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low sales volume

Slow is not a dirty word in real estate

June 13, 2019 By Ryan Lundquist 11 Comments

Slow is not a four-letter word. Well, technically it is. But in real estate it’s not a “four-letter” dirty word. Let’s talk about this, and then for those interested I have a huge market update below. 

The situation: It’s easy to feel good about real estate when the stats are glowing because there’s always something positive to share. But when a market begins to slow it can feel uncomfortable for some because all of the sudden slower stats don’t line up with the rosy narrative that’s been used to describe the market.

The reality of slowing: The market has been slowing. What I mean is right now we’re seeing more subdued price growth in many portions of the country. In other words, prices just aren’t increasing like they were in the past. This doesn’t mean the market is dull or that it’s not really competitive, but it does mean competition is more intense than actual price growth in many cases.

Main point: I wanted to mention this because it’s important to recognize when markets change so we can back away from real estate cliches that may not fit current trends. Moreover, it’s crucial to find new language to describe the market as things either speed up or slow down. My advice? Pay attention to stats and let data inform your market narrative. Thus if you see the market slowing, it’s okay to say that. In fact, sometimes it’s the best thing sellers or buyers can hear.

Abusing price per sq ft: Last week I made a quick video to talk through the problem of abusing price per sq ft in real estate. Enjoy here if you wish.

As always, thanks for being here.

—–——– Big local monthly market update (long on purpose) —–——–

Spring is feeling fairly normal so far. In fact, May was actually a pretty strong month. What a difference from the doom we felt in 2018. Let’s talk about it.

THE SHORT VERSION:

  • Prices are up from the fall and it’s shaping up to be a strong spring
  • Prices aren’t up much from last year
  • There were more multiple offers this May compared to last May
  • Sales volume has slumped for 12 months
  • There are nearly 2,700 less sales this year
  • So far the spring has felt fairly normal
  • This post is long on purpose. Skim or pour a cup of coffee

DOWNLOAD 70+ visuals: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

THE LONGER VERSION:

Here are some of the bigger topics right now:

Normal: The stats for May were strong and showed what we’d expect to see for the month. Prices showed an uptick, inventory remained low, it took less time to sell, the sales to list price ratio increased, etc… In short, the market feels a bit normal right now. This doesn’t mean it’s perfectly healthy, but from a stats perspective it’s been fairly normal.

More multiple offers: We saw more multiple offers this May compared to last year at the same time. I know, it’s barely up, but all year the number of multiple offers has been lagging, so this shows us a strong spring has sprung.

Blackstone: I mentioned last week that Blackstone (Invitation Homes) is starting to sell some homes in Sacramento. For now it looks like they’re offloading some non-performing inventory, so that’s how I plan to describe it unless new information comes to light. Keep in mind lots of headlines talk about Blackstone selling, but these headlines refer to stocks instead of homes. If you didn’t know, in recent weeks Blackstone sold $1B of their stock in Invitation Homes. This is big news of course because it means Blackstone is clearly making a move to exit the market. But this doesn’t mean Invitation Homes is going to exit the actual housing market by dumping all 80,000+ homes they own in the United States. I’m doubtful this is their plan since Invitation Homes is such a well-oiled mega-rental machine. But we’ll keep talking about this as needed.

Slower growth: Prices are up from last year, but they’re not up by much. The market feels really competitive, but we’re just not seeing insane price growth. Most metrics are up anywhere from 2-3% from last year. This reminds us it’s possible to have a really competitive market without insane price growth.

Highest sale ever in Sacramento County: There is now a $5M sale that just closed in the Sierra Oaks Vista neighborhood. It was a private sale and it’s the highest residential sale ever in Sacramento County. The ultra contemporary home was previously listed a couple times and here’s a video from Nick Sadek’s listing. I mention this because we are starting to see outlier sales like this pop up. This is a reflection of where prices are at, but it’s also a reflection of growing demand for the luxury market.

Michelin star: The big news locally is Sacramento got its first Michelin star for a restaurant called The Kitchen. Yesterday someone asked me if this star will affect property value in surrounding neighborhoods. I can comment later on that, but for now I have a Twitter poll going. Please vote.

Picky about getting into contract (and staying): I haven’t run stats on failure rate yet, but I hear from lots of real estate agents about buyers falling out of contract more often these days. I’ll have to run the numbers at some point, but I wanted to say it doesn’t surprise me to hear this. The reality is today’s buyers are incredibly picky about what they purchase. They’re choosy about condition, location, and price, so they take their time to get into contract. Moreover, since they don’t want to get stuck in a bad situation, if something doesn’t go right during an escrow, they’ll bail. Thus they’re picky about getting into contract AND staying in contract. Sellers, did you hear that? Buyers aren’t desperate.

