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EDD

The need for jobs to drive real estate in 2014

March 10, 2014 By Ryan Lundquist 1 Comment

Where is the market heading? I get asked this question every month when speaking in real estate offices. The most truthful thing I can say is my crystal ball is broken. In fact, predicting real estate is a bit like predicting what Justin Bieber is going to do next. You just never know. At the same time, we can look at the trends and make some educated guesses (still guesses).

2014 possibilities

Since I included the image above in a few recent presentations, I wanted to share a bit about what I’ve been saying, and add a few points since I have space to do so here. To be honest I’m really not a fan of making predictions because real estate is like a living organism that can grow and change in unexpected directions. But in light of my recent presentations I wanted to unpack some thoughts on the market.

sacramento real estate market trend graph median price and unemployment since 2001 by sacramento appraisal blog

Driven by the Fundamentals: The dramatic value increases over the past two years were in large part due to a huge increase of cash investors, artificially low interest rates, an extremely low housing inventory and of course very low prices. Now that all those things have changed, it means we’re inevitably going to get a taste of how strong the market really is this year. In other words, the market should be more driven by the economy instead of outside forces like cash investors and interest rates in the 3% range. Additionally, while I am mostly optimistic about the next couple months since there is still pressure to push values up (assuming sales volume does pick up), I’m more interested in the last two quarters of 2014 to see how the market behaves when Spring fever subsides and after a presumed increase in inventory and rates ensues.

sacramento real estate market trend graph median price and unemployment since 2008 by sacramento appraisal blog

Doom & Gloom: There are lots of doom and gloom real estate articles floating around right now. There are definitely points worth considering in these articles since stats are sagging nationally, but at the same time a slower real estate season and typical real estate media cycle tends to breed these types of articles, which is also worth considering. We may see some more positive news stories shortly as real estate Spring fever kicks into high gear. In fact, some of the stats I shared on median price last week could easily make the highlight reel somewhere locally.

sacramento real estate market trend graph median price interest rates unemployment inventory since 2011 - by sacramento appraisal blog

sacramento real estate market trend graph median price interest rates unemployment inventory since 2008 - by sacramento appraisal blog

interest rates imact in sacramento - graph by sacramento appraisal blog

Long-Term Challenges: As inventory creeps up and rates continue to rise, it will definitely challenge the direction of values and can ultimately foster declines in the future if both get too high. Many talk about 5 months of inventory being a normal supply, which may be true nationally. However, any time the market has had 5 months of housing supply over the past 13 years in Sacramento County, values were declining (see this image as support). Granted, we haven’t really had a normal real estate market for some time, so it’s important to consider the context. Ultimately though local real estate has become more sensitive to increases in inventory, which is why I am saying more than four months is getting to be quite a bit for our market to handle. Also, a change in interest rates is something to watch because the market is also very sensitive to increasing rates – which immediately impacts affordability. For instance, when rates shot up half a percent between May and June last year (as shown in the graph above), it was one of the factors that helped create a turning point in the market. Lastly, a stronger national economy will be important in coming time since real estate is in a softening stage after being hyped on “steroids” these past two years.

Unemployment rate US CA Sacramento 2000 to 2014 - graph by Sacramento home appraiser

sacramento real estate market trend graph unemployment 4 by sacramento appraisal blog

sacramento real estate market trend graph unemployment by sacramento appraisal blog

US, CA & Sacramento: Right now the unemployment rate in Sacramento is 8.2%, California is 8.5% and the United States is hovering at 6.7%. Both California & Sacramento shot far above the US unemployment rate when the recession hit in recent years, but slowly they are trying to find their way back to national levels again. The unemployment rate is by no means a perfect barometer for assessing the health of the economy, but it is nonetheless still good to look at the rate along with other metrics.

