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Is the market so “hot” that we won’t have a slow fall this year?

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Values are going to keep going up. The market is so “hot” we’re not going to have a fall slowdown this year. I’ve heard this sentiment quite a bit lately and I’ve even thought it myself. Yet today let’s remember five things about the fall season. Then for those interested we’ll dive deeply into the latest Sacramento trends.

5 things to remember about the fall market:

1) A general truth: Unless we have reason to believe there won’t be a slower fall season, let’s believe there will be one because it’s normal for real estate to have seasons.

2) The typical signs are happening: When the market starts to slow we usually see certain symptoms, and we’re seeing those right now. Inventory has increased slightly, sales volume is starting to slough, and prices in the region dipped a bit last month. Yet Sacramento County stats are nothing but glowing, which makes it hard to believe a slowing could happen.

3) Slow vs. slowing: The market is NOT slow, but we’re seeing slowing. That’s a big distinction for many markets in the country right now. In reality it almost sounds offensive to say the market is slowing when we have multiple offers and bidding wars, but things right now don’t feel quite as aggressive as they did in April and May. We’re seeing slightly more price reductions, slightly less offers, and buyers more frequently not accepting counter offers like they did a few months ago. I know, this isn’t true in every transaction. All I’m saying is we are generally seeing more symptoms of a slowing market (but it’s NOT slow).

4) Not always dull: Sometimes the fall months can be really dull, but other times not so much. Thus even though the stats sag at the end of the year, it doesn’t always feel like the market is dragging. My guess is the fall softening this year will not feel as dull because of how low inventory is right now.

5) Rare: It’s rare to not have a seasonal market. The only time I can think of us not having a fall slowdown in recent years was in 2012 when investment funds and flippers were gutting the market. Values simply kept going up, and investors basically trumped the seasonal market that year.

I hope that was helpful or interesting. Any thoughts?

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

Glowing and slowing. That’s a good way to sum up the market. The stats are generally glowing, but we’re starting to see subtle signs of a seasonal slowing. Price stats in Sacramento County increased by about 1% last month and they’re up 8-10% from last year (that doesn’t mean actual values are up that much in every neighborhood and price range). Though if we look closely, especially in the region as a whole, prices dipped by 1% last month, inventory is up slightly, and sales volume sloughed off last month (which isn’t a surprise). Properties have been selling very quickly still in only 9 median days in Sacramento County and 11 in the region. For perspective, on average it was taking about a week longer to sell a home last year. The market actually tends to normally show a slowness in days on market between June and July, but we didn’t see that this year, which is a reminder the market feels a bit more aggressive right now compared to last year. Overall housing inventory increased last month, but the bigger story is it’s down about 14% in the region from last year. Despite all the glorious stats, the market is still price sensitive, which means buyers aren’t willing to pull the trigger at any price (did you hear that sellers?). Oh, and by the way, the median price in Sacramento County is now 10% from the peak in 2005. I could go on and on with words, but let me share some graphs to show the market visually.

DOWNLOAD 65 graphs 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 65 graphs (and stats) 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).

Questions: What signs of glowing or slowing are you seeing? Do you think we’ll have a fall market? Did I miss anything? I’d love to hear your take.

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Price ceilings & literal ceilings that are too low

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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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A high-voltage tower INSIDE the backyard

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Have you ever seen a high-voltage tower INSIDE a backyard? I’ve seen towers behind backyard fences, but never something inside until my appraiser colleague Dawn Foucault shared a couple images of a brand new neighborhood in Sacramento. What the? Can you believe it? Let’s kick around some thoughts.

The PG&E tower is operational AND is located inside the parcel lines of the subject property. By the way, Dawn gave me permission to share these images.

Here’s some initial thoughts on my mind. Anything to add?

1) Surprise: Anyone who works in real estate sees some odd stuff, so I’m not all that surprised at most things. But with so much conversation around the safety of electromagnetic fields in recent years, I’m a bit taken aback to see something like this. I’m sure there is a technical reason why the building department allowed this to happen, but that doesn’t replace my shock. Can you relate?

