Picky buyers, the housing crash, and a Sacramento market update

How did the previous housing crash affect buyers? In other words, how are buyers different today because of what they went through years ago? Without writing a dissertation, let’s consider a few thoughts below. Then for anyone interested, let’s take a deep look at the Sacramento market. Any thoughts?

56718353 - careful and picky choice of properties with a magnifying glass

Three ways the housing crash seems to have impacted buyers:

  1. Getting into Contract: Despite inventory being low, buyers seem to be picky about price. In other words, if the price isn’t right, they won’t make an offer (in Sacramento at least). Sellers haven’t fully embraced this yet, but it’s very real. You’d think buyers would feel desperate and offer on anything since housing inventory is sparse, but it’s simply not the case. There could be many reasons for this, but one of them is buyers are being cautious about what they offer because they don’t want to feel like they are making the mistake of overpaying like they did a decade ago. Of course prices today are much higher than they were just four years ago and buyers are willing to pay these prices. It’s just buyers are generally more cautious about overpaying. Also, keep in mind buyers are much more informed about prices because of Metrolist, Zillow, Redfin, etc…. This means buyers can often sniff out something that’s overpriced.
  2. Staying in Contract: Many real estate agents in Sacramento have been reporting contracts falling out of escrow much more often. It’s like buyers are picky about getting into contract in the first place and then they are picky about staying in contract. I’ve heard some say contracts falling apart is a sign the market is beginning to crash, but there have actually been more sales this year than last year in Sacramento. Thus the truth is more contracts are actually closing regardless of however many are falling out.
  3. Sensitive about Location & Condition: Buyers seem to be exhibiting a sensitivity to adverse locations and properties that are not in pristine condition. In other words, buyers have higher expectations about what they are buying and they aren’t overlooking the true condition of a home or paying top dollar for junk. Lenders and appraisers certainly aren’t overlooking the condition either (or at least they shouldn’t be). Also, consider how HGTV and other networks have exploded in popularity this past decade. I have to think constantly seeing the latest designs on TV (and Pinterest) only helps foster a more finicky buyer when looking for a home.

What do you think? Any further insight? Let’s talk. Please comment below.

—-—–—– And here’s my big monthly market update  ———–—–

big-monthly-market-update-post-sacramento-appraisal-blog-image-purchased-from-123rfTwo ways to read the BIG POST:

  1. Scan the talking points and graphs quickly.
  2. Grab a cup of coffee and spend time digesting what is here.

DOWNLOAD 79 graphs HERE: Please download all graphs in this post (and more) here as a zip file. Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Quick Market Summary: The market is softening just like we’d expect to see during the fall. Sometimes we talk about real estate in only hyper-positive terms as if values do nothing but increase, but that’s simply not realistic. Almost every year values soften as a part of the normal real estate cycle, and that seems to be what we’re seeing right now. It’s starting to take longer to sell, prices are down a few percent from the summer, housing inventory is up from a few months back, and sales volume is beginning to slough off. Keep in mind one year ago it was taking an average of 6 days longer to sell, which reminds us the fall market this year has been more aggressive so far. Overall single family housing feels flat and the market is very price sensitive, so sellers ought to be very cautious about pricing according to properties that are actually getting into contract in their neighborhood and price range. On a different note the 2-4 unit market has been somewhat subdued for a number of years as values have recovered much more slowly than the single family market, but it seems to be heating up as news of higher rents is spreading to investors. Let’s keep an eye on that and of course keep hoping the economy and wage growth can drive values more than low interest rates and freakishly low housing inventory. Check out specific stats and graphs below for Sacramento County, the Sacramento Region, & Placer County.

Sacramento County:

  1. The median price was $317,000 in September. It dipped 2% from the previous month, but is 9% higher than last year.
  2. The average price per sq ft was $201 last month (down 2% from the previous month, but still 7% higher than last year).
  3. There were only 25 short sales in the county last month.
  4. Sales volume was 3% higher this September compared to September 2015.
  5. It took 4 days longer to sell a house last month compared to the previous month (though one year ago it was taking 6 days longer to sell).
  6. Sales volume is up 7% this year compared to last year.
  7. FHA sales volume is down 7% this year compared to 2015 (keep in mind nearly 26% of all sales were FHA this past quarter).
  8. Cash sales are down 7.6% this year (they were only 13.6% of all sales this past quarter).
  9. Housing inventory is 5% lower than the same time last year.
  10. The average sales price at $346,000 softened by 2% last month (but is 10% higher than last year).

Some of my Favorite Graphs this Month:

median-price-since-2013-in-sacramento-county

price-metrics-since-2015-in-sacramento-county-look-at-all

inventory-in-sacramento-county-since-2013-part-2-by-sacramento-appraisal-blog

distressed-sales-since-2009-in-sacramento-county

inventory-september-2016-by-home-appraiser-blog

fha-and-cash-sales-by-quarter-in-sacramento-county

cdom-in-sacramento-county-by-sacramento-regional-appraisal-blog

sales-volume-in-sacramento-county-since-2012

seasonal-market-in-sacramento-county-4

seasonal-market-in-sacramento-county-sales-volume-6

SACRAMENTO REGIONAL MARKET:

  1. The median price was $355,000 in September. It’s down less than 1% from the previous month, but is 9% higher than last year.
  2. The average price per sq ft was $207 last month. It went down 1.5% from the previous month, but is 7% higher than last year.
  3. It took 4 days longer to sell compared to the previous month (but 6 less days compared to September 2015).
  4. Sales volume was 3% higher this September compared to September 2015.
  5. FHA sales volume is down 7.5% this year compared to last year.
  6. Cash sales were 16% of all sales last month (FHA sales were 22%).
  7. Cash sales are down 6% this year compared to last year.
  8. Housing inventory is 9% lower than the same time last year.
  9. REOs were 2.5% and short sales were 1.3% of all sales last month.
  10. The average sales price was $393,000 in September. It softened by 1% last month but is 9% higher than last year.

Some of my Favorite Regional Graphs:

sales-volume-2015-vs-2016-in-sacramento-placer-yolo-el-dorado-county

sacramento-region-volume-fha-and-conventional-by-appraiser-blog

median-price-sacramento-placer-yolo-el-dorado-county

regional-inventory-by-sacramento-regional-appraisal-blog

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

regional-market-median-price-by-home-appraiser-blog

median-price-and-inventory-in-sacramento-regional-market-2013

PLACER COUNTY:

  1. The median price was $432,000 last month, which is up 11% from last year.
  2. The average price per sq ft was $212 last month. It softened by 1.5% from the past couple months, but is 4.7% higher than last year.
  3. It took 1 day longer to sell compared to the previous month (but 5 less days compared to September 2015).
  4. Sales volume was similar this September compared to September 2015.
  5. FHA sales volume is down 15% this year compared to last year.
  6. Cash sales were nearly 16% of all sales last month (FHA sales were nearly 16% also).
  7. Cash sales are down 1.7% this year compared to last year.
  8. Housing inventory is 16% lower than the same time last year.
  9. REOs were 1.3% and short sales were 1.1% of all sales last month.
  10. The average sales price was $483,000 and is 8.5% higher than last year.

Some of my Favorite Placer County Graphs:

days-on-market-in-placer-county-by-sacramento-appraisal-blog months-of-housing-inventory-in-placer-county-by-sacramento-appraisal-blog number-of-listings-in-placer-county-2016 placer-county-housing-inventory-by-home-appraiser-blog placer-county-median-price-since-2014-part-2-by-home-appraiser-blog placer-county-sales-volume-by-sacramento-appraisal-blog

DOWNLOAD 79 graphs HERE: Please download all graphs in this post (and more) here as a zip file. Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Classes I’m teaching in Lake Tahoe: On October 21st I’ll be teaching two classes in Lake Tahoe for an Appraisal Institute Conference. This is an enormous honor and I look forward to mingling with appraisers and sharing ideas. Click here for details.

Question: Did I miss anything? Any other market insight you’d like to add? What are you seeing out there? I’d love to hear your take.

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

That awkward moment when the market changes

Have you ever met someone who looked really good on the outside, but the inside was a different story? That’s sort of like the housing market right now. Sales stats look super attractive, but if we really consider listings and other metrics we begin to see a different story. The market is slowing. Since it’s not always easy to explain that, here are a few analogies to help describe how important it is to look beyond just sales to gauge the temperature of the market. Then for those interested, let’s take a deep look at Sacramento trends. Any thoughts?

Examples to explain the market when it begins to slow:

  1. First Date: A first date is all about putting your best foot forward, and that’s exactly why we usually need more than just one good date to make up our mind about someone (gotta be sure the person is not psycho). The same thing happens with real estate. Shining sales stats are like a first date because they lure us in and make us feel good. But we can’t really judge an entire market just by the sales. We need to consider listings and other metrics too.
  2. Taking the Temperature in the Shade: If you take the temperature in the shade in the summer, you’re going to get a much different reading. The same thing happens in real estate where we can get the wrong temperature of the market if we only focus on sales instead of listings and other factors.
  3. Judging by one Tweet: These days it’s easy to judge a person by one tweet instead of looking at their wider body of work (their life). The same thing happens in real estate when we only look at sales instead of listings and other stats. If our vision is too narrow, we might not see what the market is actually doing.
  4. Pregnancy Test: I asked my author wife for an analogy and she said the market is like a pregnancy test (I wouldn’t ever have thought of that). You can technically be pregnant but an over-the-counter test won’t tell you that for a couple of weeks. Similarly, the market may have changed, but we may not see a price difference in sales for a month or two. But the change is definitely there when we look at listings and other metrics.
  5. Pokemon: I’m just kidding. I won’t go there.

In a small way, I hope this was helpful. It’s very powerful to explain the market in different ways. Any other analogies to share?

—————– For those interested, here is my big market update  —————–

Big monthly market update post - sacramento appraisal blog - image purchased from 123rfTwo ways to read the BIG POST:

  1. Scan the talking points and graphs quickly.
  2. Grab a cup of coffee and spend time digesting what is here.

DOWNLOAD 80+ graphs HERE: Please download all graphs in this post (and more) here as a zip file. Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Quick Market Summary: On paper the market has been hot. We’ve seen all the normal stuff like price increases, slightly higher sales volume in 2016, and sparse housing inventory. If you didn’t know, the median price in Sacramento County is 105% higher than it was in 2012 and 16% lower than the peak in 2005. Distressed sales actually reached their lowest level since 2009 last quarter too. Cash sales volume has been hovering at a normal level while FHA sales volume has been declining. Overall the market is still really competitive, but it’s starting to turn. Keep in mind it’s common for real estate to lose some steam around mid-Summer. While the sales stats don’t show it yet, we see a slower market with the sales-to-list price ratio declining last month from the previous month, it took the same amount of average days to sell for the past two months in the region, and there has been a slightly more optimistic tone among real estate professionals about buyers getting into contract. While it felt utterly hopeless to get an offer accepted a few months ago in certain price ranges, it is starting to feel slightly more hopeful based on feedback from agents. Moreover, it seems like there has been growing price resistance lately (particularly at the higher end of the market). The market has been price sensitive all year as buyers are not fooled by absurdly high prices, but the sensitivity seems more heightened right now.

Sacramento County:

  1. FHA volume has been about 24% of the market (it was nearly 27% of the market last year at the same time).
  2. Cash volume is roughly the same as it was last year at the same time (around 16% of the market).
  3. It took an average of 25 days to sell a home last month, which is 2 days less than the previous month (and 5 less days compared to last year).
  4. REOs were only 2.9% of all sales last quarter (lowest level in years).
  5. Sales volume is up very slightly Q2 2016 compared to Q2 2015.
  6. There is only 1.38 months of housing supply in Sacramento County, which is 14% lower than it was last year at the same time.
  7. The median price increased by 3.5% last month.
  8. The median price is 13% higher than the same time last year.
  9. The avg price per sq ft increased by 1.4% last month.
  10. The avg price per sq ft is 9.7% higher than the same time last year.

Some of my Favorite Graphs this Month:

inventory - June 2016 - by home appraiser blog

CDOM in Sacramento County - by Sacramento Regional Appraisal Blog REOs and Short Sales in Sacramento - 1 inventory in sacramento county Since 2013 - part 2 - by sacramento appraisal blog

Cash & FHA sales in sacramento county

median price context in sacramento county price metrics since 2015 in sacramento county - look at all

june market in sacramento - by sacramento regional appraisal blog 2

layers of the market in sacramento county - by sacramento appraisal blog

Bottom of the Market in Sacramento

SACRAMENTO REGIONAL MARKET:

  1. It took the same amount of time to sell last month as it did the previous month (though 3 less days to sell this June compared to last June).
  2. Sales volume is up slightly in 2016 compared to 2015.
  3. Cash volume is about the same this year (16% of the market for Q2).
  4. FHA volume is down 7.5% so far this year in the region.
  5. The sales to list price ratio was 98% in the region last month.
  6. There is 1.6 months of housing supply in the region right now, which is 13.5% lower than it was last year at the same time.
  7. The median price increased 3.6% last month from the previous month.
  8. The median price is 11% higher than the same time last year.
  9. The avg price per sq ft increased by nearly 1% last month.
  10. The avg price per sq ft is 8.9% higher than the same time last year.

