Seeing the forest & the trees in real estate: Part II

Two weeks ago I talked about seeing the forest through the trees in real estate. The big point was it’s easy to look so closely at the most recent stats that we don’t see the bigger picture of the market. It’s sort of like noticing only the trees instead of the forest (hence the title). Anyway, in today’s big monthly market update I wanted to show how this concept actually works in real life when crunching numbers in the Sacramento area. Whether you’re local or not, I hope this will be interesting or even provocative for how you think about and share housing trends. I’d love to hear your take in the comments below.

The forest and the trees image - sacramento appraisal blog - image purchased and used with permission from 123rf dot com

Interest Rates & Nerf Battle: Before diving in, I have two quick things to share. Unless you’ve been in a bunker without internet access, you’ve probably heard the Fed finally increased rates. There is some good discussion unfolding on a post on my Facebook page. I’d love to hear your take there or here. Also, in non-real estate news, I recently built a Nerf gun battlefield out of pallet wood for my son’s birthday. Check out a quick video tour at the bottom of the post (or here).

Recommendations for reading THE BIG MONTHLY POST: Compare the numbered bullet points to get a sense of the latest numbers (the trees) with older stats (the forest). If you’re short on time, just skip the graphs or download them for later use. The big question today: What difference does it make to look at both recent numbers and year-old numbers? If you’re new here, once a month I do an in-depth market update, whereas other posts are short and sweet. I know the post is long, but it’s on purpose (thanks for reading).

SACRAMENTO COUNTY:

The Latest Numbers (Trees):

  1. DOM: It took 3 more days to sell a house last month than two months ago.
  2. Volume: Sales volume declined 18% from the previous month.
  3. Inventory: Housing inventory stayed about the same as the previous month.
  4. Median Price: The median price has been the same for 7 months.

Last Year’s Numbers (Forest):

  1. DOM: Last year in November 2014 it was taking 6 days longer to sell.
  2. Volume: It’s normal for volume to decline from October to November, so highlighting an 18% “decline” is silly. The bigger story is volume this November is actually 12% higher than last November.
  3. Inventory: Current inventory is 36% lower than last year at the same time.
  4. Median Price: The median price was 5.8% lower last year, which reminds us values have seen a modest uptick this year.

Some of my Favorite Graphs this Month:

price metrics since 2014 in sacramento county

inventory - November 2015 - by home appraiser blog

CDOM in Sacramento County - by Sacramento Appraisal Blog

seasonal market in sacramento county sales volume 2

market in sacramento - sacramento appraisal group

DOWNLOAD 61 graphs HERE: I have many more graphs you can download for study, use in your newsletter, or share some on your blog. See my sharing policy for ways to share (please don’t copy this post verbatim).

SACRAMENTO REGIONAL MARKET:

The Latest Numbers (Trees):

  1. DOM: It took 4 more days to sell a house last month than two months ago.
  2. Volume: Sales volume declined 20% from the previous month.
  3. Inventory: Inventory increased by 3% from the previous month.
  4. Median Price: The median price is down 1% from a few months ago.

Last Year’s Numbers (Forest):

  1. DOM: It took 5 days longer to sell a house the same time last year.
  2. Volume: Sales volume in 2015 is actually 9% higher than last year. Also, in 2014 sales volume declined 23% from October to November, so let’s not freak out about the 20% “decline” above.
  3. Inventory: Current inventory is 28% lower than last year at the same time.
  4. Median Price: The median price was 9.7% lower last year at the same time.

Some of my Favorite Regional Graphs:

prices in sacramento region - FHA and conventional - by appraiser blog

months of housing inventory in region by sacramento appraisal blog

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

median price and inventory in sacramento regional market

number of listings in sacramento regional market

PLACER COUNTY:

The Latest Numbers (Trees):

  1. DOM: It took 4 more days to sell a house last month than two months ago.
  2. Volume: Sales volume declined 22% from the previous month.
  3. Inventory: Inventory increased by 10% from the previous month.
  4. Median Price: The median price has been jumping up and down for the past few months (generally hovering between $390-400K).

Last Year’s Numbers (Forest):

  1. DOM: Last year it took an average of 5 days longer to sell.
  2. Volume: Sales volume this November was 12% higher than last November.
  3. Inventory: Current inventory is 23% lower than last year at the same time.
  4. Median Price: The median price was 5-7% lower last year at the same time.