A year of slumping volume: Sales volume in the region was strong for May and has rebounded substantially from a dreadful fall season, though technically volume has been down 12 months in a row in Sacramento County (and 13 months in the region). All things considered we’ve had 9% fewer sales, which means there have been 2,700 fewer homes sold this year. Keep in mind this is not the sign of a market meltdown, but it’s definitely safe to call this a slower year in terms of volume. This is something we have to keep watching. I suspect if rates go up, we could see volume slump again too.

Rates are doing the limbo: Rates keep doing the limbo by finding lower levels, and that tends to put a steroid in the market to create more competition. This is a big factor to watch since our market feels heavily influenced by the direction of rates right now. As a side note, if rates get really low it could lead to stronger price growth.

Getting back to the top: The median price in the region is now higher than the previous peak in 2005. It took us fourteen years to get back, which is the entire lifespan of my 8th grader. Anyway, in coming time we’ll surely have more “bubble” conversations because of this. But let’s be real. Many buyers are already wondering and having these conversations. Keep in mind the market in 2005 was much different than today and there is no such thing as a formula where the market “pops” when reaching 2005 levels. Technically, current values aren’t actually anywhere near 2005 when we consider inflation. But in my experience very few buyers actually think about inflation like this unless they’re statistics nerds. In case it helps, here’s a post I wrote about buyers worried about another housing bubble.

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

FOUR BIG ISSUES TO WATCH:

1) SLOWING MOMENTUM: Despite the spring market clearly heating up, stats show the market is slowing down when we look at the rate of change by year. So while we might describe the market as “hot”, we can also describe it as slowing.

2) LAST YEAR VS THIS YEAR: Check out the price metrics below. Can you see why I’m saying prices seem flat lately? This may not be true in every single price range or neighborhood of course, but this shows us price momentum is slowing. With that being said, it’s still okay to say the market is “hot”. It is. But I’d say competition is hotter than price appreciation.

3) SALES VOLUME SLUMP for 12 months: It’s important to look at sales volume in a few ways to get the bigger picture. Here it is by month and year.

SACRAMENTO REGION:

Key Stats:

  • May volume down 4.6%
  • Volume is down 9.2% over the past 12 months

SACRAMENTO COUNTY:

Key Stats:

  • May volume down 6.1%
  • Volume is down 8.3% over the past 12 months

PLACER COUNTY:

Key Stats:

  • May volume is up 2.7%
  • Volume is down 8.4% over the past 12 months

EL DORADO COUNTY:

Key Stats:

  • May volume down 4.9%
  • Volume is down 12.6% over the past 12 months

4) SPRING GETTING HOT: The market is heating up for 2019. We’re seeing price changes, low inventory, and increased sales volume.

NOTE: Take El Dorado County data with a grain of salt. Stats change significantly month by month.

Quick note on how NOT to use my content: Please don’t copy my post verbatim or alter the images in any way. I will always show respect for your original work and give you full credit, so I ask for that same courtesy. Here are 5 ways to share my content.

Now here are a bunch of images. Please enjoy.

SACRAMENTO REGION (more graphs here):

SACRAMENTO COUNTY (more graphs here):

PLACER COUNTY (more graphs here):

EL DORADO COUNTY (more graphs here):

DOWNLOAD 70+ visuals: 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 are you seeing out there? What do you think prices are doing? What are you hearing from buyers and sellers lately?

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

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Filed Under: Market Trends Tagged With: 2019 real estate market, Appraisal, Appraiser, El Dorado County, Home Appraiser, House Appraiser, low sales volume, Placer County, real esate bubble, real estate graphs, Sacramento County, Sacramento real estate trends, Sacramento Region, slowing market

3 talking points for Sacramento real estate

April 22, 2014 By Ryan Lundquist 2 Comments

Let’s look at three trends today. Instead of only unpacking Sacramento County though, let’s glance at the region as a whole to understand larger dynamics at hand. I hope this will help give you a few more real estate talking points, whether for conversation with friends or clients. Any thoughts?

1)  It’s taking 20% longer to sell properties compared to last year

days on market for sac placer yolo el dorado county - sacramento appraisal blog

It’s not earth-shattering news that properties are spending more time on the market these days compared to last year. It’s simply one of the byproducts of having more housing inventory. Keep in mind 47 days is actually really quick considering sales in March 2012 took more than 80 days.

