Home Appraiser

Foreclosures for Christmas & housing on steroids

December 9, 2021 By Ryan Lundquist 16 Comments

Are you getting into the holiday spirit? I’m not there yet, but I’m hoping to find my way there. I mean, I did see the Foo Fighters play this week and that was incredible. But it didn’t really catapult me into holiday cheer either. Anyway, I’m open to ideas if you have some. For now here are three things on mind:

This visual shows a holiday wrapped gift and some decorations with a caption the same as the blog post title

1) ‘Tis the season for foreclosure press releases:

In the next week we’re going to start seeing press releases about foreclosures being delayed for the holidays. This is a nice gesture, but the truth is foreclosure is going to be unwrapped as a New Year’s gift instead. Even in Sacramento County we see bank-owned sales spike in the first quarter. Thankfully distressed sales aren’t common these days as there were only six bank-owned sales in the region last month (one quarter of one percent of sales).

2) Is this what a slow housing market feels like?

This is supposed to be the slowest time of the year in real estate and there is no mistaking the market has softened from the spring, but it’s still really competitive. This is exactly what I’m hearing from the real estate community and it’s the story stats are telling. As I unpack numbers, I want to reiterate my advice last week to buckle up for the beginning of next year. I’m telling you, we’re poised to begin 2022 at a really competitive spot – especially if this is what the slowest time of year feels like.

3) Speaking gigs in January:

Here are two events I’m doing next month. I’ll have two or three others also, but I haven’t seen details released yet.

Big 2022 market update at SAR: I’m doing a market talk on January 18th from 9-10:30am. Hope to see you there. Sign up here.

Top producer panel: I’m doing a market update at Granite Bay Country Club on January 12th and here is the most random promo video. I didn’t write this script, but I did play along. Haha.

I hope you’re finding joy during this holiday season.

Thanks for being here.

—–——– BIG MARKET UPDATE FOR THOSE INTERESTED ———––

This image says "Caution" and it's yellow and black. Then it says "big monthly market update below." Skim or digest slowly.

QUICK SUMMARY:

Between November and December we tend to see the housing market hit its slowest point of the year, but it doesn’t really feel like that right now in the trenches. I mean, on one hand we definitely have less demand as some buyers are sitting out because the holidays are upon us. But for buyers playing the market it’s ultra-competitive. There is a smidgen of hope as buyers have slightly more power than the spring, but the market is still more elevated than usual for the time of year.

A quick recap:

This image summarizes other visuals in this report. It is a bullet point list of recent market stats in the Sacramento region. There are about 15 bullet points.

Some visuals eh…

SEASONAL MARKET ON STEROIDS:

That’s a really good way to describe the market right now. Statistics are showing clear seasonality, but the market is still way more competitive than it normally is at this time of year.

YEAR OVER YEAR:

Year over year stats are important to digest, but don’t forget to look at month to month stats to understand what the market is doing right now.

A recap of the Sacramento region year over year

MONTH TO MONTH:

Stats from October to November were somewhat flat. I mean, technically prices rose, but I wouldn’t make too much of that. At this time of year stats bounce around all over the place. In other words, when the market starts to slow at the beginning of summer we don’t always see a dramatic decline each month. Sometimes the numbers are up and sometimes they’re down month to month. Ultimately what I’m trying to say is don’t write home and talk about the market showing a price increase from October to November.

WHAT THE…. STILL SELLING ABOVE THE LIST PRICE:

Two years ago properties on average sold about three percent below their original list price at this time of year because that’s what tends to happen during a slower fall season. But last month properties on average sold at 100.27% of their original list price. This might sound incredibly minor to say homes sold 0.27% above their asking price on average, but compared to a normal trend, homes really should be selling a few percent below their list price. In short, this is bananas.

On average properties sold $1,671 above their original list price. Remember, this only represents the average. It does not perfectly describe every escrow because clearly some sold way above that amount, some sold at list price, and some sold below. The bigger issue is if we had a normal market properties on average should be selling about $15,000 or so below the asking price.

