housing market

Sellers, you don’t need 20 offers

September 8, 2020 By Ryan Lundquist 23 Comments

Sellers, getting twenty offers is the dream, right? That way you can be choosy about accepting the buyer with the strongest terms and probably a higher price too. But do you really need that many? In other words, can you get the same price with just a few offers? Let’s kick around this idea today.

THE SHORT VERSION:

1) No surprise. Getting more offers tends to lead to a higher sales price.
2) Sometimes just one offer can go way above the list price.
3) Homes with one offer also more regularly close way below the list price.
4) You don’t need 20 offers (but it sure does help).

THE LONGER VERSION:

Let’s look at some visuals and then consider some takeaways.

County Visuals: First off, I’m concerned these visuals are going to be confusing, so sorry if you’re thinking, “Dude, I only see dots and I have no idea what’s going on.” The goal is to show how much higher the sales price is compared to the original list price while considering the number of offers. Basically, when a dot is at 100%, it means a home sold at exactly the original list price. Or if a dot is at 110%, it sold 10% above the list price. Or 95% means it sold 5% lower than the original list price.

Question: What happens to prices when there are more offers?

The big plain truth: The truth is properties with more offers tend to close higher above the original list price than properties with fewer offers. Duh, I know we could have said that without the research, but it’s good to see what stats actually show rather than going with what we feel might be true. With that said, sometimes a home with just one offer can actually close at the same high percentage above the list price as a home with ten offers. So technically you don’t need ten to twenty offers to command a huge price (but it sure does help).

Neighborhood Visuals: Let’s check out some neighborhoods too instead of just the county. What do you see?

Conclusion: There are fewer data points to consider in the neighborhood visuals, but the takeaway is the same as the county (see above).

QUICK THOUGHTS:

1) 20 offers: If you’re getting 20 offers, it’s probably because you’re priced too low unless that’s what every listing is getting.

2) Aim for a few: Price it reasonably and you’re more likely to command a few solid offers and statistically be in the zone to compete above the list price. The reality is you don’t need 20 offers to get a huge price (but it helps).

3) Hang in there buyers: It’s not easy out there right now, but it’s worth noting not every sale is getting ten offers. It may feel true, but the stats don’t show it is.

4) Not everything is getting bid up: While many properties go 10% to 15% above the original list price, many homes sell below the list price. The narrative is Bay Area buyers are swooping in, paying cash, and everything is getting bid up, but that’s not true when looking at how many homes recently sold below the original list price (basically any dots below the 100% line).

5) Clear advantage: Having lots of offers gives sellers a huge advantage to be selective and accept contracts with the best terms (and probably higher prices).

6) Layers of the market: Not every price range is experiencing the same dynamic when it comes to multiple offers and getting bid up. This is why it’s so dangerous to take an experience with just one property and call it a trend for the market. Maybe. Maybe not.

I hope that was helpful. Thanks for being here.

Questions: How many offers do you think is ideal for a seller to get? Why are some listings able to command a huge price even though they only get one or two offers? What is it about those ones? Any other insight? I’d love to hear your take.

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How will the pandemic shape buyers and sellers?

April 30, 2020 By Ryan Lundquist 8 Comments

How will this pandemic shape buyers and sellers? What will people do differently when it comes to real estate? Here are some things on my mind. What do you think? Please comment below.

Rural areas: I’ve heard data firms and colleagues talk about growing interest in rural areas, so this is something to watch to see if it pans out. The idea is people are craving more space, so they’ll embrace a country lifestyle.

Land: A friend the other day was talking about land on the outskirts of the region. Owning a couple acres for $20K is appealing in light of the idea of having more space. Here’s a list of thirty lots under $50K.

Family & Divorce: Some people may want to move closer to family while other households are going to be splitting due to divorce.

Buyers more sensitive about location & condition: For years buyers have been exhibiting sensitivity to adverse locations and homes 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. I expect going through a pandemic will only inflame this dynamic.

Accessory dwelling units: I’m guessing accessory dwelling units will be more useful and desirable for extra income as a rental, housing family members, helping friends who lost jobs, and working from home. Here are all sales in MLS over five years with a listed guest house (I may do a deeper post on this soon). Some of these properties of course had more of a pool house, but many do have a legit ADU / second-unit / apartment thingy.

Moving out of state: This pandemic may motivate people to finally make that move they’ve been talking about to a different county or state. I’ve heard some locals say things like, “I’m heading to Texas as soon as this ends.” And I imagine some Bay Area residents are declaring, “I’m going to Sacramento when this is over.” Migration has been a trend already, and we’ll see how it evolves.

