is there really? I mentioned previously how investors and hedge funds have been on a purchasing rampage lately. As you can see below, cash sales under $200,000 in Sacramento County have been increasing through 2012. Everyone knows buyers have been struggling to get into contract because of a tight housing inventory, but the allure of cash offers to sellers is surely a part of the struggle too. These cash deals on MLS represent the acquisition market for flippers, rental properties and the resale market once properties have been rehabbed.

Does it surprise you that 40% of all recent sales under $200K in the entire county have been cash?

Cash Sales under 200K in Sacramento County - by Sacramento Appraisal Blog

Click on image to view larger version: All Cash Sales in Sacramento County in 2012 under $200K - by Sacramento Appraisal Blog AppraiserCash vs Financed Sales Graph: If you want to see the data above in a graph format, click on the thumbnail image. This file will help illustrate the cash market vs financed market under $200,000 in Sacramento County. It’s definitely a busy graph since there have been over 9,000 sales so far this year, but I’d still be curious to hear your take. What do you see? Any thoughts?  

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