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10 quick talking points for Sacramento’s housing market

July 15, 2014 By Ryan Lundquist 2 Comments

Imagine you’re in line at Starbucks with a friend, and your friend asks you about the housing market. How would you describe what the Sacramento market is doing? It’s easy to speak in generalities about it being a good time to buy or sell, but when you get more specific, something powerful happens. You begin to sound like a pro. Check out ten quick talking points to help explain how the market is unfolding.

Two ways to read this post:

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

free graphs from sacramento appraisal blog

1)  The median price has been flat for the past couple of months:

Median price and inventory since 2011 by sacramento appraisal blog

The market over these past six months has seen a normal seasonal uptick, but values have been flattening out a bit lately. Different neighborhoods are experiencing different dynamics of course, but the overall market is more or less flat. The median price in Sacramento County is currently $270,000.

2) The number of listings has increased since January:

Active listings in Sacramento County by sacramento appraisal blog

It’s normal in real estate to see listings increase during the Spring and beginning of Summer, but it’s still good to be able to explain that the number of active listings in Sacramento County was closer to 2200 in January and is now over 3000. This means buyers have more opportunities to get into contract.

3) Inventory increased again last month and is close to 2.2 months:

inventory in sacramento county - by sacramento appraisal blog

Housing inventory increased again this past month and is now at 2.16 months of housing supply. This means there is just over two months worth of houses listed for sale on the market compared to the number of sales last month.

months of housing inventory by sacramento appraisal blog

Keep in mind two months is still very low, which means there is still quite a bit of competition to get into contract. The graph above illustrates how much inventory is in each price segment, and there is clearly stiff competition below $400K. This underscores the reality that different price segments can experience different trends in the same market.

4) Sales volume is down 14% from last year:

sales volume in Sacramento County since 2008

sales volume in June in Sacramento County since 2008

Sales volume this past quarter is down 14% compared to the same time last year, but the good news is we’ve had three strong months of sales in a row. This is an especially welcome phenomenon after a couple dismal months in the beginning of the year. There were slightly more sales in June compared to May, but not really anything to write home about.

5) FHA buyers are gaining more power:

FHA sales in Sacramento County by sacramento appraisal blog

It has been much easier for FHA buyers to get into contract these days compared to the beginning of 2013 when it was incredibly difficult. In fact, FHA sales increased by 6.4% when comparing Q2 2013 to Q2 2014. If you haven’t brushed up on FHA minimum property requirements, it may be a good time to do so since FHA is becoming more relevant again.

6) Cash sales have declined by 13% since last year:

Cash sales since 2009 in Sacramento County by sacramento appraisal blog

FHA and cash sales since 2009 in Sacramento County by sacramento appraisal blog

Cash sales are down 13% county-wide compared to where they were one year ago (down 16% from their peak). There has been a dramatic decrease of cash in the Sacramento market, and it has really made the rest of the market adjust or “normalize” so to speak. What does it look like to be a market that is not driven by cash investors from outside of Sacramento? That’s what the housing market is trying to figure out.

cash sales and volume in sacramento county - by home appraiser blog

This graph shows cash sales from January to June in both 2013 and 2014. What do you notice? Cash volume was about two times higher (47%) in 2013 compared to 2014, whereas there have been more non-cash sales this year. When you’re talking to clients about how the market has changed, this is an X-factor. In other words, if cash volume was still as high as it was last year, inventory would be incredibly low, and the market would feel much like it did in early 2013.

7) It’s taking 35 days on average to sell a house:

CDOM in Sacramento County - by Sacramento Appraisal Blog

On average it’s taking just over one month (35 days) to sell a house in Sacramento County. This trend is about the same for the entire region (37 days), but I’ll get to that on Thursday. Generally speaking, the higher the price, the longer it takes to sell. Keep in mind there were only 12 sales between $750,000 to $1M, so don’t put too much weight in that category.