Being that only 13% of sales sold below the list price last month, that’s a sign the market is not overpriced as a whole. It is true that sellers who list too high are going to have properties that sit (seriously). It’s just stats show this is not what every seller is doing.

HOW IS THE MARKET DISTRIBUTED?

I’m glad you asked. This is a cool visual I’ve been making for a few months. It shows how prices are distributed throughout the market. Do you dig this one?

STRONG SALES VOLUME:

There is no mistaking prices have risen and the housing market is becoming more difficult to afford, but stats still show buyers are getting it done. This is not to gloss over the reality of some buyers being priced out of the market. I’m just saying statistically sales are happening at strong levels. Here is what sales volume looks like right now in various counties.

OTHER VISUALS:

As if anyone really wanted more…

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Thanks for being here.

SHARING POLICY: I welcome you to share some of these images on your social channels or in a newsletter. In case it helps, here are 6 ways to share my content (not copy verbatim). Thanks.

Questions: What are you seeing out there in the market?

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

Housing on steroids, slowing, & smaller homes

November 17, 2021 By Ryan Lundquist 20 Comments

Real estate has been slowing, but it’s still completely nuts. I’ll explain below. But first let me unpack the NAR conference in San Diego and share some exciting personal news. Oh, and let’s talk about smaller homes selling. Then stats and perspective for those interested.

This picture shows an asphalt road with the words "fast" and "slow" written on the asphalt. The top of the image includes the blog title

NAR Conference & my new BFF: I had the honor of sitting on an appraiser panel last weekend at the National Association of Realtor’s annual conference. I appreciated being asked to share my two cents and I’m so grateful to have met and mingled with colleagues too. Also, I met former quarterback Drew Brees since he spoke at the conference and he’s pretty much my new BFF.

This photo shows a few pictures of the NAR conference in San Diego. These are other apprasiers with Ryan. Though one picture has quarterback Drew Brees and Ryan.

500 days of no beer: In personal news it’s now been 500 days since I gave up alcohol. I said goodbye to alcohol for health reasons and I’m feeling really good. This was a personal milestone and now I’m targeting two years. At some point in the future I might re-introduce beer back into my life, but for now I’m taking some time to focus on health. This has been good. And my pants fit better too. 🙂

Slowing but not slow: The housing market has been experiencing definitive seasonal slowing and I’ve been talking about that for months, but at the same time the market is still so much more competitive than it usually is for the time of year. In other words, the stats are slower than spring, but they’re elevated way beyond normal for the fall season. On that note, when some say the housing market is crashing, I wonder if they’re in touch with how aggressive some of the statistics are right now.

Smaller homes: During the beginning of the pandemic there was a notable uptick in the size of homes selling. Initially I thought it was maybe due to buyers targeting larger homes to sort of quarantine in style, but now with the benefit of hindsight I think the real culprit was a spiked emphasis on more expensive (and larger) homes due to an influx of buyers at higher prices.

Here are a few visuals to show this spike in size in 2020 and now a slightly smaller size in 2021. I wanted to mention this because part of me wonders if we are starting to see a bit of the pandemic home size sizzle begin to fade slightly.

This visual shows the median home size and average home size in the Sacramento region since 2012. It has increased over time and there was a spike in 2020 in particular. This is a line graph.

This image shows the average home size and median home size in Sacramento since 1998. Size has increased and it shows there was a slight tick down in 2021 from 2020. This is a line graph.

This visual shows a dip from 2020 to 2021 in home size. It almost looks like 2020 was an elevated year and now the trend is getting back to normal.

Sharp size drop lately: There has been a definitive drop in home size since May. It’s normal to see larger homes sell for about half the year and then smaller homes for the second half of the year. The drop this time around though has been sharp and that’s something I’ll be watching. This could speak to a normalizing of the higher end market (fewer higher-end sales after a pandemic spike), but we need some time to understand. Stay tuned.

