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Seeing the market while driving, crunching numbers, & eating tacos

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It’s not just about numbers. Look, I geek out over stats, but sometimes all we need to do is drive around town or have a few conversations to see the market. Today I wanted to share some trends I’m seeing by sharing photos I’ve taken recently. Then for those interested we’ll get into the numbers in my big monthly market update below. Anyway, let’s take a drive.

The rage of modern homes: Modern units like this are popping up in Sacramento in places that are typically close to Downtown. This small development is located in Midtown.

Flipping seminars: I’ve seen this guy on late-night TV promising to teach people how to flip homes. The problem? The market isn’t actually that great for flipping in Sacramento right now. Read about celebrity flipping seminars here.

The Prince tree: A local artist in Citrus Heights paid tribute to Prince in her front yard. I know something like this would not fly in an HOA community, but it reminds us there is maybe some room for creative expression in real estate.

Marijuana homes getting busted: There was a big raid last week where federal agents targeted 75 homes in the Sacramento region that were suspected to be “grow houses”. Remember, recreational cannabis is legal in California, but it’s never legal to have a commercial grow operation in a residential property. Anyway, I came across a different article in the SacBee that listed nine addresses of previous grow houses (golden data for appraisers).

Tearing down the neighborhood: A ranch house in Arden Park was purchased for $462,000 and torn down to build a custom home (currently pending close to $1.3M). This doesn’t happen in every neighborhood, so I’m always asking questions: What is being built? Who is buying? What is being flipped? Where is the bottom of the price market? Where is the top?

Neighborhoods that are changing: This is a colorful six-unit modern project in Oak Park off 2nd Avenue. Modern units like this are starting to pop up – especially around The Broadway Triangle.  

Here’s a modern project under construction on 1st Avenue in Oak Park.

The word on the street (while eating tacos): Every few months or so I get together with a group of real estate friends to eat at Chandos (my fav taco joint). It’s not like we gather to have exclusive rigid market talk, but I always leave with some insight because our taco club has investors, a loan officer, and a Realtor / flipper. I find understanding a market is about crunching numbers, but it’s also about the word on the street. This is why I regularly ask people, “What are you seeing out there?”

I hope that was interesting or helpful. Anything to add?

And now for anyone interested in the numbers….

–——-——- Big monthly market update (it’s long on purpose) ———–——-

Spring is definitely here. Well, the market has been alive for a couple of months, but we’re now really starting to see it in the stats. The median price rose about 4% in the region last month and it’s up 9% from last year. Overall we’re seeing all the normal signs of a spring market in that it took 7 less days to sell last month, more listings are hitting the market, and sales volume is increasing for the season. Housing inventory is up slightly in the region from where it was last year and so is sales volume (though volume is down 1.5% in Sacramento County).

New recap images: I spend so much time putting together graphs, but I’ve struggled to figure out a way to quickly sum things up. Anyway, here’s a stab at a summary. Do you like these? Anything you’d change? Feedback is welcome.

A few quick things:

Not much cash actually: It’s easy to believe cash is dominating – especially from the Bay Area, but it’s really not (did you hear that sellers?). Cash sales were 15% of all sales last month in the region and in Sacramento County we actually have about 3% less cash this year so far.

Oh dang… the median price: If you didn’t know, the median price is now 6.9% lower than when the “bubble” burst in Sacramento County in 2005. I tend to see jaws drop when sharing this stat, but here are some things to keep in mind about bubble conversations. Remember, there is no formula that says our market will “pop” if we go 6.9% higher, so it’s important to not get too stuck on the previous peak. Today’s market certainly has an inflated feel, but it’s also being driven by different factors than 2005 too, so it’s not a perfect comparison to always look back to 2005. Anyway, let’s not get too side tracked, but navigating this conversation will be key in coming time for real estate professionals, and I’ve heard some sellers wanting to list too in light of how high prices are. 

