Advice for an increasing real estate market (and Sacramento trends)

When the market is flat, it’s easy to impress clients and look like a guru because of how accurate your values are. But when inventory shrinks, demand is off-the-hook, and the market shifts, it’s not always easy to nail value because things can change quickly in a short period of time. In light of the market increasing in value lately in many areas of the country, I thought it would be useful to offer some quick advice for dealing with increases. Then at the bottom of the post I have my ridiculously long Sacramento market update. I’d love to hear your take. Any thoughts?

increasing market advice for agents and appraisers - sacramento regional appraisal blog

Advice for Agents: When values are increasing, it’s crucial to pay careful attention when pulling comps before a listing. The tricky part in a “hot” market is it can be possible to get into contract at much higher levels than what is reasonable, so in a sense the agent has to really spend time weighing what a realistic value looks like before the listing hits the market. Keep in mind a lender’s appraiser is going to need to come up with a value that is supported by market data, reasonable for the neighborhood, and representative of the market. It’s easy to say, “The market is ‘hot’ and inventory is low, so I priced it higher,” but there really has to be support for the higher value. I recommend asking yourself the following questions and then talking clients through the answers.

  1. Is there support for value at the list price? (sales, pendings, listings, data)
  2. Is the list price reasonable? Does it make sense for the neighborhood?
  3. Would the market pay this price or would only one buyer pay this amount?

Advice for Appraisers: In an increasing market appraisers need to spend time figuring out how much the market has changed in recent time. In other words, if there has been upward value movement since the most recent sales got into contract, it could be very reasonable to give upward market adjustments to the comps. I suggest paying careful attention to competitive pendings, making market graphs in each report to help see the market, and keep an eye on competitive neighborhoods too in case data is sparse in the subject neighborhood. Lastly, let’s remember value increases might look more aggressive in some areas than others, so adjustments won’t look the same in every neighborhood or price range. Moreover, a typical canned market adjustment might be 1% per month (because that’s what a mentor taught us to do), but that might not be legit at all (like most canned adjustments). What does the market say? Let’s do our best to listen and then adjust if needed.

Questions: Any thoughts? What other advice would you give?

—————– 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 77 graphs HERE: Please download all graphs in this post (and more) here as a zip file (or send me an email). 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 has been showing value increases. Whether looking at the median price, average price, or average price per sq ft, all the numbers sound “hot” so to speak. This isn’t a surprise though because it’s what normally happens in April. It’s worth noting it took 8 less days to sell last month compared to the same time last year, and the median price is up in the region by nearly 8% from last April. FHA sales were roughly 25% of all sales last month in Sacramento County, though they are down slightly from 27-28% of the market in past quarters (this is a stat worth watching over time). Sales volume for the entire year is down slightly, but not by much. In short, the stats are glowing overall because there has been upward growth with most metrics. However, buyers are still exhibiting price sensitivity. If properties are not priced correctly they are sitting instead of selling. Moreover, under the umbrella of a “hot market”, some sellers are simply pricing WAY too high for the market. They hear the word “hot”, but that doesn’t mean you can sell for anything. Lastly, just because the market has increased in value in some neighborhoods and the entire county doesn’t mean values are increasing for every property type or in every price range.

Sacramento County:

  1. It took an average of 31 days to sell a home last month.
  2. It took 6 less days to sell last month that the previous month.
  3. It took 11 less days to sell this April compared to last April.
  4. Sales volume is down slightly from last year by 3%.
  5. There is only 1.3 months of housing supply in Sacramento County.
  6. Housing inventory is 15% lower than it was last year at the same time.
  7. The median price increased by 1% last month.
  8. The median price is 10% higher than the same time last year.
  9. The avg price per sq ft increased by 2.8% last month.
  10. The avg price per sq ft is 8.8% higher than the same time last year.

Some of my Favorite Graphs this Month:

inventory - April 2016 - by home appraiser blog

CDOM in Sacramento County - by Sacramento Regional Appraisal Blog

Median price since 2013 in sacramento county

price metrics since 2015 in sacramento county - look at all

median price and inventory since 2005 - by sacramento appraisal blog

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

fha and cash in sac county - sacramento appraisal blog

seasonal market in sacramento county sales volume 2

SACRAMENTO REGIONAL MARKET:

  1. It took 6 less days to sell last month compared to the previous month.
  2. It took 8 less days to sell this April compared to last April.
  3. Sales volume was 4.6% lower in April 2016 compared to last April.
  4. Short sales were 3% and REOs were 3% of sales last month.
  5. There is 1.6 months of housing supply in the region right now.
  6. Housing inventory is 9.5% lower than it was last year at the same time.
  7. The median price increased 3% last month from the previous month.
  8. The median price is 7.7% higher than the same time last year.
  9. The avg price per sq ft increased 2.5% last month.
  10. The avg price per sq ft is 6% higher than the same time last year.

Some of my Favorite Regional Graphs:

median price sacramento placer yolo el dorado county

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

sacramento region volume - FHA and conventional - by appraiser blog

Regional Inventory - by Sacramento regional appraisal blog

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

median price and inventory in sacramento regional market

PLACER COUNTY:

  1. It took 6 less days to sell a house last month than March.
  2. It took 2 less days to sell this April compared to last April.
  3. Sales volume was 6% lower in April 2016 compared to last April.
  4. FHA sales were 17% of all sales last month.
  5. Cash sales were 21% of all sales last month.
  6. There is 1.8 months of housing supply in Placer County right now.
  7. Housing inventory is 6.7% lower than it was last year at the same time.
  8. The median price increased 5.6% last month (take with a grain of salt).
  9. The median price is up 9.2% from April 2015.
  10. Short sales were 2.7% and REOs were 1% of sales last month.