This visual is both a bar chart and a line graph to show the average sales price (bars) and average hom size in the Sacramento region (lines). This shows a seasonal rhythm to both over time.

No blog post next week: I won’t have a blog post next week because I’ll be thinking about family, woodworking, and eating pie. I am doing Run to Feed the Hungry, so I hope to see some local friends there. Happy Thanksgiving!!

Thanks for being here.

—–——– BIG MARKET UPDATE FOR THOSE INTERESTED ———––

This image says "Caution" and it's yellow and black. Then it says "big monthly market update below." Skim or digest slowly.

QUICK SUMMARY:

The market is so obviously not as hot as it was during the height of spring. Yet the slower speed today is still so much faster than a normal fall season. This is why I keep saying the market is like a car speeding on the freeway that recently let up on the gas. The car is clearly slowing, but it’s still going really fast. Both things are happening at once. Ultimately buyers have been gaining more power and it’s been a bit easier to get into contract, but there is a difference between easier and easy.

Some visuals eh…

YEAR OVER YEAR:

Year over year stats are important to digest, but don’t forget to look at month to month stats to understand what the market is doing right now.

Sacramento housing region stats for price, number of sales, cash percentages, and other elements.

Sacramento county stats for price, number of sales, cash percentages, and other elements.

Placer county stats for price, number of sales, cash percentages, and other elements.

MONTH TO MONTH:

Stats from September to October basically show more seasonal slowing, but not every category is slowing. Remember, stats around this time of year tend to bounce around a bit. One month prices might be up slightly and the next month they could be down slightly. And remember, part of prices dropping has to do with smaller homes selling. Technically the median price in the region has dropped 4% from June, but this does NOT mean prices are 4% lower in every area. Simply put, some of this price drop really has to do with size.

Sacramento region stats for price, number of sales, cash percentages, and other elements. September to October stats.

Sacramento county stats for price, number of sales, cash percentages, and other elements. September to October stats.

Placer county stats for price, number of sales, cash percentages, and other elements. September to October stats.

STILL SELLING ABOVE THE LIST PRICE:

Here are some visuals to show how properties have sold in relation to the original list price. In short, we are seeing more properties sell at or below the list price, but last month on average properties still sold almost 0.50% above the original list price. For context, 43% of the market sold at or below the list price last month (most of that is not below). In 2019 more than 70% of all sales sold at or below the list price though, so despite seasonal slowing the market is still moving really fast. It is actually highly unusual to see homes selling above the list price in October. On average homes sold about $2,800 above the original list price whereas in October 2019 homes sold about $15,800 below the list price.

We really don’t have an overpriced market, but some sellers need to adjust to the reality of a slower pace compared to April. Buyers, there is a little more hope for you, but you still have to bring a strong offer. Only 13% of homes sold below the original list price last month. In a normal market his number should easily be 20% or more. Hang in there.

A line graph to show the original sales price to list price ratio since 2018 in the Sacramento region A line graph to show how much buyers have paid in relation to the original list price since 2018 in the Sacramento region August through October stats for specific price ranges

This visual shows the percentag eof homes that sold above the list price from November 2020 through today

UPDATED VISUAL:

This is a cool visual I’ve been making for a few months. It shows how prices are distributed throughout the market. I actually corrected this visual since I made an error in Excel that pushed the columns over one bin (and that changed everything). Sorry about that.

TWO BRAND NEW VISUALS:

Here are a few new visuals to show how much buyers paid above asking price. I like this format because it compares multiple years at once. But I’m not totally sold on this either because 2020 was such an odd year and 2021 is so far removed from the trend. It just feels a bit awkward maybe. No matter what though, do you see how normal it is at this time of year to see cooling? It’s like the market goes up for about half the year and then things descend.