Home office: We’ve all been having Zoom meetings and figuring out ways to work from home lately. I suspect many businesses will go back to normal, but some may adapt their model. Thus having dedicated space for working from home could prove to be more valuable over time. I don’t know that buyers at the moment are actually shopping with this in mind, but if we see a bigger change in business models this will be something that becomes more important.

Cash out at the top: Some people are concerned about the market changing directions, so we’ll see certain owners try to cash out at the top so to speak. I’m not saying we’re at the top of a price cycle. I’m only saying some people think the pandemic has pushed us or will push us into a new price cycle.

Downsize & Upsize: There are households in need of more space because they’ve learned their home is too small. In contrast, maybe it’s time for some to sell, buy a smaller home, and pocket cash (or invest in hand sanitizer and toilet paper).

Gardens: It seems like everyone and their Mom is either baking bread or starting a garden (except for my house). Thus I expect to see more gardens in coming time when visiting properties. The other day someone asked me if a one-acre parcel would now be more appealing because of all the extra space to start an urban farm. Well, in my mind most people are not looking to have a garden of that magnitude.

No effect at all: Let’s be real that lots of people will come out of this not doing anything differently.

Other: What else? I’d love to hear your take in the comments.

Okay, moving on.

FRESH STATS:

Like I said last week, buyers are starting to get more used to this market, and this week it looks like pending contracts are on pace again to outpace the previous week (we’ll know more in a few days).

RESOURCES:

New market video: Here’s a fresh market update. It’s 20 minutes and I talk about the future (NOT a prediction video). Check it out below or here.

SAR market event (free): On Monday May 4th at 10am I’m doing a free big market update with the Sacramento Association of Realtors. This will be about an hour and it’s for anyone (not just members). Register here.

Videos this week: I’ve been doing lots of video conversations lately. I figured I would post the recorded ones here in case anyone wants to listen.

4/22/2020 Conversation with Madison Chase Team
4/24/2020 Conversation with Rico Rivera
4/24/2020 Conversation with Jenica Williams
4/27/2020 Conversation with Kristin Cooper

Appraiser John Carlson GoFundMe: John is a well-known appraiser in Southern California and he is going through a difficult time as he was diagnosed with cancer and hospitalized. I invite you to pray for him and donate if you can. See more here.

I hope this was interesting or helpful. Thanks for being here.

Questions: How do you think quarantining will shape buyers and sellers? What else would you add to the list? What did I miss?

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Are buyers & sellers getting used to the pandemic?

April 22, 2020 By Ryan Lundquist 8 Comments

Quarantine. Wearing masks. Social distancing. It’s so weird that these are regular things now. The world indeed has changed over the past month and so has the housing market. Let’s talk about some new developments.

FIVE WEEKS AGO: About five weeks ago the real estate market started to have a strong reaction to the coronavirus. I look to March 12th as our day of change as that’s when things started to kick into high gear with events cancelling and sellers and buyers backing off the market.

OBSERVATIONS RIGHT NOW:

1) Pendings and listings declined heavily for a few weeks.
2) Pending contracts have begun to increase again.
3) More new listings are hitting the market.

Here’s a closer look at the numbers. These are single family detached homes without condos. I don’t include condos because they’re a different market that can water down the data. If you include them in your numbers, that’s cool.

Here is a look at new listings. There has not been a dramatic uptick, but we are seeing more new listings compared to a month ago (the first week we had sheltering in place).

SOME CLOSING THOUGHTS:

1) Goodbye cliches, hello experts: In a market like today it forces us to place our cliches, canned statements, predictions, and positive or doomy narratives aside. We simply must look to the numbers to understand the market. When trends change it creates opportunities for experts to arise. It also creates opportunity for credibility to be destroyed by making predictions that don’t come true and getting swept up in every single sensational headline.

2) Other markets too: This dynamic of the market seeming to hit a bottom a few weeks ago is something that is happening in some other areas across the country too as reported by Mike DelPrete in his email yesterday (a must follow). I’ll talk about this more in my weekly video at the end of this week. Please know I’m not saying prices or other metrics have bottomed out. I’m only saying it looks like listings and pendings (for now) have begun to increase again.

3) The future: We still don’t know the future, so I’d exercise caution in saying definitively the market has begun a recovery or rebound and will move forward from this point onward. We need time to see how everything shakes out and we’re still living in the midst of so many unknown factors that could sway the market in many ways. The reality is what we say about the market could be different next week based on new data.

4) Getting used to the pandemic: For now it looks like buyers and sellers have started to get a little more used to this pandemic market, which is evidenced by more pending contracts and an increase of listings lately. It’s possible some of this could be attributed to real estate agents being deemed essential too. Will this continue? Is this a trend we’ll see more in coming weeks? To be determined.

GRAPHS: I plan to make a tutorial soon on how to make a few of the graphs I’ve been posting. Appraiser colleagues, I haven’t forgotten.

I hope this was helpful.

Okay, moving on:

RESOURCES:

New market video: Here is a fresh market update video. This is 25 minutes and perfect for the background while working. Check it out below or here.

Interview with The Appraiser Coach: I did an interview with Dustin Harris to talk about not waiting for sales to see pandemic data. Watch below (or here).

Interview with Brad: I did a Facebook Live Q&A with Brad L’Engle last week to talk shop. Enjoy here if you wish (you don’t need Facebook to watch).

I hope this was interesting or helpful. Thanks for being here.

Questions: What do you make of the stats above? What are you hearing in escrows from buyers and sellers? If you’re not local, what are you seeing happen in your market?

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Thoughts on PG&E and the housing market

November 7, 2019 By Ryan Lundquist 41 Comments

I’ve been asked quite a bit to talk about what’s happening with PG&E. It’s mind-blowing to think close to one million households have had spurts without electricity lately in California. I don’t think anyone saw this curveball coming, so let’s talk about it. Please pitch in your thoughts below too.

Here are a few things on my mind.

Prolonged vs isolated incident: Whenever something changes in a market we tend to immediately ask about the impact, but the truth is we don’t always have answers – especially at first. It’s important to remember a few power outages aren’t likely to alter the perception of sellers and buyers in a market. But if we begin to see a prolonged issue, then that’s a different story.

The market will adapt: Generators haven’t been easy to find in the Sacramento area despite all the radio ads, but at some point if power outages become prolonged the market will simply adapt and generators will become commonplace. Thus properties with some sort of system to retain power are going to be more marketable. Remember though, if a generator isn’t a permanent part of the house, it’s really personal property, so it’s not going to be included in the appraised value.

Uncertainty: People like stability and so does the housing market. A friend in a rural area recently said she doesn’t know if she can take PG&E outages for the next ten years. I feel for her and I think her sentiment captures the struggle many residents have right now of living in the tension of not knowing the future.

The market hasn’t stopped: It’s important to note the housing market hasn’t stopped. There are still properties trading hands. In fact, here’s current pendings in Placer, El Dorado, and Nevada County. I realize this isn’t the perfect image because only portions of these counties are having outages. Nonetheless, this is a quick glance to highlight the market is still moving. With that said, we’re at the beginning stage of this new issue and my sense is we’re in a stand-by period where owners and buyers are watching and waiting to see what the future holds.

Migration: Unplanned power outages could drive some residents to leave rural areas (or even suburban areas having issues). I think this is especially true for anyone who has already been flirting with the idea of leaving California. This could be the final straw. But for many rural owners they’re going to stay because they love their lifestyle (of course as long as there are solutions for keeping the power on during outages).

Solar: There’s lots of buzz about solar becoming a bigger trend in outlying areas. My advice? Just be sure the solar system is actually going to work if the power is out. And don’t make a rash decision about installing an expensive solar system if there is a more cost-effective solution too.

Insurance costs: Fire insurance has skyrocketed in outlying areas in recent time and it’s been a huge struggle. Just yesterday I had a real estate agent tell me a client was paying about $800 for an annual insurance plan and now the bill is $3,000 for the year. What a burden – especially for those with a fixed or lower income. Thus throwing in a new layer of power outages really doesn’t help boost appeal for outlying areas. Insurance is certainly a hardship, but at least it is a known factor. What is especially challenging with power outages is their frequency in the future is not known. This is where an element of uncertainty can be more stressful than insurance costs for some households.

Stories vs stats: When something new happens in a market there is a season where we have stories from the trenches of escrows and eventually these stories become stats. In my opinion right now we have limited data and we need more time to understand what the market is doing. With that said, when it comes to areas with rising insurance rates I’m noticing housing supply has ticked up at a higher rate in El Dorado County compared with the rest of the region, and sales volume has seemed to slump more in El Dorado County also. This includes the entire county of course and at some point I may parse only fire insurance areas (this is not as easy to do as it sounds). Anyway, let’s keep watching.

I hope this was helpful. I’m so sorry to friends who have been struggling with power outages. By the way, if any appraiser friends need space to plug into wifi if your power goes out, please hit me up.

Million Dollar Market: On a different note, here’s a quick rundown of the million dollar market in the Sacramento region if you’re interested.

Questions: If you live in PG&E territory, what have you been experiencing? What are you hearing from residents? What did I miss?

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