The Main Point: Since real estate is expected to be more driven by the fundamentals this year and there are less cash investors playing the market, it will naturally be more important for the pool of existing buyers to have jobs that can help them afford higher prices. Last year property values seemed to sprint ahead of the job market, but this year the job market really needs to make some strides forward to try to sustain where real estate went.

Questions: Are your local friends able to find work these days? Would you say the economy is improving or not?

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Filed Under: Market Trends Tagged With: appreciation, economy in Sacramento, EDD, Home Appraiser, House Appraiser, real estate trends, Real Estate Values, Sacramento Real Estate, Sacramento Real Estate Market, Unemployment, unemployment graphs

An unemployment update & 2014 economic outlook

January 24, 2014 By Ryan Lundquist Leave a Comment

I hope your week has been fantastic so far. If you can give me a minute, here are two quick things to digest.

1) The Unemployment Scoop: New unemployment rates have been posted, so I wanted to give you the lowdown for national, state and local trends. Check out the graphs below and feel free to use them on your blog or in your newsletter. What are the rates at for December 2013? United States (6.7%), California (7.9%) and Sacramento County (7.7%). The jobless rates have continued to decline, which is good news on one hand because the economy seems to be on the rise. Yet on the other hand the labor participation rate is really low, which means less people are working and some are not moving back into the labor market. In short, since the labor force has seen a steep decline over the past five years in particular, it can make the job improvement numbers look a bit sexier than they really are. I mention this because it’s an important asterisk when looking at unemployment data. Yes, the economy has been improving and there are some positive things stirring locally, but we still need more jobs (and good ones).

2) Economic Report: If you haven’t seen the Sacramento Business Review that is put out by Sacramento State, it’s worth a read as it gives an economic forecast for 2014. I recommend you DOWNLOAD THE REPORT (pdf file), save it to your desktop and read at your leisure.

sacramento real estate market trend graph unemployment by sacramento appraisal blog

sacramento real estate market trend graph unemployment 4 by sacramento appraisal blog

sacramento real estate market trend graph unemployment 3 by sacramento appraisal blog

sacramento real estate market trend graph unemployment 2 by sacramento appraisal blog

Question: Any thoughts or questions? Comments are welcome below.

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Filed Under: Market Trends Tagged With: economic forecast in Sacramento, EDD, Home Appraiser, House Appraiser, real estate trends, Sacramento 2014, Sacramento Business Review, Unemployment Rates

Juggling jobs and property value in Sacramento

November 25, 2013 By Ryan Lundquist Leave a Comment

The unemployment rate for the past two months was finally published, so I hope to get you up to speed today. If you didn’t know, the government shutdown set EDD back, so that is what caused the delay. Here are a few graphs to not only see the job market in action, but also property values. Let’s take a look at some trends for Sacramento County, California and the United States. What stands out to you?

jobs and median sales price by sacramento appraisal blog 2

Here is a glimpse of jobs and values in Sacramento County over the past couple of years. The unemployment rate in Sacramento County is 8.4% (October 2013) and the median sales price is $255,000 (October 2013). This is the seasonally unadjusted unemployment rate, whereas the seasonally adjusted rate is 8.7%. By the way, if you’re riding the Bitcoin wagon right now, it looks like the median price in Sacramento County is 308 Bitcoins.

jobs and median sales price by sacramento appraisal blog

There is a tie between jobs and real estate, but the real estate market does not always fluctuate right away because of jobs. For instance, property values here in Sacramento hit bottom in early 2012, but the unemployment rate hit its peak about 18 months earlier in July 2010. This tells us it took a year and a half for the real estate market to stop declining despite unemployment beginning to trend downward. Moreover, even though joblessness has been very high, the real estate market has seen an exponential surge in values over the past 12-18 months. The driving force was mainly historically low interest rates, cash investors and low inventory – not vast improvements in the local job market. This goes to show there are many different “layers of the cake” when it comes to things that make real estate values move.

unemployment rate US CA Sacramento by sacramento appraisal blog

unemployment rate US 1948 to 2013 by sacramento appraisal blog

The unemployment rate in California is currently 8.3% (or 8.7% for the seasonally adjusted rate) and it’s 7.3% in the United States. The graph immediately above shows 65 years of unemployment in the United States, and it’s a good reminder how trends move up and down like a roller coaster.