Zillow is going to sell homes: Yesterday HousingWire reported Zillow is going to be selling homes. There was suspicion this would happen, but The Big Z always denied it. Well, the cat’s out of the bag and I’m wondering how this will unfold. I’m also wondering if they’re going to try to chop agent fees. Let’s talk about this more as things develop. On a side note, will we have to watch listings and sales on Zillow in addition to MLS?

I could write more, but let’s get visual instead.

DOWNLOAD 61 graphs HERE: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

SACRAMENTO COUNTY (more graphs here):

SACRAMENTO REGION (more graphs here):

PLACER COUNTY (more graphs here):

DOWNLOAD 61 graphs HERE: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: What images around town remind you of what the market is doing? I’d love to hear your take.

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Slumping volume, too many million dollar listings, & rising rates

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We love sensational real estate headlines, but here’s what tends to happen. We talk about something like it’s the biggest thing ever, it ends up being no big deal, and then we move on to the next thing. It sort of reminds me of Y2K because there was so much fear about worldwide chaos, but then nothing happened. All bark. No bite. Anyway, let’s talk about a few issues, and you decide if these are hyped-up “Y2K real estate trends” or not. Then I have a big Sacramento market update for anyone interested. Any thoughts?

Rising interest rates:

For years we’ve heard interest rates would rise, but nothing really happened. Well, now things have begun to change. It’s like Mom & Dad were threatening a punishment, but they never followed through, so we didn’t believe them…. until now. Interest rates are finally ticking up and it’s bound to make an impact on prices if the increase hits buyers in the wallet. What I mean is if buyers in mass can afford the increase, then it’s not a big deal unless buyers start showing resistance. An increase in rates won’t hit everyone the same either as buyers at the lowest price ranges will feel it the most. Keep in mind rising rates in the near future could actually lead to buyers rushing the market instead of withdrawing from it. What will happen? Nobody knows. Heck, rates are still incredibly low, and we don’t even know if they’ll continue to rise. But the Fed has been more forthright about coming rate hikes, so that’s why this feels like more than pure hype. Anyway, let’s see how this plays out and keep an eye on creative financing from lenders too.

Are there too many million dollar listings?

Headlines are talking about the high-end market softening in portions of the country. Locally I’ve heard that sentiment since inventory seems imbalanced at the top right now in the Sacramento region. It sounds alarming to think there is a year’s worth of million dollar listings, so it’s easy to conclude the high-end market is sagging. But last year at the same time we saw nearly the same number of listings. If you need to see the numbers, at the beginning of February 2017 there were 213 listings above $1M and this year there were 220 listings at the beginning of the month. It would be insanity to see twelve months of housing inventory at the lowest prices, but it’s actually fairly normal for January stats for the high-end. In short, it could be possible the million dollar market is softening, but for now let’s not use the number of listings alone as evidence.

Is sales volume slumping?

I’ve been noticing real estate headlines talking about slumping sales volume in many markets across the United States. For Sacramento County we actually had the strongest January since 2013, yet it is true that yearly volume is down 2.5%. This isn’t shocking news because nearly all of last year volume was down 1-2% depending on the month. Here’s the thing though. Sales volume in 2017 was slightly lower than 2016, but it was actually higher than 2015. This reminds us if we only look at one year of sales we might miss the bigger trend. Anyway, volume is also down in the entire region, though only by 1%. Overall it’s fair to talk about lower volume because that’s a fact, but it’s probably not fair to hype the issue too much – especially since volume is actually higher than 2015. Let’s keep watching though because it would be a huge deal if sales volume really did start to decline significantly.

Overpricing because the market is so “hot”:

In case you wanted some background noise while working, I did a Facebook Live Q&A last week with Realtor Justin Vierra and we talked about pricing for the “unicorn.” Overpricing is a real issue in today’s market. By the way, if anyone wants to do podcasts and interviews, I love that stuff. You can listen to our hour-long conversation here too in case you wanted more than just this clip.

I hope that was interesting. Anything to add?

