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cash purchases

Price ceilings & literal ceilings that are too low

July 12, 2017 By Ryan Lundquist 13 Comments

I have two types of ceilings on my mind. How do you know when a market begins to reach its price ceiling for the season? And how low can a ceiling be in a home and still be considered legitimate square footage by an appraiser?

I recently inspected a house where the ceiling was 6 feet 8 inches high. Is that tall enough to count? Is there such a thing as too low? Let’s talk about it. 

How low can a ceiling be? Lots of people think 8 feet is the minimum ceiling height because that’s a common height in most homes, but it’s actually 7 feet according to the American National Standards Institute (ANSI Z765). Technically ANSI says it’s okay to have a ceiling height at 6’4″ under beams though. Keep in mind sometimes a ceiling might have a downward slope like we see with a Tudor or the photo above. When ceilings slope really low, there is something called the “5 foot rule” where the appraiser can count any space above 5 feet as living area as long as over 50% of the ceiling area is at least 7 feet.

When appraisers observe houses with ceilings below 7 feet, they’ll typically email the lender and say, “Hey there, this property has a ceiling less than 7 feet, and that doesn’t cut it according to ANSI standards. How do you want me to proceed?” After hearing that there’s a good chance the lender might not want to do the loan. Of course a property with low ceilings can still have value and even be appraised, but it may need to be marketed to an investor paying cash instead of a buyer using conventional or FHA financing.

Market price ceilings: Switching ceiling gears, how would you know if the market was beginning to reach its price ceiling for the season? That’s a great question to ask since many markets in the United States are going to be doing just that over the next couple of months. As I said in June, the Sacramento market is beginning to slow down even though we don’t see it in the sales stats yet. This doesn’t mean the market is cold or values are declining. It only means we are seeing subtle clues to a slowing market as high altitude values from the spring are at the beginning of a downward seasonal descent.

Umm, please don’t say the market is slowing!!!

At times it’s not very popular in the real estate community to publicly talk about the market slowing, but it’s something that happens nearly every single year. I realize we have big headlines about the market being “hot”, and it really is in many way, but catching the symptoms of a slowing market is key for valuing properties (and it’s good for clients). I suggest starting to watch price reductions more closely because they’ve been increasing lately in Sacramento and this is one of the first signs of a slowing market. Also pay attention to days on market increasing in coming time along with some of the other factors above (including the sales to list price ratio). I highly recommend asking other real estate professionals the question, “What are you seeing out there?” It’s amazing the type of insight you can glean from title reps, loan officers, appraisers, agents, escrow officers, etc…

I hope that was helpful or interesting. Any thoughts?

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

Values showed an increase again last month and sales volume was very steady compared to the past few Junes. Overall most price metrics were up 1-2% from last month, though the month prior they increased 2-4%. Inventory is still down about 20% from last year, and properties have been selling like hotcakes in only 9 days (that’s the median). In case you wanted to know, most price metrics are up about 7% from last year. One interesting thing to watch is FHA sales are starting to sag more noticeably as they ticked down a few percentage points to 21% of the market in Sacramento County. Granted, 1 in 5 sales is still quite a bit of FHA volume, but last year we were seeing 1 in 4 sales go FHA. It’s easy to think this means first-time buyers are getting squeezed out by Bay Area buyers, but that’s not really the case. My sense is the downtrend is due to more would-be FHA buyers using competitive conventional products instead of FHA. Lastly, it’s worth noting Curbed has a glowing article about Sacramento (cool that they quoted me too). This article is starting to go viral and it’s bound to get many locals pumped on how “hot” the Sacramento market is. Yet despite being “hot” in many ways, let’s remember to look for the signs of a slowing market because we have to realize the market usually hits its seasonal price ceiling right about now (but we won’t see it in the sales stats for a while). I could go on and on with words, but let me share some graphs to show the market visually.

DOWNLOAD 74 graphs (and a stat sheet) 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 74 graphs (and a stat sheet) HERE: Please download all graphs in this post (and more) here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: Any low ceiling stories to share? Is the price ceiling for the season just about here? Did I miss anything? I’d love to hear your take.

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Filed Under: Market Trends Tagged With: 5 ft rule, ANSI, appraisals, Appraiser, average sales price, avg price per sq ft, cash purchases, ceilings are too low, days on market, FHA, foreclosures, Home Appraiser, hot market, house appraisals, increasin market, Median Price, Placer County real estate trends, Sacramento County real estate trends, Sacrametion Regional Market, seasonal slow down, sensational news, trend graphs

The striking difference of cash in real estate in 2013 and 2014

June 19, 2014 By Ryan Lundquist 6 Comments

Last year was dominated by cash sales. Or I should say DOMINATED since investors really drove the market. This was true in Sacramento and it was true for many markets across the United States. But this year has been different. In fact, cash has been about half of what it was last year, and it has simply softened the market. Let’s take a look at some images and six quick talking points to share with clients and contacts. Any thoughts?

cash sales in sacramento county 2013 vs 2014 - by sacramento appraisal blog - 530

Key Takeaways for Sacramento County: 2013 vs 2014*

  1. Total sales volume is down 14% from 2013
  2. Cash sales are 21% of the market, but they used to be 35% of all sales
  3. There have been 48% fewer cash sales in 2014
  4. As prices in real estate have increased, so have cash price levels
  5. About half of cash sales are still under $200,000
  6. Less cash has created more space for financed offers to get accepted. There have been more conventional /FHA purchases in 2014 compared to last year. There were 4087 in 2013 and there have been 4194 in 2014.

* Data is based on January to May (single family detached sales in MLS).

cash sales in sacramento county 2013 vs 2014 - by home appraisal blog

I hope this was helpful. By the way, this is completely off topic, but here is my latest wood project. If you didn’t know, I love to tinker with wood – especially scrap wood. I built this outdoor cooler a few days ago out of scrap in my garage.

my DIY outdoor cooler

Questions: How have you been seeing cash investors impact the real estate market (even if you are not local)? What is driving your market right now?

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Filed Under: Market Trends Tagged With: 2013 vs 2014, cash in Sacramento, cash investors, cash purchases, Home Appraiser, house appraisers, investment funds, real estate cash, Real Estate Market, trends in Sacramento, what is driving real estate market

FHA increases as investors buy less in Sacramento

August 29, 2013 By Ryan Lundquist 4 Comments

The “force” is growing stronger with FHA lately in Sacramento. Yes, that was a Star Wars reference. The latest stats over the past couple of months show an uptick in FHA loans by 2% when considering the entire county and 4% when looking at sales under $200,000. As you can see, less cash and more inventory are creating an environment for FHA to take a stronger grip on the market. Any thoughts or predictions for upcoming market changes? If you are an agent, do you find your sellers more open to FHA these days?

FHA cash and conventional stats for Sacramento County - by Sacramento Appraisal Blog

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Filed Under: Market Trends Tagged With: cash investors in Sacramento, cash purchases, Conventional, FHA, Home Appraiser, House Appraiser, investment funds, less cash in the market, market trends in Sacramento, Sacramento County real estate data

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First off, thank you for being here. Now let's get into the fine print. The material and information contained on this website is the copyrighted property of Ryan Lundquist and Lundquist Appraisal Company. Content on this website may not be reproduced or republished without prior written permission from Ryan Lundquist.

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