Questions: What is the relationship between the unemployment rate and property value? Any thoughts, insight or stories to share? I’d love to hear your take.

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Filed Under: Market Trends Tagged With: California unemployment graph, EDD, graph of unemployment rate, Home Appraiser, House Appraiser, jobs and real estate market, Sacramento appraisals, The multi-layered real estate cake analogy, Unemployment Rate, unemployment Sacramento County, United States unemployment graph, US unemployment 1948 to 2013

Three things to digest about Sacramento real estate

August 21, 2013 By Ryan Lundquist 3 Comments

I don’t know about you, but I’ve been encountering quite a few home owners who say, “I like that values have been increasing, but I’m a little nervous at how fast they’ve gone up.” Since the market has changed so rapidly over the past 12-18 months in Sacramento County, it’s understandable to feel this way. Today let’s take a quick look at a few market trends to gain some context for local real estate.

Median price in Sacramento County - by Sacramento Appraisal Blog - 2

1) Median Price on Steroids: The median sales price in Sacramento County is now close to $250,000. As you can see from the graph above, the median price has skyrocketed over the past year. The median sales price was above $375,000 in Sacramento during the peak of the market, but then dropped 59% until it began increasing again in early 2012. Right now stats on a graph like this (year-end median sales price figures only) make it look like the current market resembles previous values in 2003 and 2008. Personally I think today’s values in most areas of Sacramento are much more aligned with 2002 and 2008-ish. I say this because I often make graphs of historic sales in neighborhoods and values are usually still higher in 2003 compared to current values (for most areas). Why is this? The median sales price right now is inflated due to the disappearance of foreclosures at the bottom, increased investor cash and a lower inventory overall. Remember, the median sales price can be a helpful metric, but it also has its limitations.

CntyPriceChange_June12to13

By the way, here is a graph of AVERAGE price per square foot for surrounding counties. Thank you to Real Estate Broker Joel Wright for this graph. I love Joel’s data, and you can read more on his post here.

Unemployment Rate through July 2013 in Sacramento County - 530 - by Sacramento Appraisal Blog

Unemployment Rate

2) The Unemployment Rate is Back from Vacation: The unemployment rate took a recent “vacation” south to 8% in Sacramento County for a few months, but has since crept back up to 9.2% as of July 2013. The unemployment trend has been declining since the summer of 2010, but we’re not out of the woods yet, are we? For reference, unemployment in California right now is 8.7% and the United States unemployment rate is 7.4% (as of July 2013).

3) Changes in the Market: I appreciate Realtor Doug Reynold’s take on the market in his most recent YouTube video. Doug talks about how the market has begun to see some changes lately in light of more inventory and less investor cash. Give it a watch or listen above (or here) and let me know what you think.

Question: Any thoughts, stories or insight to share? Comment below.

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Filed Under: Market Trends, Videos Tagged With: Doug Reynolds real estate, EDD, Home Appraiser, home appraisers, House Appraiser, Joel Wright Real Estate, Median Price in Sacramento, real estate market data, Sacramento County Real Estate Market Trends, Sacramento County unemployment rate graph, Unemployment, unemployment rate California, United States unemployment

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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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The information on this website is meant entirely for educational purposes and is not intended in any way to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or any other potential real estate or non-real estate purpose. The material found on this website is meant for casual reading only and is not intended for use in a court of law or any other legal use. Ryan will not appear in court in any capacity based on any information posted here. For more detailed market analysis to be used for an appraisal report or any appraisal-related purpose or valuation consulting, please contact Ryan at 916-595-3735 for more information.

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