8) Interest rates are still flirting with the 4% range:

interest rates by sacramento appraisal blog since 2008 interest rates by sacramento appraisal blogInterest rates took another slight dip last month, but really rates have been flirting with the lower 4s all year. What happens with interest rates will directly impact affordability, which really matters since values are much higher than they used to be. The market still feels fragile, so if rates shoot up too quickly, it could be bad news for values. It’s doubtful The Fed would increase rates aggressively right now, but who knows.

9) Today’s market is simply different than the market in 2013:

layers of the market since 2011 sacramento county - by sacramento appraisal blog layers of the market sacramento county - by sacramento appraisal blog

The real estate market has many “layers” that impact value. The keys drivers for the latest real estate boom were cash investors, historically low interest rates, and incredibly low inventory. Now the “layers” of the market have shifted though where inventory is increasing, interest rates are no longer in the 3s, and cash investors have sincerely stepped back their game. This means we have a real estate market that is much more sensitive to the health and strength of the local economy instead of being driven by rates and out-of-town investors. Key factors to watch over the next two quarters are inventory, sales volume, and interest rates.

10) REO sales are ten times lower than what they used to be:

REOs and Short Sales in Sacramento County

REOs and Short Sales Percentage and Volume in Sacramento County

Sacramento County used to feel like Foreclosureville, but the market is simply no longer distressed. Both REO and short sales are hovering at about 7% of the market. This is very low considering in the first quarter of 2009 REO sales were literally ten times what they are now.

One Last Bonus Chart:

Q2 2013 and Q2 2014 comparison in Sacramento County

Summary: Our market was on fire for 18 months after values bottomed out in early 2012, but over the past year the market has really slowed, and is ultimately trying to figure out how to be normal again. The beginning of 2014 has shown a typical seasonal uptick, but overall the market feels as if it is cooling more than not since some properties are being priced at similar levels to the most recent sales (or slightly lower in some areas). The market is competitive because inventory is still low, but at the same time it is very price sensitive. Buyers are not biting on listings that are priced too high, and they are not willing to pay top dollar for outdated homes either. In a hot market buyers tend to look past some negatives when inventory is really tight, but that’s becoming less common now. By the way, I’ll share some Placer County and regional trends in a few days.

Sharing Trends with your Clients? If you want to share graphs online or in your newsletter, please see my sharing policy. Thank you for sharing.

Questions: How else would you describe the market? I’d love to hear your take.

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

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Filed Under: Market Trends Tagged With: active listings, cash investors, FHA buyers, first-time buyers, foreclosures, Home Appraiser, House Appraiser, housing inventory, housing supply, interest rates, investment funds, less investors, Market Trends, Median Price, REO sales, Sacramento Real Estate Market, sales volume, Short Sales, trend graphs

The striking difference of cash in real estate in 2013 and 2014

June 19, 2014 By Ryan Lundquist 6 Comments

Last year was dominated by cash sales. Or I should say DOMINATED since investors really drove the market. This was true in Sacramento and it was true for many markets across the United States. But this year has been different. In fact, cash has been about half of what it was last year, and it has simply softened the market. Let’s take a look at some images and six quick talking points to share with clients and contacts. Any thoughts?

cash sales in sacramento county 2013 vs 2014 - by sacramento appraisal blog - 530

Key Takeaways for Sacramento County: 2013 vs 2014*

  1. Total sales volume is down 14% from 2013
  2. Cash sales are 21% of the market, but they used to be 35% of all sales
  3. There have been 48% fewer cash sales in 2014
  4. As prices in real estate have increased, so have cash price levels
  5. About half of cash sales are still under $200,000
  6. Less cash has created more space for financed offers to get accepted. There have been more conventional /FHA purchases in 2014 compared to last year. There were 4087 in 2013 and there have been 4194 in 2014.

* Data is based on January to May (single family detached sales in MLS).

cash sales in sacramento county 2013 vs 2014 - by home appraisal blog

I hope this was helpful. By the way, this is completely off topic, but here is my latest wood project. If you didn’t know, I love to tinker with wood – especially scrap wood. I built this outdoor cooler a few days ago out of scrap in my garage.

my DIY outdoor cooler

Questions: How have you been seeing cash investors impact the real estate market (even if you are not local)? What is driving your market right now?

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Filed Under: Market Trends Tagged With: 2013 vs 2014, cash in Sacramento, cash investors, cash purchases, Home Appraiser, house appraisers, investment funds, real estate cash, Real Estate Market, trends in Sacramento, what is driving real estate market

10 quick things to know about Sacramento’s housing market

June 10, 2014 By Ryan Lundquist Leave a Comment

Competitive. Normal-ish. Price sensitive. These are all words that describe Sacramento’s housing market right now. Let’s take a look at some of the latest trends so we can better understand and explain how the market is unfolding.

Two ways to read this post:

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

If you want an email with all graphs in this post for free, fill out the form below:

free graphs by sacramento appraisal blog

1) Prices have seen a normal-ish seasonal uptick:

price metrics in sacramento county

The market is showing a fairly normal and steady seasonal uptick in price. Whether you look at median price, average sales price, or average price per sq ft, there has been an increase in recent months. The market has seen about a 4% increase in prices over the past four months, yet at the same time many are describing the market as fairly flat since some neighborhoods are not seeing much of an uptick at all. Remember that just because county-wide stats show a 4% recent increase does not necessarily translate into 4% value increase for each property.

2) Houses are taking about one week longer to sell:

CDOM in Sacramento County - by Sacramento Appraisal Blog From April to May, sales took about one week longer to sell in Sacramento County. In contrast, Placer County and the Region showed very little change in cumulative days on market. Generally speaking, the more expensive the property, the longer it is taking to sell. Overall, the market is price sensitive, which means if properties are not priced correctly, they are sitting. Expect this trend to continue so long as inventory increases in coming months.

3) Inventory increased only slightly from April to May:

median price and inventory since 2008 - by sacramento appraisal blog

Housing inventory increased from 1.80 months to 2.0 months in Sacramento County from April to May 2014. Inventory is still very low, which is making competition aggressive in certain price ranges.

4) Not every price range is showing the same trend:

months of housing inventory by sacramento appraisal blog

number of listings in sacramento - by home appraiser blog

Different price ranges experience different trends. This is clearly seen since inventory isn’t the same at every price level.The market is very competitive under $300,000 right now, but anything above $750,000 is far less competitive. There was little change from last month for properties under $500,000, though above $750K saw some increases. Take the 24 months of inventory above $1,000,000 with a grain of salt since there were only 3 sales in this price range last month, but there are 20 or so pendings right now. Ultimately this million-dollar stat is skewed, but it’s still safe to accurately say there is one year or more worth of houses for sale above $1,000,000 in Sacramento County.

5) Volume is down by 15% from last year, but similar to last month:

sales volume in Sacramento County

Sales volume is down compared to last year, but sales in May were about the same compared to April. In the next few days as more sales are entered into MLS, I suspect sales volume for May will increase beyond volume in April. After a very sluggish start to the year in terms of sales, it’s nice to have two consecutive months of more than 1400 sales. Of course volume is still significantly lower than previous years, and that is something to continue to watch over time.

6) Cash sales have been declining for one year now:

Cash sales since 2009 in Sacramento County by sacramento appraisal blog

Cash sales used to represent closer to 35% of all sales in the county just one year ago, but now they’re only 19.5% of all sales (for April & May 2014). Cash investors were a very significant driver for the market, but now the market is no longer being driven by cash.

7) FHA & conventional sales are both showing increases:

FHA and cash sales in Sacramento County by sacramento appraisal blog FHA and cash sales since 2009 in Sacramento County by sacramento appraisal blogWhen cash investors took their foot off the gas pedal one year ago, it got much easier for FHA and conventional buyers to get into contract. The market is still very competitive since inventory is low, but owner occupant buyers have much more of a fighting chance these days.

8) Distressed sales continue to be sparse:

REOs and Short Sales in Sacramento County REOs and Short Sales Percentage and Volume in Sacramento County

Both short sales and REOs have decreased dramatically in recent years and are definitely not driving the market. Banks are tending to spend more time and money fixing up their REOs, while short sales are often still priced aggressively low. REOs have shown a slight uptick recently (especially considering the most recent “quarter” is only comprised of two months of sales. This isn’t anything to write home over per se, but something to watch over time to see how it evolves.

9) Interest rates decreased slightly last month:

interest rates by sacramento appraisal blog

Interest rates showed a slight decrease over the past month, and that is something that will help prices be slightly more affordable. In light of massive price increases over the past couple of years, affordability is becoming a challenge for many buyers.

10) “Layers” to watch over the next two quarters:

layers of the market since 2008 sacramento county - by sacramento appraisal blog

layers of the market since 2001 sacramento county - by sacramento appraisal blog Median price & unemployment in Sacramento County

The real estate market has many “layers” that impact value. Last year the market was heavily influenced by interest rates, cash investors and incredibly low inventory, but things have shifted in 2014. Right now some of the main drivers to watch over these next two quarters are the job market, interest rates, inventory and affordability. Local real estate can no longer be so heavily driven by outside cash investors, which means it will be more sensitive to the health and strength of the local economy. Prices increased over the past two years, but not because people are making more money. How does that strike you?

Summary: Our market has slowed down quite a bit from last year. The market is still competitive, but it is very price sensitive. Real estate is still “hot”, but it is definitely cooler than last year in that days on market has increased, inventory doubled, interest rates are higher than they were, and cash investors are much less of a factor. By the way, I’ll share more Placer County and regional trends in a few days.

Sharing Trends with your Clients? If you want to share graphs online or in your newsletter, please see my sharing policy. Thank you for sharing.

Questions: How else would you describe the market? I’d love to hear your take.

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

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Filed Under: Market Trends, Videos Tagged With: affordability, appraiser in Sacramento, appraisers sacramento, cash investors, CDOM, conventional buyers, distressed sales, FHA buyers, higher prices, housing inventory, increasing prices, interest rates, investment funds, Market Trends, REO sales, rising prices, Sacramento County Real Estate, sales volume, Short Sales, trend graphs

One big reason why the market has felt sluggish

March 26, 2014 By Ryan Lundquist 3 Comments

Why has sales volume been down? Let me give you a hint. It’s green, sometimes crisp, has presidential branding, swooped in to boost the real estate market for two years, and there has been less of it lately. Bingo. You guessed it. The decline of cash sales so far in 2014 is one of the big factors causing sluggish sales in the Sacramento market as a whole. Take a look below. Any thoughts?

cash sales in sacramento county 2013 and 2014 - by sacramento appraisal blog

Unpacking the Trends: Total sales volume is down by over 20% this year compared to last year, but let’s unpack a few numbers to really understand what is happening. When looking at all non-cash sales, volume in 2014 is only down by about 4% from where it was at the beginning of 2013. Granted, volume is down very significantly though from years prior to 2013, but let’s focus on these past two years. When looking at all cash sales, there are literally less than half as many during the beginning of 2013 compared to the beginning of 2014 (595 less cash sales to be precise). Having this many fewer cash deals effectively means the rest of the market has been adjusting to such a big change after a very aggressive season of cash buying. Escrows have seemed to take longer, there are more FHA offers, sellers are offering credits to buyers and inventory has naturally seen an uptick because of the lack of cash. In short, the market has been trying to figure out how to cope now that cash has normalized. Cash of course is not the only force driving values, but we are definitely feeling its absence this year. It’s simply a different market, don’t you think?

wright reportBy the way, some bathroom reading for you:

The Wright Report: This is the most exhaustive quarterly real estate report I know of in Sacramento. The latest edition covers the last half of 2013. I contributed a couple pages to the report and talked about how there was one real estate market last year, but two chapters. You can read the report online or visit Joel Wright’s site (You can DOWNLOAD directly from Slideshare, which is what I recommend).

Question: How is having less cash investors impacting the market?

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Filed Under: Market Trends Tagged With: 2013 vs 2014, cash investors, Home Appraiser, house appraisers, investment funds, investors in Sacramento, Joel Wright, less cash, Real Estate Market, sacramento appraisers, Sacramento real estate trends, Wright Report

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