2) Inventory is up by 110% compared to last March

inventory in sac placer yolo el dorado county - sacramento appraisal blog

The Sacramento Region had just above one month of housing supply for an entire year. Inventory began to increase when interest rates shot up from 3.5 to 4.0% between May and June 2013 (and investors also began exiting the market around this time). It’s easy to get sensationalistic about a stat like this, but remember that current inventory is still VERY low.

3) Sales volume is down 17% from last year

SACRAMENTO region sales volume - by sacramento appraisal blog

Sales volume has been really low lately. The first quarter of 2014 was down 17% in sales volume when compared to the first quarter of 2013 and 25% from the first quarter of 2012. As you can see above, cash sales are an X-factor for why volume has been low, and the market has been feeling the impact. This is true in Sacramento County, and it’s true when looking at the region (Placer, Yolo, El Dorado & Sacramento).

BONUS: The first quarter of 2014 saw a 44% decline in cash sales compared with Q1 2013.

A quick video of where the market is. Watch below or here.

I hope this was helpful.

Sacramento Bee Quote: By the way, I wanted to share that I was quoted in a SacBee article last week entitled Sellers’ market has few sales. That’s always an honor. Thank you to anyone who clicked over from the story or even subscribed. I really appreciate you being here, and I’m looking forward to talking together.

Questions: What stands out to you above? What are you seeing in the trenches of the local market? I’d love to hear your insight. Comments are welcome below.

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

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Filed Under: Market Trends Tagged With: 2013, 2014, cash investors, days on market, DOM, Home Appriaser, House Appraiser, housing inventory, less sales, low sales volume, months of housing supply, sacramento appraisers, Sacramento Real Estate

Seeing Sacramento real estate in chunks

April 8, 2014 By Ryan Lundquist 1 Comment

Let’s break down the market in chunks. It’s always nice to get a county-wide view of real estate, but today let’s unpack what is happening in specific price ranges in Sacramento County. I hope this will be helpful for you and your clients. When we can explain the market, we become a valuable resource and we earn people’s trust. By the way, be on the lookout for my big monthly post in two days.

1) How many properties are available at different price levels?

months of housing inventory by sacramento appraisal blog

Inventory in all of Sacramento County saw a decline from February to March as the Spring market is beginning to unfold. Housing inventory is just under 2.0 months now after being closer to 2.5 months last month. But what does inventory look like in various price ranges? As you can see, inventory is at its lowest between 200-300K, and that makes complete sense since a great bulk of buyers find this range hot and affordable (it had the most sales out of any price range). On the other and, inventory above 400K and upward really shows a dramatic increase, doesn’t it? This helps us see there are different markets within the market.

current listings vs sales in price ranges in Sacramento county - by sacramento home appraiser

Here is another way to look at inventory. You can see the number of sales in red and the number of listings in blue. Knowing the sales vs. listings ratio can open our eyes to understanding demand, marketing time, how to price properties or even how aggressive an offer might need to be.

2) How long are listings take to sell?

days on market for sacramento sales in march 2014 - by sacramento appraisal blog

On average listings are taking about 40 days to sell (or 45 days cumulative). This is about 20% longer than they were taking last year during the same time, but we all know it’s a much different market this year (more on that in two days).

3) What is happening with sales volume?

sacramento real estate market trend graph houses sold since 2008 by sacramento appraisal blog

Sales volume is definitely down from last year by over 20%, but March sales were “normal” since volume increased from February to March by 25%. The market usually sees this type of increase, so in this regard the market behaved normally.

cash sales vs conventional sales in sacramento county - by home appraiser blog

Why is sales volume down? In large part it’s because of cash investors exiting the market. As you can see in the graph above, cash sales in the first quarter of 2014 were about half of what they were in 2013 during the same time period. As investors, particularly institutional investors, have taken their foot off the gas pedal, the market is definitely feeling it. Last year the market was on “steroids” so to speak, but this year the market is in withdrawal mode trying to figure out how to live without the extra layer of cash to drive the market.

Share the Graphs? If you want to share one or two of the graphs above in your newsletter or in a blog post, go for it. Please link back here and see my sharing policy so we are on the same page about what I mean by “share” (thanks).

Questions: What image resonates with you the most? Why? Should I keep breaking the market down by price range? (I’m looking for feedback)

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

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Filed Under: Market Trends Tagged With: appraisers in Sacramento, bottom of market, cash investors, decline of cash, home appraisers, housing inventory, institutional investors, inventory, Inventory in Sacramento, low sales volume, price ranges, price trends, sales stats, top of market, trend graphs, value trends

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