Some of my Favorite Placer County Graphs:

days on market in placer county by sacramento appraisal blog

Placer County housing inventory - by home appraiser blog

months of housing inventory in placer county by sacramento appraisal blog

number of listings in PLACER county - 2016

Placer County price and inventory - by sacramento appraisal blog

Placer County sales volume - by sacramento appraisal blog

I hope this was helpful and interesting.

DOWNLOAD 77 graphs HERE: Please download all graphs in this post (and more) here as a zip file (or send me an email). 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.

SacBee: By the way, the second article I wrote for the SacBee real estate section went live. It’s called “One size does not fit all when talking about the housing market.”

Questions: Any advice you’d give to clients right now about pricing? Is there any other market insight you’d like to add? I’d love to hear your take.

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Big demand and the force of FHA in Sacramento’s housing market

Big demand. Big FHA. Let’s talk the latest housing trends in Sacramento. If you’re local, my goal is to give you 10 quick talking points to share with clients. If you’re not local, what are you seeing in your area?

Two ways to read my big monthly market post:

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

star-wars-real-estate-photo-by-sacramento-appraisal-blog-530

One Paragraph to Describe the Sacramento Market: This year the market feels much stronger than it did last year at the same time. Values have not skyrocketed like they did a few years ago, but there has been somewhat of a desperation among buyers to get into contract before interest rates and/or values rise much more. This has made for an environment where multiple offers have been commonplace (at least for properties that are priced correctly and in average condition). Housing inventory did increase slightly last month, and we are starting to see slightly more price reductions, but demand is still “off the charts” in that pendings are a good 20% higher than one year ago. Regional prices have seen an uptick these past few months, and sales volume is 7% higher so far this year compared to last year. We all know low interest rates and sparse inventory have been driving the market, but having such a huge percentage of escrows going FHA has also boosted sales figures. Remember that many FHA buyers are not putting much “skin in the game” so to speak, and at times they tend to offer more than anyone else to get a contract accepted. Being that 25% of all sales in the Sacramento region were FHA last month (and 29% in Sacramento County), this definitely creates more competition at certain price ranges and makes housing stats look more impressive. As housing inventory presumably begins to increase over the next few months (as it did last year), watch out for price reductions, unrealistic expectations from sellers, and buyers gaining more power.

DOWNLOAD 51 graphs HERE (zip file): Please download all graphs in this post (and more) here as a zip file (or send me an email). Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share.

Sacramento Regional Trends for May 2015 (Sac, Placer, Yolo, El Dorado):

  1. The median price in the Sacramento Region is $333,250.
  2. The median price is 7.5% higher than one year ago (May 2014).
  3. Sales volume is up 7.3% so far in 2015 compared to the beginning of 2014 (January through May).
  4. It took an average of 38 days to sell a house last month (44 days in April).
  5. Cash sales were 15.6% of all sales last month.
  6. FHA sales were 25.4% of all sales in the region last month.
  7. Sales volume was 7% higher this May compared to last May.
  8. There is 1.9 months of housing inventory (2.2 months in May 2014).
  9. The average sales price is $368,525 (7.5% higher than last year).
  10. It took 14 less days to sell a house this May compared to May 2014.

median price and inventory in sacramento placer yolo el dorado county

fha and other sales in sacramento placer yolo el dorado county

volume cash and conventional in region by sacramento appraisal blog

months of housing inventory in region by sacramento appraisal blog

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

Sacramento County Market Trends for May 2015:

  1. The median price in Sacramento County is $289,950.
  2. The median price is 7% higher than one year ago (May 2014).
  3. It took an average of 35 days to sell a house last month (42 in April).
  4. Cash sales were only 15% of all sales last month.
  5. FHA sales were 29% of all sales in Sacramento County last month.
  6. Sales volume is 5.7% higher this May compared to last May.
  7. There is 1.7 months of housing inventory (2.0 months last May).
  8. The average price per sq ft is 183 (13% higher than last May).
  9. The average sales price is $317,000 (7.5% higher than last year).
  10. It took 12 days shorter to sell a house this May compared to May 2014.

Median price and inventory since 2011 by sacramento appraisal blog - with median figures

price metrics since 2014 in sacramento county

months of housing inventory by sacramento appraisal blog

CDOM in Sacramento County - by Sacramento Appraisal Blog

sales volume in May in Sacramento County since 2008 Interest Rates Since 2008

Placer County Market Trends for May 2015:

  1. The median price in Placer County is $400,000.
  2. The median price is 5.3% higher than one year ago (May 2014).
  3. It took 38 days on average to sell a house last month.
  4. Cash sales were 15.8% of all sales last month.
  5. FHA sales were 21.5% of all sales in Placer County last month.
  6. Sales volume was 9.8% higher this May compared to last May.
  7. There is 2.1 months of housing inventory (2.5 months last May).
  8. The average price per sq ft is 201.
  9. The average sales price is $445,218 (5.7% higher than May 2014).
  10. It took 16 days shorter to sell a house this May compared to last.

Placer County median price since 2012 - by home appraiser blog

months of housing inventory in placer county by sacramento appraisal blog

days on market in placer county by sacramento appraisal blog

number of listings in PLACER county - May 2015 - by home appraiser blog

Placer County sales volume - by sacramento appraisal blog

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

I hope this was helpful. Thank you so much for being here.

DOWNLOAD 51 graphs HERE (zip file): Please download all graphs in this post (and more) here as a zip file (or send me an email). Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share.

My New Office & the Desk I Built: By the way, I wanted to share some exciting news. I’m in the process of building a new home office since I recently moved to Carmichael. By this time next week my office should theoretically be finished, but for now here is a desk I built out of reclaimed wood last week. It’s a beastly 12′ long, and it’s designed for two work stations.

The desk I built

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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