–——-——- Big monthly market update (it’s long on purpose) ———–——-

Right now we’re in that weird place where sales stats are sagging from a slower fall season, but the market is heating up. For January stats we saw all the typical signs we’d expect to see. Sales volume declined, it took an extra day to sell, most price metrics sloughed, and inventory increased. The median price in Sacramento County actually has been fairly flat, but last week I talked about how the market really did slow down despite the flatness. Anyway, I have quite a few visuals below to help show how the market has moved in recent time.

Housing supply: Inventory is up a bit right now. It’s not much, but this January was up 6.5% in the region compared to last year at the same time. Over the past few months inventory has actually ticked up slightly, and that’s welcome news for the market. Yet before writing home to say the housing shortage is over (it’s not), let’s wait to see what happens during the spring market. I’m not overly impressed at a few months of slightly higher inventory around the slower fall months. Let’s watch the spring market, which will be the bigger test.

I could write more, but let’s get visual instead.

DOWNLOAD 62 graphs HERE: Please download all graphs in this post and more here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

SACRAMENTO COUNTY (more graphs here):

SACRAMENTO REGION (more graphs here):

PLACER COUNTY (more graphs here):

NOTE: I cut out a few graphs and data this month. If you miss something, let me know.

DOWNLOAD 62 graphs HERE: Please download all graphs in this post and more here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: What are you seeing out there in the market? Is the top softening? What are buyers saying about interest rates? Anything I missed? I’d love to hear your take.

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The myth of the collapsing market (and a big Sacramento market update)

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Positive real estate news is sexy. It gets clicks. It makes us feel good. And we love sharing it. But what happens when the market cools? Well, it’s not always easy to digest. In fact, lots of people freak out and think the market is starting to tank when it’s actually just doing its normal thing of slowing. Today let’s talk about the danger of embracing the collapsing market myth, and then take a deep look at the slowing Sacramento market. Any thoughts?

The myth of the collapsing market: The market tends to slow down around this time of year. Just as the weather changes, so does the real estate market. The kids go back to school, sales volume usually starts to slide, inventory goes up, and prices soften. Yet despite this happening nearly every single year, we hear things like, “The market is beginning to take a big turn” or “The ‘bubble’ has finally popped.” Case-in-point, I watched a video a few weeks back from a national show that said new construction home prices in Texas were beginning to take a turn, and that the Texas market was six months ahead of everyone else. Maybe this show is correct, but my problem is the host made a huge sweeping market statement based on a VERY minor dip in prices from June to July. I suppose I could do the same in Sacramento since the median price dipped 1% last month. The truth is we’ll see many more articles like this in coming months because we tend to confuse a seasonal softening with a big market turn. It’s like we forget the market is cyclical at this time of year.

My advice? Cut through the hype and know the seasonal market wherever you are located in the United States. What does the market normally do at this time of year? What normally happens to prices, sales volume, and inventory? Understanding what a slowing season tends to look like can help us give advice to friends and clients, and we can avoid saying the market is tanking just because prices dipped last month. Of course at some point the market really could collapse, but unless we are seeing symptoms beyond a normal seasonal slowing, it’s probably okay to be cautious of a doom & gloom housing message.

I hope that was helpful or interesting. Any thoughts?

–——-——- Big monthly market update (it’s long on purpose) ———–——-

The stats have been glowing for months in Sacramento County, but last month we finally saw a dip in prices. In short, the glowing stats are now showing a slowing. But that’s not really a surprise because we all felt this slowing in the market for the past 30-60 days. It’s just we didn’t see it show up in the sales stats until now. After all, it takes a month or two to see slower pendings close escrow. Anyway, the median price dipped by about 1%, inventory increased, and most importantly it took 3 days longer to sell last month than the previous month. I know, there are still multiple offers and there is still upward pressure in some areas and price ranges. I get that. Remember, the market is slowing, but that does not mean it is dull or slow. Ultimately when looking at price metrics, the market is up anywhere from 7-9% from last year, and sales volume is about the same as last year too, which shows the market is trying to normalize. Housing inventory in the region is about 10% lower than it was last year at the same time, which reminds us that the market is still more aggressive compared to last year. Lastly, if the market was collapsing, I’d suspect we would be seeing a big change in the psyche of buyers, a big change in inventory, and a big change in sales volume. Not that the market has to tank the same way all the time, but if values were turning we’d likely expect to see something much more out-of-the-ordinary beyond all the normal seasonal stuff we’re seeing right now.

DOWNLOAD 66 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

SACRAMENTO COUNTY (more graphs & stats here):

SACRAMENTO COUNTY STATS:

  1. The median price is currently $348,000 and dipped 1% last month.
  2. The median price is 7.6% higher than the same time last year.
  3. Sales volume in August was 4.7% lower this year than 2016. There were 1668 single family detached sales last month.
  4. It took an average of 24 days to sell a home last month (one year ago it was taking 2 days longer).
  5. The median days on market last month was 12 days, which means properties are selling quickly.
  6. It took 3 more days to sell in August compared to July (median days).
  7. FHA sales were 22.6% of all sales last month in the county.
  8. Only 0.8% of sales last month were bank-owned & 1.5% were short sales.
  9. The avg price per sq ft was about $223, which is slightly higher than last month (8.7% higher than last year).
  10. The avg sales price decreased about 1.5% last month and is currently $378,885. This is 6.8% higher than last year.
  11. Cash sales were 12.5% of all sales last month.

SACRAMENTO REGION (more graphs & stats here):

SACRAMENTO REGION STATS:

  1. The median price is $389,900 and declined slightly last month.
  2. The median price is 9% higher than the same time last year.
  3. Sales volume in August was 0.2% higher this year than 2016. There were 2771 single family detached sales last month.
  4. It took an average of 28 days to sell a home last month (one year ago it was taking 3 days longer).
  5. The median days on market last month was 13 days, which means properties are selling really quickly.
  6. The median days on market increased by 2 days last month, which helps shows a slowing in the market.  
  7. FHA sales were 18.1% of all sales last month.
  8. Only 0.8% of sales last month were bank-owned & 1.48% were short sales.
  9. The avg price per sq ft was about $227, which is the same as last month (7.9% higher than last year).
  10. The avg sales price declined slightly last month and is currently $430,101. This is 8.6% higher than last year.
  11. Cash sales were 14% of all sales last month.

PLACER COUNTY (more graphs & stats here):

 

PLACER COUNTY STATS:

  1. The median price is currently $462,000 and increased about 2% last month (but still down from a couple months ago).
  2. The median price is 7.4% higher than the same time last year.
  3. Sales volume in August was 14% higher this year than 2016. There were 637 single family detached sales.
  4. It took an average of 30 days to sell a home last month (one year ago it was taking 10 days longer).
  5. The median days on market last month was 15 days, which means properties are selling really quickly.
  6. The median days on market increased by 3 days last month, which helps shows a slowing in the market. 
  7. FHA sales were 12.5% of all sales.
  8. There were only 2 bank-owned sales last month and only 9 short sales.
  9. The avg price per sq ft was $229, which is slightly higher than last month (7.4% higher than last year).
  10. The avg sales price increased about 0.5% last month and is currently $508.686. This is 7.7% higher than last year.
  11. Cash sales were 14.4% of all sales last month.

DOWNLOAD 66 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: What are you seeing out there? What signs of slowing have you noticed? Did I miss anything? I’d love to hear your take.

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5 things to remember about lofty list prices

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There’s huge buzz this week about a $4.1 million dollar condo that just hit the market. I know that’s chump change in other places, but it’s a conversation piece in Sacramento since we don’t see listings anywhere near that level in Downtown (or almost anywhere in the county). Anyway, there’s some good conversation to be had from this, so I hoped we could consider a few ideas and then unpack local market trends (for those interested). Any thoughts?

5 things to remember about lofty list prices:

1) Attention & buzz: A high list price for a luxury property is designed to get attention, create buzz, and help market a property. In this case the $4.1 million dollar condo listing is located in a development called The Residences at The Sawyer. This penthouse unit is 3323 sq ft and is located directly across from the new arena at 500 J St (killer location). 

2) Records & price context: When hearing of high listings it’s tempting to treat the list price like a record has been broken. But if we’re honest this list price doesn’t matter unless the property actually sells at that level. Last year in Sacramento we had a $5M listing, the year before it was a $7M one, and a few years back there was a $10M listing. None of them sold = No records. There have actually only been three sales on MLS in the past that have sold at $4,000,000 or above in Sacramento County. They include: 1) The Governor’s Mansion built in Carmichael when Ronald Reagan was Governor (sold in 2004 at $4.1M); 2) A property in Sierra Oaks in 2013 that sold at $4.7M; and 3) An estate in Elk Grove that sold at $4.6M in 2005, and then re-sold for $1.3M in 2011 after a foreclosure.

3) Marketing to non-locals: Most locals aren’t anywhere close to affording a $4,100,000 listing – not to mention the whopping $4,021 monthly HOA fee (that’s not a typo). But the thing is this property is probably being marketed to someone from the Bay Area, maybe one of the owners of The Kings, or one of the Kings players. The Beverly Hills firm who is running the sales office is likely focused on non-locals more than anything because this is the type of property that would appeal to a wider group outside of the region. In that sense the property is an anomaly of sorts. Of course there is no guarantee they can fetch a price that high. For reference, the highest condo price I’m aware of in Midtown is the L-Street Lofts penthouse which former NBA player Kevin Martin bought for $1.34M in 2008 (and it re-sold in 2014 for $1.3M). The location on J St is bound to fetch higher prices, but how much higher? We’ll see.

Here’s a Twitter pricing poll I ran yesterday.  🙂

4) Reductions and good deals: It’s tempting for sellers to list something at an absurdly high price level, reduce the list price, and still feel tied to the original list price. So the seller says, “Hey, we came down 30% in price already. The buyer is getting a great deal.” But the problem is the listing was priced 30% too high to begin with. We see this with outrageously priced high listings, but we also see it in just about every neighborhood too. Thanks Jonathan Miller for influencing my thoughts on this.

5) Freaking out: When hearing about a “4 million dollar” property, it’s easy to freak out and start saying, “Holy Batman, prices in Sacramento are now at LA and SF levels,” or “I cannot believe how high values have risen.” Take a breath though because this is just a listing right now. If it makes you feel better, remember that $250,000,000 listing in Bel-Air that garnered world-wide attention in January? Well, that one’s still listed for sale at the same price… In short, let’s give this one some space and see if this price pans out or not.

I hope that was helpful or interesting. Any thoughts?

———–——-——- big monthly market update below ——-———–——-

A LOCAL MARKET SUMMARY:

Values have continued to increase in the spring, though at the same time the market isn’t aggressive in every price range. When looking at Sac county and the region as a whole, both the average sales price and average price per sq ft saw increases last month. On the other hand the median price softened slightly (don’t make too much of that since the median can go up and down depending on what has sold). Housing inventory feels like it is doing the Limbo as it keeps going down and down. Seriously, inventory was already low last year, but it’s 20% lower this year. This is definitely putting pressure of values to increase in some price ranges. My sense is lower prices in just about every neighborhood are experiencing upward pressure because that’s what represents affordability to buyers for those areas. So buyers in La Riviera are feeling the pressure under $300,000, buyers in Whitney Ranch are feeling it under $400,000, and buyers in East Sacramento are feeling similar pressure under $450,000. Yet buyers at middle-to-upper ranges are not experiencing this same dynamic because the market is flat or soft in many areas at upper price levels (yet we still might see multiple offers though). As expected, last month it took about 5 less days to sell than the previous month. I could go on and on with words, but let me share some graphs to show the market visually. 

DOWNLOAD 53 graphs HERE: Please download all graphs in this post (and more) here as a zip file (including a quick stat sheet). See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Sacramento County graphs this month (more here):

Sacramento regional graphs (more here):

DOWNLOAD 53 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: What do you think of the $4.1M condo listing? Did I miss anything? What are you seeing out there in the market? I’d love to hear your take.

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