Some of my Favorite Placer Graphs this Month:

Placer County sales volume 2 - by sacramento appraisal blog

number of listings in PLACER county - November 2015

months of housing inventory in placer county by sacramento appraisal blog

days on market in placer county by sacramento appraisal blog

Placer County price and inventory - by sacramento appraisal blog

Quick Market Summary: On one hand the market in Sacramento has been slowing down. This is normal to see during the fall, and we see a slowness with less sales volume compared to a few months ago, increased days on the market, and a slight increase in housing inventory. The bigger story though is how much different the market is this year compared to last year. In 2014 the fall was extremely dull and incredibly overpriced (as evidenced by 300-400+ price reductions every day). This year housing inventory is over 20% lower, sales volume has been roughly 10% higher, it’s taking 5-6 days less to sell a house, and price reductions have been far less of an issue. However, even with strikingly low housing inventory and more glowing numbers this fall, if the price is not right, buyers are not pulling the trigger. Bottom line. Well-priced listings are tending to attract multiple offers, but otherwise there are homes that are being priced higher that are sitting instead of selling. Sellers would be wise to remember prices tend to soften in the fall, which means pricing like it’s the spring probably isn’t a good move.

Nerf Battlefield I built: Okay, now let me give you a quick tour of a pallet wood Nerf battlefield I built for my son’s birthday. Yes, an epic war happened just two weeks ago in my backyard. Check it out below (or here). Locals, if you want to borrow it for a birthday party, feel free to reach out (you have to pick it up, return it, sign a liability waiver, and of course be trustworthy).   🙂

DOWNLOAD 61 graphs HERE: I have many more graphs you can download for study, use in your newsletter, or share some on your blog. See my sharing policy for ways to share (please don’t copy this post verbatim).

Questions: What stands out to you when comparing the latest numbers with older stats? What impact do you think an increase in rates will have on the housing market? I’d love to hear your take.

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

How to use a CMA to gauge the temperature of the real estate market

Temperature changes all the time. It’s a reality whether we’re talking about a cup of coffee, the weather, or even the real estate market. Today I want to show you one of the ways I use a CMA to take the temperature of a neighborhood real estate market. This helps me communicate well with clients, and I hope it will do the same for you.

Image purchased by sacramento appraisal blog from 123rf dot com - neighborhood market

NOTE: “CMA” stands for “Comparative Market Analysis”, and it’s a tool real estate agents (and others) use to communicate about the market to clients.

Three steps to gauge the market with a CMA:

1) Draw Neighborhood Boundaries:

rosemont neighborhood

All your data is going to come from the boundaries you choose, whether you draw them with a polygon tool in MLS or pick an MLS area (you choose since you are the market expert). I don’t recommend using a radius search because you’ll probably pick up sales from other neighborhoods that could skew the accuracy of what you are trying to present to a client.

2) Run a CMA in your MLS system:

Now run a CMA in MLS so you have access to current listings, pendings, and sales over the past 90 days. The final product may look something like this. I truncated the images below, but you can see the total count of listings and sales in yellow.

Active Listings:

listings in rosemontPendings:

pendings example

Sales over Past 90 Days:

sales example

Compare listings, pendings, and sales: As you can see, actives have been on the market for 103 cumulative days, it took pendings 61 days to get into contract, and recent sales took 49 days to sell. In other words, buyers have been pulling the trigger in about 50-60 days, but at the same time a whole host of homes in the neighborhood are not selling.

BIG POINT: If listings have been on the market for longer than sales, something has changed in the market. Maybe it’s the real estate season, or sellers are trying to “test the market” at higher prices. It could also be that inventory has increased, buyers have become more picky, or maybe current listings consist of different types of homes that take longer to sell. This is key to communicate with clients since clearly some properties are selling and others are definitely not.

3) Figure out Monthly Inventory:

You can quickly figure out monthly housing inventory in the neighborhood. There were 61 sales over the past 90 days, which means the market absorbed about 20 sales per month (61 divided by 3 months = 20.33). Note there are currently 47 active listings. If you want to figure out monthly inventory, all you need to do is divide the number of current listings by the number of sales over the past month. In other words, 47 listings divided by 20.33 sales equals 2.31 months of housing supply.

how to calculate monthly housing inventory

WHAT TO SAY TO CLIENTS: Here is an example of what you might be able to tell clients about this neighborhood:

Right now there are about 2.5 months worth of houses for sale in the neighborhood. This isn’t very many listings, BUT when houses aren’t priced right, they are sitting instead of selling. Most homes are taking 50-60 days to sell, but overpriced homes are literally on the market for over 100 days. These homes will probably sell for even less than they would have had they been priced right from the beginning. 

General Tips:

  1. Don’t make sweeping interpretations because of one CMA.
  2. Be sure you have enough data since few sales can lead to skewed results.
  3. Remember that trends for a larger county or even an entire neighborhood may not reflect trends for the property you’re trying to value. This is why it might also be worthwhile to run a CMA for competitively-sized properties instead of the entire neighborhood.

