10 things to know about low housing inventory

Inventory is low. Really low. That’s one of the big stories right now in real estate, so I wanted to spend some time kicking around some thoughts. Let’s take a look at ten things to know about housing supply in Sacramento. If you aren’t local, I hope you can still find some value. Do you see any parallels to your market? Any thoughts? 

DOWNLOAD 50 graphs HERE: Please download new market graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

10 THINGS TO KNOW ABOUT LOW HOUSING INVENTORY

1) Housing inventory is clearly on a declining trend.

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

Housing supply has been vanishing over the past few years in light of greater buyer demand, sellers sitting instead of selling, less new construction, increasing sales volume, and other reasons.

2) Housing supply is really sparse (except at the top).

inventory - March 2017 - by home appraiser blog

Housing supply was low last year, but this year it’s 15-20% lower. Having less listings means it’s really competitive for buyers – especially under $400,000. However, inventory is not low at every price range as there are far more listings at the top. Before freaking out though, this is actually a normal trend we see almost every single month. But the disparity between under $500,000 and above $1,000,000 is striking. As an FYI, it’s worth noting the top of the market does feel a bit soft.

3) Inventory is still not as low as the Blackstone days.

inventory in sacramento county Since 2011 - by sacramento appraisal blog

It’s true that inventory is anemic, but we have to remember during 2012 and 2013 it was at one month for nearly an entire year when Blackstone and other investors were gutting the market. I mention this because while the market has an aggressive feel, it’s still not what it was. If inventory persists in declining though it will be a bloodbath in terms of competition for buyers (good for sellers though as a developer mentioned to me on Twitter). 

4) Inventory was 1400% higher ten years ago during the “bubble”.

inventory in sacramento county Since 2007 - by sacramento appraisal blog

Ten years ago during the worst of the real estate “bubble” popping we had a 14-month supply of homes for sale (as opposed to one month now).

5) Bank-owned inventory is not a driving factor today.

REOs and Short Sales Sacramento County - by Sac Appraisal Blog

Eight years ago over 70% of all sales in Sacramento County were REOs, but that number is now about 3%. Some folks promise a new “foreclosure wave”, but it’s definitely not here right now.

6) Low inventory is putting pressure on values to increase.

Median price since 2013 in sacramento county

Declining inventory over the past few years is a big factor in rising prices. Right now values are about where they were at the height of last summer (or slightly higher) after a lull in the fall in many neighborhoods in Sacramento County. But let’s not make the mistake to think the market is doing the same thing everywhere. The truth is in some areas increases have been modest at best over the past year while some price ranges feel flat, but the bottom of the market is hands-down experiencing the largest increases. Remember, in some price ranges the market feels more aggressive than actual value increases too, so it’s really important to sift through emotions, look at actual numbers, and not overprice because the market is “hot”. A good mantra for some areas is “Aggressive Demand, Modest Appreciation.”

7) Strong demand is a huge reason why inventory is declining:

price metrics since 2014 in sacramento county

Demand is strong right now for both buying and renting, and buyers and tenants are simply gobbling up almost anything out there (I say “almost” because buyers are still sensitive about adverse locations and overpriced homes). Thus it’s not surprising to see the median price is 7% higher than last year, the average sales price is 9% higher, and the average price per sq ft is about 9% higher. Prices increases from February to March were anywhere from 1-3% depending on the metric (this doesn’t mean values went up by 1-3% though). 

8) Increasing sales volume is one reason for lower inventory.

Cash in Q1 - by Sacramento Regional Appraisal Blog

Housing inventory is the relationship between sales and listings, so if there are more sales and no real change in the number of listings it will naturally mean inventory as a metric will show a decline. Look at the graph above to see all sales since 2013 for the first quarter of the year. Can you see how sales volume is increasing? At the same time we see cash volume declining. This reminds us the market is trying to figure out what normal looks like. It’s healthy to see sales volume growing.

9) Low interest rates have helped take homes off the market.

Interest Rates Since 2008

Historically low interest rates have played a big role in shaping inventory in that some owners are sitting on a 3.5% interest rate from years ago and they are simply not going to move unless necessary. Why would they anyway if their replacement home would come with a much higher mortgage? This means there are fewer homes hitting the market that might otherwise sell.