2) Resale value: Properties like this tend to struggle in the resale market. They might be able to command a decent price when selling directly from the builder, but in the future after the allure of a brand new home has worn off, many buyers will simply pass on properties with adverse or odd issues. This is especially true in markets with higher housing inventory. 

3) True Comps: We can’t assume the house next door is a perfect comp because there is likely a value difference between a property with a high-voltage tower INSIDE the backyard vs being located NEXT DOOR to a tower. In an ideal world we’d find other sales with high-voltage towers inside the backyard (or maybe something equally adverse) to help tell the story of value for the property. In this case there was actually one other sale in the neighborhood a year ago with a backyard tower, so my appraiser friend lucked out to say the least. 

I hope this was interesting or helpful.

Questions: What do you think after seeing these photos? Would you ever buy a house like this? Why or why not? I’d love to hear your take.

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Insane value increases (not really) and Facebook real estate trends

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The market has been showing insane value increases. Well, on paper it looks that way, but in reality that’s not what we’re seeing right now. Let’s take a deep look at the market today and also consider real estate trends we can glean from Facebook statuses. This big monthly post is long on purpose. You can scan it quickly or pour a cup of coffee and spend some time here. If you aren’t in Sacramento, I hope you can still find some value. Do you see any parallels to your market? Any thoughts? 

Three real estate trends we can glean from Facebook:

1) Asking for inventory: I am seeing many posts from real estate agents saying, “I have buyers, but there aren’t any homes on the market”, or “Do you have any upcoming homes in XYZ city or neighborhood?”, or “There are only 11 listings in the entire zip code.” Even if we didn’t have actual numbers to show inventory is sparse, we could pick up on this reality by some of what we see on Facebook. This is a good reminder that data is not just about looking at sales. 

2) Asking for rentals: Many in the real estate community and the general public are asking for rental inventory on social media. There are so many posts from tenants needing to find a home or agents and loan officers asking on behalf of someone. A person I know recently posted about trying to rent a home in Roseville only to have to compete with 23 other contracts on one house.

3) Announcing price improvements: This market is “hot”, but buyers are not biting on absurdly overpriced listings. This is why we still see Facebook posts telling of price reductions or “price improvements” (a softer way of saying the same thing). You might think we wouldn’t see such a thing in a “crazy hot” market, but we do.

4) What is #4?

———————- big monthly market update below ———————-

DOWNLOAD 70 graphs HERE: Please download all graphs in this post (and more) here as a zip file (including a one-page quick stat sheet). See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

A MARKET SUMMARY:

Last month values increased no matter how we look at it. The median price, average sales price, and average price per sq ft all increased in Sacramento County, Placer County, and the region. This isn’t a surprise though because it’s what tends to happen in the spring. The mistake we can easily make though is to look at the median price rising nearly 5% last month and say things like, “Values increased by 5%.” Thus if we’re not careful we might claim values are increasing rapidly when in reality they simply got back to where they were at the height of summer before a lull in the fall.

While the market is said to be “hot” in the “Farm to Fork Capital of America”, let’s still remember the market is not doing the same thing at every price level. Inventory is incredibly sparse under $400,000, and that is putting tremendous pressure on values to increase, but in some higher price ranges and neighborhoods the market feels a bit flat. Yes, there are multiple offers on about anything that is priced right, but still we have to not confuse the aggressive feel of the market with rapid appreciation. In short, at the moment we are not seeing the type of rapid appreciation we had in 2013 at the height of the glory days of Blackstone. In all of this let’s remember too we’ve had value increases without much wage growth. Let’s keep rooting for wages and the economy to drive the market instead of anemic inventory and low interest rates. 

Lastly, let’s remember the bulk of listings in 2016 hit the market between April and August, so my advice to buyers is to keep waiting for inventory to come (many buyers are feeling hopeless). I would advise sellers to price according to other properties that are actually getting into contract too instead of sensational real estate headlines.