Keynote Speaker on Friday: By the way, I will be the keynote speaker on February 6 at the Masters Club Roundtables event at the Sacramento Association of Realtors. My 30-minute talk begins at 9am and is called “How to tell the story of the market to your clients”. I’ll focus on unpacking what the market did last year, where it is right now, and how to talk with clients about trends. Swing by if you can.

SAR roundtables

Questions: How do you use a CMA? How else do you gauge the temperature of the market?

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

Parenting and watching real estate unfold in Placer County

Being a parent is a bit like being a private investigator. When problems come up, I often get different stories from my kids or neighborhood kids about who said or did what. It’s then my job to listen (hopefully), gather evidence, and then sift through bits of information to maybe uncover the truth. Can you relate? The same thing happens in real estate because you get different stories depending on who you talk to. One person might say, “the market is on fire and values are increasing”, while another says “the ‘bubble’ is about to burst”. This is why it’s important to pay careful attention to trends so we can be informed and offer accurate information to clients. Today let’s take a look at the latest stats for Placer County, and also touch on what is happening in Sacramento’s regional market. I hope this is helpful.

Two ways to read this post:

  1. Scan the highlighted text and graphs quickly.
  2. Grab a cup of coffee and spend a few minutes digesting what is here.

placer county real estate trends june 2014

PLACER COUNTY:

1) Prices have been flat in Placer County:

Placer County median price and inventory - by home appraiser blog

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

There was a small seasonal uptick in the Spring in Placer County, but prices have been more or less flat lately, which is in part a byproduct of increasing inventory. The median price in Placer County is $380,000. Prices are more or less flat in Sacramento County too, though the median price is about $100,000 less compared with Placer County. Remember that sales stats show a flat market, but these sales got into contract 30-60 days ago. I bring this up because there is even more inventory in the current market, which is really softening values beyond what mere sales stats might tell us.

2) Housing inventory is increasing:

Placer County housing inventory - by home appraiser blog

months of housing inventory in placer county by sacramento appraisal blog

Monthly inventory increased from 2.52 months to 2.76 months between May and June. It’s normal around this time to see an increase of inventory, but this is still important to keep in mind when pricing properties in certain price segments. Less competition tends to cool values. When considering all price segments, the higher the price, the more inventory there is.

3) Houses are taking an average of 37 days to sell:

days on market in placer county by sacramento appraisal blog

On average it is taking 37 days to sell a home in Placer County as opposed to 35 days in Sacramento County (minor difference). Generally speaking, the higher the price, the longer it is taking to sell (which is normal). There were only 7 sales above $1M, so take the “10 days” stat with a grain of salt since properties above $1M generally take much longer to sell. Overall it took less days for homes to sell last month compared to previous months, and if the market unfolds like it did last year, expect to see a longer listing period over these next few months.

4) Volume is down by 11.5% from last June:

Placer County sales volume - by sacramento appraisal blog

Sales volume has been down in the entire Sacramento region. Why? In large part it’s a reaction to investors stepping away from the market one year ago. There were 11.5% less sales in June 2014 compared with June 2013. The same trend is showing up in Sacramento County also. The market is simply trying to figure out how to normalize or adjust now that investors have taken their foot off the gas pedal.

5) Listings increased by 6% from last month to this month (normal):

number of listings in PLACER county - june 2014 - by home appraiser blog

Listings increased by 6% from last month to this month. At the beginning of June there were 1303 active listings on the market, and at the beginning of July there were 1387 listings. This isn’t earth-shattering news, but the number of listings is something important to watch because the market tends to soften as there are more listings (assuming the number of sales does not increase).

6) “Layers” to watch over the next two quarters:

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

What is driving value in Placer County? Low interest rates and low inventory are two of the bigger “layers of the market” right now. In light of less cash investors playing the market (especially in Sacramento County), local real estate is more sensitive to interest rates and upticks in inventory. Rates are still flirting with the low-to-mid 4s, and that is helping buyers afford higher prices for the time being. Yet it will be interesting to see how the market is able to cope with higher inventory and presumably higher rates in the third and fourth quarter of the year.

THE SACRAMENTO REGION:

7) Inventory is increasing in the Sacramento Region:

months of housing inventory in region by sacramento appraisal blog

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

Real estate trends are sort of like neighborhoods at times. What happens on one parcel can tend to impact a property next door (even though we’d like to think we live on “parcel islands“). That’s why knowing what is happening in Sacramento, Placer, Yolo, and El Dorado County can help us see where the market as a whole is going. Overall inventory increased from 2.23 months in May 2014 to 2.43 months in June 2014.

8) It’s taking 37 days on average to sell a house in the Sacramento Region:

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

Properties are not sitting on the market for very long since 37 days is still fairly quick. However, if they are not priced correctly, they are DEFINITELY sitting. Buyers have been gaining more power in the market, so they can afford to be a bit more picky. My advice to sellers? Remember, the market is no longer as aggressive as it was in 2012 and 2013, so it’s important to price your properties correctly if you want to sell.