10) Low inventory is causing homes to sell faster.

CDOM in Sacramento County - by Sacramento Regional Appraisal Blog

Last year it was taking 5 days longer to sell a home and two years ago in March 2015 it was taking 15 days longer to sell a home. Can you see how low inventory makes a difference in how long it takes to sell? By the way, here is CDOM by price range. As you can see, the higher the price the longer it takes to sell. Just because it is a “hot” market does not mean every property is selling in 3 days.

BIG MONTHLY POST NOTE: Once a month I do a big market update (and it’s long purpose). Normally I talk about Placer County and the Sac Region too, but I tore my MCL a few weeks back, so I only had time to focus on Sacramento County in today’s post. Next month I’ll likely be back to normal (but I may change it up too).

DOWNLOAD 50 graphs HERE: Please download new market graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: Did I miss anything? Any other thoughts as to why inventory is low? How would you describe the market right now? I’d love to hear your take.

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How $10 (and an amazing Mom) made two boys happy on Christmas

Today I wanted to share my favorite Christmas photo. This is me and my family in 1980 or so. And yes, I have a twin brother in case you did not know. I wrote about this picture four years ago, but I felt it was time to revisit the image since this is always a powerful reminder for me of what really matters during Christmas. I hope it’ll be encouraging for you too.

favorite christmas photo - by sacramento appraisal blog

How $10 (and an amazing Mom) made two boys happy on Christmas:

Let me introduce you to my grandparents, mother, and the four-year old version of me and my twin brother. This photo was taken during a time when my family had very little money as my mother was a single parent doing her best to work full-time and raise us boys. We lived a modest lifestyle out of necessity, and so when December rolled around, there wasn’t much to cover Christmas gifts. My Mom had a total of ten dollars, and since she was too proud to accept additional funds from family members, she made do with what she had.

When I look at this post gift-unwrapping picture, I see two extremely happy boys and an amazing mother who stretched out ten bucks to provide both of her sons with a superman t-shirt and cape, Mork & Mindy egg, coloring book, and soccer ball.

Maybe it’s just subjective sentimental goo, but this photo gets me thinking about what really matters and even how I can enjoy the coming week. There are some real nuggets of truth here: Family time is so important. Money doesn’t make us happy. Humble circumstances can teach us valuable life lessons. Moms are amazing. Christmas is not about the gifts. Financial hardship doesn’t have to steal our joy. Life is good. There is much to celebrate and be grateful for. We need to savor the time we have with our kids.

Merry Christmas and Happy Holidays from my family to yours!! May you find tremendous joy and peace (and not too much drama) with your family and friends over coming days. And on a different note, thank you so much for hanging around here on the blog this year and for enhancing my life. I am truly grateful for you. I’ll be taking the next week off to unplug and get some much needed rest. I cannot wait to connect again in early January. Blessings to you and your family.

Question: What is your first thought after reading this post?

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I support homeless students from “head to toe”

I like what I do, but you’ll probably never catch me saying appraisals are my passion. What is my passion? Rooting for the underdog. That’s why I’m taking a break from real estate talk to announce Project 680’s “Head to Toe” drive for homeless students. Project 680 is a volunteer organization I help steer, and its work matters deeply to me. It’s sobering that local kids are living in some sketchy places right now and going without some of the basics – like adequate shoes and clothing. The “Head to Toe” drive is simply a response to help these students in relevant ways. It’s about the community finding a solution to a local problem.

I’ll donate $1 to Project 680 for every comment, Facebook share and tweet this post gets (up to $100). Thanks for spreading the word.

Check out a one-minute promo video below (or here) and read more about a few ways to get involved. It’s amazing what can happen when we get intentional as a community about responding to needs around us. Project 680 is looking for more people to get involved (churches, businesses, families, individuals, schools, etc…). What about you? Let’s join forces together.

Project 680

UPDATE: Thank you so much for spreading the news. This post was shared on Facebook about 30 times that I know of, tweeted 30-40 times (the button isn’t correct below) and fetched some comments too. I will cut a check for $100 at some point this week. It’s neat to see how we can share information and use social media to spread vision for a cause. Thank you everyone.

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook