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

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.

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Sagging stats and increasing values (and a market update)

January stats are down, but the market feels up. That’s normal at this time of year, but it can be confusing. Let’s focus on three things to keep in mind about the beginning of the year in real estate, and then let’s unpack the market. This 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? 

39613867 - close up of weathered and textured boards on an old wooden farm door

3 things to keep in mind about the beginning of the year in real estate

1) Recent sales lag the real trend: At this time of year it’s important to remember that the most recent sales don’t necessarily tell us about the current market. It’s like a pregnancy test. You might be pregnant, but an over-the-counter test won’t tell you that for two weeks even though there has been a change in your body. Similarly, the market may have changed, but we may not see the price change in the stats for a month or two.

2) Insane appreciation: We are seeing multiple offers, but in many cases it seems the market is trying to get back to prices from the peak of summer rather than showing rapid value increases like we saw in 2013. I recently heard about a property getting into contract 5% above sales from December, but that doesn’t mean the market actually increased in value by 5% over the past month. It could simply be the market is pulling itself out of the fall seasonal lull and getting back to prices from the summer (where they were 5% higher).

3) We see the market in the pendings: If we want to see the current market we have to look at the pendings and listings. Let’s obviously give strong weight to properties that have actually sold, but we cannot ignore pendings to help us gauge the direction of prices for the current market. If we rely too heavily on sales from December and January alone, we might essentially undervalue properties because the market usually ticks up during the early part of the year (which we would see in the pendings). In other words, today’s higher pendings will close over the next 30-60 days and then show value increases on paper for March and April. But the truth is the value increases are actually happening right now. It just takes skill to be able to see the market before the change shows up in the stats. This is why have to give way more respect to pendings. I realize we don’t know the exact price of pending sales though, and that’s why we have to look at many examples of pendings rather than just one. In some markets pendings get into contract at ridiculous levels too, so we have to sift if the prices are realistic (that makes it even more tricky). If there are few listings in a neighborhood, we can look at competitive neighborhoods for more data because we don’t want to base the entire market on just one listing or pending. Let’s not forget to be in tune with where sales left off at the end of summer too.

Appraisal class: I’m teaching a 3-hour class next week on Feb 22 at SAR called How to Think Like an Appraiser. I’d love to have you come. Details here.

DOWNLOAD 77 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: The market is always interesting in the early part of the year because we are in a place where values have changed, but we don’t see the change in the sales stats yet. So there is a disconnect between reporting slow January data and how the market feels right now. What I mean is the median price softened last month by 3%, sales volume declined by 27% from December, and it took 3 days longer to sell a house than the previous month. If we didn’t know any better we’d say the market was tanking. But let’s back up and think through this.

January sales stats aren’t often very sexy because they represent properties that went into contract in November and December. Do you remember Thanksgiving and Christmas? Yeah, you probably weren’t looking for a house, so it’s not a surprise to see sales stats sag from those months. At times the real estate community doesn’t like to admit the market shows a price lull during the fall, but a lull happens nearly every single year. So if we’re not careful we can focus on sales volume declining last month by 27% without realizing that’s normal to see every January (see graphs below). The irony is it’s easy to say we are in trouble because sales volume declined, but this January actually had its strongest month of volume in 4 years. We might also be concerned about sales showing a good 5% or so decline from the height of summer, but that’s not unusual (see graphs). Or we can freak out about sales taking longer to sell, but over the next month or two we are bound to see this stat change as it will begin to take less time to sell during the spring.

The truth is the market is beginning to heat up. Right now we have an atmosphere of multiple offers in many price ranges. Let’s remember though the market feels more aggressive than actual value increases at times. Moreover, it’s easy to let news of a “hot” real estate market or anemic housing inventory trump actual market data. Thus I would caution sellers to price according to the market instead of the headlines. Just because inventory is spare does not mean you can get whatever price you want too. I would also remind buyers that the bulk of listings don’t usually come on the market for a few months (April through August tends to be the peak).

Sacramento County:

  1. The median price softened to $305,000 (down 7% from summer).
  2. The median price is currently 8.9% above January 2016.
  3. Sales volume was stronger in January than it’s been in 4 years. We could focus on sales volume declining by 27% from December, but volume always declines from December. See the graphs below.
  4. Sales volume in January 2017 was 14% higher than last year.
  5. One year ago in January it was taking 4 days longer to sell.
  6. FHA sales volume is down 6% this year compared to 2016 (but 27% of all sales were FHA last month).
  7. Only 3% of all sales were bank-owned last month and 2.4% were short sales.
  8. The average price per sq ft was about $202 last month (about the same as December, but 8% higher than last year).
  9. The average sales price softened 1% last month and is currently $339,028. This is down 5% from the height of summer (but is 9% 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

january and december

january seasonal market in sacramento

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

price metrics since 2015 in sacramento county - look at all

CDOM in Sacramento County - by Sacramento Regional Appraisal Blog

inventory - January 2017 - by home appraiser blog

SACRAMENTO REGIONAL MARKET:

  1. The median price softened to $339,000 (down 8% from summer).
  2. The median price is currently 5% above January 2016.
  3. Sales volume in the region is up about 2% over the past year.
  4. Sales volume in January 2017 was 7.6% higher than last year.
  5. One year ago in January it was taking 3 days longer to sell.
  6. It took an average of 47 days to sell a home last month.
  7. FHA sales volume is down almost 7% over the past year (but still 23% of all sales were FHA last month).
  8. The average price per sq ft was about $208 last month. This is down about 1.5% from summer, but 5.7% higher than last year.
  9. The average sales price softened 2% last month and is currently $380,151. This is down about 6.5% from summer (but is 5.9% higher than last year).
  10. Cash sales were 16% of all sales last month.

Some of my favorite images this month:

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

inventory in sacramento regional market

sacramento region volume - FHA and conventional - by appraiser blog

PLACER COUNTY:

  1. The median price is $424,500 (down 3% from the height of summer).
  2. The median price is currently 4.8% above January 2016.
  3. Sales volume in Placer County was down almost 13% this January compared to last January. 
  4. Sales volume in January was nearly identical in volume to January 2014 and January 2015.
  5. Housing supply is down 4% from last year.
  6. It took an avg of 52 days to sell a home last month (same as Jan 2016).
  7. The average price per sq ft was about $211 last month. This is down about 2.5% from summer, but about 5% higher than last year.
  8. The average sales price softened 1% last month and is currently $467,276. This is down about 3% from summer (but is 3% higher than last year).
  9. Bank-owned sales were 2.4% of all sales last month (short sales were 1.3%).
  10. Cash sales were 19.5% of all sales last month.

Some of my favorite images this month:

Placer County price and inventory - by sacramento appraisal blog

Placer County sales volume - by sacramento appraisal blog

months of housing inventory in placer county by sacramento appraisal blog 2

days on market in placer county by sacramento appraisal blog

Placer County housing inventory - by home appraiser blog

DOWNLOAD 77 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.

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An open letter to buyers in an aggressive market

Dear Buyers,

Yesterday I talked with a few buyers who are in the trenches of the market. One is feeling frustrated at not getting offers accepted, and the other is starting to feel like affordability is beginning to vanish. I was actually taken aback with the sense of hopelessness felt by the latter individual, so I wanted to share some perspective as an appraiser when it comes to making offers in an aggressive-feeling market. Whether you are in Sacramento or elsewhere, I hope this helps. Any thoughts?

40519811 - empty notebook and pen on table

Advice for buyers in an aggressive market:

1. Shop below your price range: We are in a market where multiple offers are commonplace in many price ranges and neighborhoods. This means if you are qualified up to $300,000 and money is tight, you might want to consider homes that are priced $270,000 to $300,000 instead of just $299,000. This allows you some space in case there is a bidding war.

2. Expect to get beat: Sorry to be a downer, but you probably aren’t going to get into contract on the first home you offer on. Remember, real estate is a bit like dating. You often don’t marry the first person you go out with. So take heart and expect you’ll submit many offers until something sticks.

3. Know when listings usually hit the market: There is a season in real estate, just like there is a season for baseball, weather, or elections. It’s true inventory is sparse, but it’s also true listings don’t start to hit their stride until March through August. Sometimes February will be a stronger than usual month, but we still don’t see the bulk of what’s going to hit the market until May through July / August. If you don’t believe me, look at the light green listings below over the past few years. In short, don’t freak out in February if there isn’t much on the market. 

listings in sacramento - sacramento appraisal blog

4. Don’t let sensational headlines stress you out: Headlines these days often talk about how hot the market is, but my advice would be to read stories carefully and ask a few real estate professionals what they think too. For instance, one headline says “Sacramento will be one of the hottest markets in the nation” as values are projected to increase by 7% in 2017. This one story has seriously saturated the market and I’m hearing this sentence about everywhere I go. The irony though is a 7% price increase is about what happened in 2016, which means the headline could have just as easily said, “The market looks like it’ll do about the same thing this year.” I don’t say this to gloss over how competitive the market is, but only to highlight we need to read articles carefully and think critically rather than immediately stress out.

5. Don’t mistake low-ball pricing for the market: Some properties are attracting 15-20 offers, but my sense is when that happens it’s usually more about low pricing than the actual market. This week I saw a property listed at $290,000 that probably should have been listed at $350,000. We can look at the 15 offers and bemoan how intense it is out there or we can realize this one was priced ridiculously low.

6. Be careful of bidding up to “no man’s land”: While it’s plausible to think the contract price might get pushed up a bit with multiple offers, don’t forget to be realistic about what the home is actually worth. If you know you don’t have cash to pay for the difference between a realistic appraised value and the contract price, you might not want to offer that high then. Somehow you’re going to need to stand out as a buyer to the seller, but an unrealistic offer well beyond a reasonable value probably isn’t going to help you in the long run.