A BUNCH OF VISUALS:

In case you’re still reading, here are a bunch of visuals to digest. I’m playing catch-up after being out of town, so I don’t have any more time to organize these. Let me know if anything stands out to you.

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Thanks for being here.

SHARING POLICY: I welcome you to share some of these images on your social channels or in a newsletter. In case it helps, here are 6 ways to share my content (not copy verbatim). Thanks.

Questions: What are you seeing out there in the market?

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

The struggle to afford the market & making the top of the list

November 1, 2021 By Ryan Lundquist 18 Comments

Are buyers struggling to afford the market? Let’s talk about that today. I have some brand new visuals to share (Part I) and then let’s unpack a new study that says Sacramento is the least affordable area for new homes (Part II). What are you seeing in your area regarding affordability? I’d love to hear.

This image shows a house with a picket fence all made from american currency. The caption reads "The struggle to afford the market"

UPDATE: News just broke about Zillow exiting the market for good. I’ll talk about that next week on my blog (but now on social channels).

PART ONE: Affordability

1) Duh, affordability is going down: It’s no surprise to see affordability diminished in recent years in the United States, California, and locally. Prices have risen and while mortgage rates have been a game-changer for affording higher prices, affordability is still taking a hit. Here are some visuals I made based on data from the California Association of Realtors (CAR) (here).

This image shows the housing affordability index for California, Sacramento, and the United States. This is a line graph and each image basically starts out around 10-20% in 2006, peaks around 50-70% in 2012, and each line is now anywhere from 20-50% today.

2) What was affordability like during the “bubble” days? How many people could afford to buy before the market crashed? According to CAR data in 2006 only about 12% of buyers could afford the median price in California, 10% of buyers in the United States, and 21% of buyers in Sacramento. In contrast, this same index today shows 23% of buyers in California can afford a median-priced home, while it’s 50% of buyers in the United States and 38% of buyers in Sacramento. Keep in mind just because you cannot afford the median price doesn’t mean you cannot afford to buy at a lower price.

This is a line graph that shows the housing affordability index for Sacrameneto and California from January 1991 to December 2005. This is a line graph that basically peaks in 1998 and heads way down in 2005.

California: This visual tells the story that 23% of households in California are able to afford a median-priced home. I suspect many states are more affordable than California, but I’d love to hear any specifics from any onlookers. As CAR points out, affordability was at the peak in 2012. See full report from CAR here. As a side note, there are thirty seven counties in California where fewer buyers can afford the market compared to Sacramento County. But Placer, Yolo, and El Dorado are all less affordable, so when we look at regional data this pushes Sacramento as a whole to be less affordable (though nowhere close to the Bay Area and coast).

This is a bar chart from the California Assoication of Realtors to show the housing affordability index from 2006 through 2021. Basically right now the affordabilty index is at 23%. This means only 23% of households can afford the median-priced home in the state.

PART TWO: Sacramento made the top of the list

A new report says Sacramento is the least affordable area in the country for brand new homes. This report from a company called Knock has gone viral. The Sacramento Bee wrote about it here. I even had an out-of-state family member forward me a national TV show talking about the subject.

A few things:

1) This is only about new homes: Understanding the fine print helps us interpret what is and isn’t being said. For instance, this study from Knock only focuses on brand new construction. In Sacramento 12% of the market is said to be brand new homes, which means this report doesn’t apply to 88% of the market. In other words, when people start saying stuff like, “Bro, Sacramento is the least affordable place in the country,” that’s NOT what this study is saying.

2) Brand new vs used: The median price for a brand new home is said to be $650K compared to $550K for older homes. This highlights the reality of how much more expensive new construction can be at times and also how difficult it is to build affordable housing too (but that’s a different post). Keep in mind some of this price difference could have to do with newer units being larger too. Anyway, it’s not a massive shocker to see fewer buyers able to afford a home priced $100,000 or 18% higher than older units. Check out Knock’s research below. I know, the font is tiny. Click the image for a larger version.