9) There are 8% more listings this month in the Sacramento area:

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

The number of listings jumped by about 8% from last month to this month, while the number of sales stayed about the same. The number of pending sales is actually lower than last month, which shows the market definitely experienced a slow down.

A little wood project: By the way, from time to time I like to share things I build since I enjoy working with wood. This is a porch footstool I built a few weeks ago out of scrap wood. It’s really meant for an adirondack chair, but it’ll still work I think. It’s kind of funky and it can double as a launch ramp for the kids.

porch footstool

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: How else would you describe the market? I’d love to hear your take.

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

10 quick real estate trends to know about in Placer County

Flat. That’s sort of how the market has felt in Placer County. Well, there has been a slight uptick lately, but otherwise the market seemed to level out a few quarters ago after a massive stint of appreciation. Let’s take a look at the latest trends below, and touch on what is happening in the regional market too. I hope this is helpful.

Two ways to read this post:

  1. Scan the highlighted text and graphs quickly.
  2. Grab a cup of coffee and spend a few minutes digesting what is here.

If you want an email with all graphs in this post for free, fill out the form below:

free graphs from sacramento appraisal blog

PLACER COUNTY:

1) Prices have been mostly flat (small uptick):

Placer County median price and inventory - by home appraiser blog

The market has felt much more flat in Placer County compared to Sacramento County. The median price and average price per sq ft did see an uptick last month on paper, but by in large values have been somewhat flat overall. The market has felt very price sensitive in that if a property is not priced right, it’s going to sit. Of course not all cities or places in Placer County are experiencing the same trends, so take county-wide stats with a grain of salt since they do not apply across the board to every market niche.

2) Inventory is about the same as it was last month:

months of housing inventory in placer county by sacramento appraisal blog

The higher the price, the more inventory there is. Right now inventory is at 2.5 months for Placer County, which is about the same as it was last month. There are actually more listings this month (which is normal), but there are also more sales (also normal).

3) The higher the price, the longer it is taking to sell:

days on market in placer county by sacramento appraisal blog

On average properties took 54 days to sell in May compared with 55 in April (cumulative days on market). Just as it is in Sacramento County, the same holds true in Placer that higher-priced listings take longer to sell.

4) Volume is down by 12% from last year, but up 15% from April:

Placer County sales volume - by sacramento appraisal blog Sales volume is up by 15% from last month, but for some perspective it is down 12% from May 2013. Nonetheless, it’s been good to see more sales these past two months after a more sluggish start to the year.

5) Listings increased by 15% from last month to this month (normal):

number of listings in PLACER county - May 2014 - by home appraiser blogThis is what the market looks like in terms of listings in Placer County. There is very little for sale under $200,000, but quite a bit between $300K to $750K.

6) “Layers” to watch over the next two quarters:

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

What is driving the market in Placer County? Low interest rates and low inventory are two of the bigger “layers of the market” right now. Values really leveled off last summer after cash investors began to pull back from the Sacramento Region and inventory increased. Cash investors were far more dominant in Sacramento County during the heat of the market last year, but you have to remember cash had a ripple effect throughout the market, and what happened in Sacramento County impacted surrounding counties too. Interestingly enough, Blackstone is still buying properties in Placer County. Their purchases have been fairly minimal in 2014 in Placer County, but virtually non-existent in Sacramento County these past six months. The job market is also a factor in Placer County as we need to see higher paying jobs to support higher values. The unemployment rate as of April 2014 in Placer County is 6.1% (compared with 7.1% in Sacramento County).

7) Sacramento County vs Placer County:

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

For reference, there is about a $100,000 median price difference between Placer County and Sacramento County.

THE SACRAMENTO REGION:

8) Inventory increased slightly last month in the Sacramento Region:

months of housing inventory in region by sacramento appraisal blog

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

Keeping an eye on regional trends is important for context. When considering Sacramento, Placer, Yolo, & El Dorado County, inventory saw a slight uptick from last month and is now hovering at 2.23 months for May 2014 (still very low). The higher the price, the higher the inventory.

9) On average it’s taking 52 days to sell a house in the Sacramento Region:

days on market in placer sac el dorado yolo county by sacramento appraisal blog There was no change in CDOM from last month to this month. On average properties are taking 52 days to sell (which is about 40% longer than last year).

10) What prices look like in the Sacramento area:

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

This is evidence of a market that has really changed these past few years. There are increasingly less listings available under $100,000 since the market is no longer saturated with REOs, and values have simply risen exponentially.

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: How else would you describe the market? I’d love to hear your take.

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