7. Realize cash doesn’t always win: There is a false idea that cash investors from the Bay Area are beating out financed buyers all the time – especially those bringing very little money to the table. The truth is 1 in 4 sales last year in Sacramento County were FHA buyers who put down 3.5% (or less if they used down-payment assistance). Keep in mind only 14% of all sales were cash during this same time. Moreover, 27.4% of all sales under $500,000 had FHA loans in 2016 in Sacramento County.

8. Find a way to stand out: There could be multiple offers, so you need to figure out a way to stand out and make a positive impression on the seller. Of course the strength of your offer is the first place to start, but beyond that find a way to make an emotional connection with the seller too if possible. I might recommend brainstorming ideas with your agent. When my wife and I bought a house a couple of years ago there was actually a higher offer on the property, but the seller accepted our offer instead. When touring the home we were fortunate to meet the seller and we hit it off a bit. During the conversation the seller mentioned her son was going to start at a new private school. Anyway, when we submitted the offer we wrote a personal letter complimenting the house and reminding the seller who we were. We also looked up the school and found it was $1400 per month. We then wrote in our offer we were going to give the seller an extra $1400 at the close of escrow to help pay for her son’s school (The underwriter actually freaked out because she’d never seen a buyer do that). I’m not saying you need to do something like this, but in our case it definitely made a huge impression. It showed that we listened, we truly cared, and we were very serious about the home. 

9. Listen to your agent: You probably know the market pretty well by now because you’re scouring listings in an obsessive compulsive way on Redfin, Zillow, and MLS. This also means you are most likely going to find your eventual home before your agent does. That’s how it works these days. Just remember finding the home is the easy part, but the most important thing your agent can do for you is negotiate on your behalf and offer professional guidance and advice along the way. Will you listen?

I hope this was helpful.

Sincerely,

Ryan

Questions: What piece of advice resonates with you? What is #10? Did I miss something? I’d love to hear your take.

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High demand persists in the Sacramento real estate market

What is the real estate market doing? That’s not always a quick 10-second answer you can give someone while standing in line at Starbucks. Yet here’s the scoop: Demand is very high, values are up, and inventory is down. We are seeing exactly what we would expect to see in a Spring market, and I’d like to invite you to unpack the market with me in this post so you can share specific trends with your clients.

buyers are ready to pull the trigger - image purchased by sacramento appraisal blog and used with permission

One Paragraph to Explain the Market: The market is having a normal Spring so far. Prices are up, sales volume is increasing, and housing inventory is down. Buyers are hungry out there, which is seen with pendings being 25% higher in the regional market in March 2015 compared to March 2014. Cash sales continue to decline in volume, while FHA buyers are gaining a greater share of the market. Short sales and bank-owned sales are still hovering at very low levels, though there was a slight uptick in volume this past quarter (nothing to sound the alarm about). It took an average of 51 days to sell a house in the region last month, which is 4 days longer than it took last year (thus while the market feels hot, we can also see the market is slowing down too). Well-priced listings are going quickly and experiencing multiple offers, but properties with adverse locations and/or a lack of upgrades are tending to sit on the market. There is a huge demand for quality inventory, yet at the same time the market is price sensitive since buyers are showing discretion. Many neighborhoods over these past few months experienced a seasonal increase in value (not all areas though). Remember in coming time that inventory historically sees a huge increase from April onward, and that can very easily change the tone of the market.

NOTE: This post is longer since it is my big monthly market update. I am experimenting with more graphs and less text. Do you miss the numbers and bullet points? I’d love some feedback.

Two ways to read this post:

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

DOWNLOAD 62 graphs HERE for free (zip file): Please download all 62 graphs here as a zip file (or send me an email). Use them for study, for your newsletter, or even some on your blog. See my sharing policy for 5 ways to share.

SACRAMENTO REGION (Sac, Placer, Yolo, El Dorado):

median price and inventory in sacramento placer yolo el dorado county

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

months of housing inventory in region by sacramento appraisal blog

number of listings in Placer Sacramento Yolo El Dorado county - by home appraiser blog

interest rates inventory median price in sacramento regional market by sacramento appraisal blog

SACRAMENTO COUNTY:

Median price and inventory since 2012 by sacramento appraisal blog price metrics since 2014 in sacramento county

cash in sacramento county

fha and cash in sacramento county - by sacramento appraisal blog

Volume and cash since 2009 - by Sacramento Appraisal Blog

reo and short sales in sacramento county

months of housing inventory by sacramento appraisal blog

CDOM in Sacramento County - by Sacramento Appraisal Blog

sales volume through feb 2015 in sacramento county

sales volume in march in Sacramento County since 2001

PLACER COUNTY:

Placer County median price and inventory - by home appraiser blog

days on market in placer county by sacramento appraisal blog months of housing inventory in placer county by sacramento appraisal blog

Placer County median price since 2012 - by home appraiser blog

Placer County sales volume - by sacramento appraisal blog

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

Questions: How do you think sellers and buyers are feeling about the market right now? What are you seeing out there?

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