3) Is the resale market 80% unaffordable? This study says 80% of households in Sacramento are not able to afford a brand new home at the median price of $650,000. That’s a sobering stat that most of us wish was different. But does this mean 80% of buyers cannot afford homes that are not brand new (aka “resale” homes)? Nope. According to the California Association of Realtors 38% of households last quarter could afford the median price in Sacramento County and most other local counties range anywhere from 31-35% (see visual). To say this negatively, 62-69% of buyers can’t afford the median price in the Sacramento region (the percentage varies depending on the county). Ultimately it’s clear affordability is better in the resale market, but the stats at 62-69% don’t sound incredibly encouraging either, right?

This line graph shows the housing affordability index for various counties in the Sacramento region (namely Sacrament, Placer, Yolo, and El Dorado). It goes from 2012 through 2021 and the results are about what we would expect. The percentages used to be about 70-75% and now they're about 30-38% of the market being able to afford a median-priced home.

4) Buyers are engaged: It’s easy to say stuff like, “The market is not affordable”, but does that line up with actual stats? Are buyers pulling the trigger at current prices or are they stepping on the brakes? For now despite affordability declining in recent years, volume has been really steady locally and buyers have had a voracious appetite. So despite weakening affordability buyers have been getting it done. Anyway, stay tuned for fresh stats in coming weeks.

Let me stop before this becomes a dissertation.

Stephen Forrester: I did not know Stephen, but he was an appraiser who tragically passed recently. Here is a GoFundMe to help him out.

Questions: What stands out to you most above? What are you seeing and hearing regarding affordability? What did I miss?

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Buyers have a bit more power in today’s housing market

September 21, 2021 By Ryan Lundquist 17 Comments

Are buyers finally gaining more power? Yes. The truth is the market is still ultra-competitive, but there is a slightly better chance buyers can get into contract these days and maybe not pay as much above the asking price (maybe).

Big (Free) market update: On September 23rd from 11am-12pm I’m giving a market update for CornerStone Title Company. This is for the real estate community only. Sign up here.

Teaching my favorite class: On September 28th from 9am-12pm I’m teaching my favorite class at SAR called How to Think Like an Appraiser. It’s three hours, which sounds painful, but I love this one because we have space to dig deep into comp selection and adjustments. Sign up here.

BRAND NEW VISUAL:

I’m excited about this visual because it focuses on a dollar amount. I could be wrong, but I don’t think anyone has published this in my area.

FOUR TAKEAWAYS:

1) Freakishly high: Over the past few years buyers on average were NOT paying above the original list price, but that changed this year. In fact, in June buyers paid $25,000+ over the original list price in the region. I know that almost seems low because we’ve been hearing stories about properties selling $200K over asking, but this is the average and it represents over 2,800 sales.

2) An average of $11,211: Last month buyers on average paid $11,211 above the original asking price in the Sacramento region.

3) Fall prediction: In a normal year buyers pay less during the fall and it looks like that’s what we’re heading toward since two months in a row we’ve seen a softening from the height of the seasonal market in June. Ultimately unless something unexpected happens to reverse the seasonal slowing we’re experiencing, we should continue to see buyers on average pay less above the asking price over the next few months. This doesn’t mean it’s not competitive though (see #4).

4) Still not normal: The good news for buyers is the market is slowing for the season, but the harsh news is the trend is still more aggressive than it should be for the time of year. So it’s like the car was going 130 mph and now it’s going 90 mph. It’s still speeding. For instance, buyers paid above the original list price in August even though that’s not common (see above). As I keep saying, the market is showing seasonal slowing, but that doesn’t mean the market is slow. In short, buyers ought to enjoy having just a little more power in today’s marketplace, but it’s important to realize the market is still tilted toward sellers.

MORE VISUALS:

I hope this was helpful. Thanks for being here.

Questions: What are you seeing out there with buyers and sellers? What advice would you give for pricing a property right now?

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

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