SACRAMENTO COUNTY:

  1. The median price increased to $323,500 (8.2% above February 2016).
  2. The median price rose 6% last month, but values were basically getting back to summer after a lull in the fall, so this doesn’t mean values increased by 6% in one month.
  3. Sales volume in February 2017 was just about 1% higher than last year.
  4. It took an average of 44 days to sell a home last month (one year ago in February 2016 it was taking 2 days longer to sell).
  5. It took two days longer to sell in February compared to January (next month we should see stats show less days on market as spring unfolds).
  6. FHA sales volume is down 6% this year compared to 2016 (but roughly 25% of all sales were FHA last month).
  7. Only 3.8% of all sales were bank-owned and 2.3% were short sales.
  8. The average price per sq ft was about $204 last month (about 2% higher than January, but 8% higher than last year).
  9. The average sales price increased about 2.5% last month and is currently $348,892. This is 7.7% higher than last year.
  10. Cash sales were 15% of all sales last month.

Some of my favorite images this month:

Median price since 2013 in sacramento county

price metrics since 2015 in sacramento county - look at all

inventory in sacramento county Since 2008 - by sacramento appraisal blog

inventory - February 2017 - by home appraiser blog

CDOM in Sacramento County - by Sacramento Regional Appraisal Blog

sales volume in Sacramento County since 2012

january seasonal market in sacramento - 2

SACRAMENTO REGIONAL MARKET:

  1. The median price increased to $355,600 (7.7% above February 2016).
  2. The median price rose 4.8% last month, but values were basically getting back to summer after a lull in the fall, so this doesn’t mean values increased by 4.8% in one month.
  3. Sales volume in February 2017 was about 2% higher than last year. Sales volume in the region is up nearly 3% this year so far.
  4. It took an average of 48 days to sell a home last month (one year ago in February 2016 it was taking 3 days longer to sell).
  5. It took one day longer to sell in February compared to January (next month we should see stats show less days on market as spring unfolds).
  6. FHA sales volume is down 6.7% this year compared to 2016 (but roughly 22% of all sales were FHA last month).
  7. Only 3.4% of all sales were bank-owned and 2.5% were short sales.
  8. The average price per sq ft was about $210 last month (about 1% higher than January, but 7% higher than last year).
  9. The average sales price increased about 2% last month and is currently $387,105. This is 4.3% higher than last year.
  10. Cash sales were 16% of all sales last month.

Some of my favorite images this month:

Regional Inventory - by Sacramento regional appraisal blog

inventory in sacramento regional market

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

sacramento region volume - FHA and conventional - by appraiser blog

median price and inventory in sacramento regional market 2014

Regional market median price - by home appraiser blog

PLACER COUNTY:

  1. The median price increased to $435,000 (4.8% above February 2016).
  2. The median price rose 2.5% last month, but values were basically getting back to summer after a lull in the fall, so this doesn’t mean values increased by 2.5% in one month.
  3. Sales volume in February 2017 was about 9% higher than last year.
  4. It took an average of 51 days to sell a home last month (one year ago in February 2016 it was taking 7 days longer to sell).
  5. It took 1 less day to sell in February compared to January.
  6. FHA sales volume is down 12.6% this year compared to 2016 (but roughly 17% of all sales were FHA last month).
  7. Only 2.5% of all sales were bank-owned and 3.1% were short sales.
  8. The average price per sq ft was about $219 last month (about 3.9% higher than January and 4.8% higher than last February).
  9. The average sales price increased about 2.4% last month and is currently $478,589. This is 3.5% higher than last year.
  10. Cash sales were 16.5% of all sales last month.

Some of my favorite images this month:

days on market in placer county by sacramento appraisal blog months of housing inventory in placer county by sacramento appraisal blog 2 Placer County price and inventory - by sacramento appraisal blog Placer County sales volume - by sacramento appraisal blog

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

DOWNLOAD 70 graphs HERE: Please download all graphs in this post (and more) here as a zip file (including a one-page quick stat sheet). See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Questions: Did I miss anything? What are you seeing out there? How 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.