Some of my Favorite Regional Graphs:

sales volume 2015 vs 2016 in sacramento placer yolo el dorado county

sacramento region volume - FHA and conventional - by appraiser blog

days on market in placer sac el dorado yolo county by sacramento appraisal blog interest rates inventory median price in sacramento regional market by sacramento appraisal blog - market median price and inventory in sacramento regional market 2013 median price sacramento placer yolo el dorado county Regional Inventory - by Sacramento regional appraisal blog Regional market median price - by home appraiser blog

PLACER COUNTY:

  1. It took 4 less days to sell a house last month than the previous month (and 3 less days than last year at the same time).
  2. Sales volume was up about 1% in June 2016 compared to last June and is down slightly for the year (about 2%).
  3. FHA sales were 17% of all sales last month and cash sales were 13% of all sales last month.
  4. There is 1.7 months of housing supply in Placer County right now.
  5. Housing inventory is 8.5% lower than it was last year at the same time.
  6. The median price increased 0.5% from the previous month and is up 7% from last year at the same time.
  7. The average price per sq ft was $212 last month (was $200 last year at the same time).
  8. The average price per sq ft is up 1.4% from the previous month and 6% from last year at the same time.
  9. Bank owned sales were only 1% of all sales last month.
  10. Short sales were 1.9% of sales last month.

Some of my Favorite Placer County Graphs:

days on market in placer county by sacramento appraisal blog months of housing inventory in placer county by sacramento appraisal blog number of listings in PLACER county - 2016 Placer County housing inventory - by home appraiser blog Placer County price and inventory - by sacramento appraisal blog Placer County sales volume - by sacramento appraisal blog

DOWNLOAD 80+ graphs HERE: Please download all graphs in this post (and more) here as a zip file. Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Question: Any other market insight you’d like to add? I’d love to hear your take.

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

How far has the Sacramento real estate market declined since the “bubble” burst?

Home owners often wonder how far the real estate market in the Sacramento area has declined since the housing “bubble” burst several years ago. Or in other words, if you bought your house today, how far back would you have to go to find the same price in the past? The graphs below from the Sacramento Association of Realtors help answer this question as they compare median sales price in respective zip codes to the county-wide median sales price from 1997 to 2010.

Have a look at the following graphs, see my commentary below, and let me know what you think. What do you see?

Carmichael Trend Graph (95608 zip code):

Elk Grove Trend Graph (95624 zip code):

Elk Grove Trend Graph (95758 zip code):

Fair Oaks Trend Graph (95628 zip code):

Greenhaven / Pocket Trend Graph (95831 zip code):

Land Park / Curtis Park Trend Graph (95818 zip code):

Mather Trend Graph (95655 zip code):

West Sacramento Trend Graph (95605 zip code):

Basically, if you bought a house today in the post-bubble real estate market in Sacramento, you’d be paying somewhere around late 2001 house prices generally (depending on the area of course). Many areas currently have a median price somewhere just before 2002, while some of the higher-priced zip codes tend to have a median price level right now closer to 2003-ish level. Keep in mind too that each house is different and may or may not be consistent with the overall zip code trend.

If you have any questions or insight, I’d love to hear your comment belows. If you have a need for my real estate appraisal or consluting services also, feel free to call 916.595.375, visit my website at www.LundquistCompany.com or email ryan@LundquistCompany.com.

How do the graphs above strike you?

Cost to Build, Home Prices & Unemployment in Sacramento & Placer County

My Realtor friend Jenifer Miller invited me yesterday to give a 90-minute talk to a group of new real estate agents at Lyon Real Estate in Elk Grove. It was fun and I hope overall helpful too as we discussed how to more effectively communicate with appraisers in an HVCC world as well as a few tidbits on FHA minimum requirements.

Anyway, one of the members of the class brought up a great question. He asked how properties could not be worth at least their replacement cost. The truth is that we see so many properties in the Sacramento area selling far below what they would actually cost to build from scratch (cost of land + all improvements). 

That’s the nature of the market these days. But why is that? There are many factors to consider. Do you remember the real estate bubble? It couldn’t have lasted forever. Property values really climbed too quickly to enormously high levels, didn’t they? When the bubble burst, it changed the real estate market. There ended up being a huge oversupply of distressed properties listed on the open market, and these REOs set the pace for the rest of the market. Keep in mind too everything that was going on in Wall Street, the bailouts, and the economy beginning to sincerely struggle. All of these factors (and more) influenced property values.

Moreover, check out unemployment figures to the right for both Sacramento County & Placer County. These April 2010 stats from the Employment Development Department show an unemployment rate of 12.5% in Sacramento County and 11.5% in Placer County. Let’s contrast this with data from April 2006 that shows the unemployment rate was 4.8% in Sacramento County and 4.3% in Placer County. Things changed, didn’t they? In light of unemployment rates being significantly higher nowadays, do you think buyers could really afford to purchase houses right now at 2006 levels?  

What do you think? I’d love to hear your insight.