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price reductions

My health went crazy & so did the market

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Long time no blog. I don’t know if you noticed, but I haven’t been around these past two months. Today I want to talk about why, say thank you, and then share some cool visuals I’ve been making these past couple weeks.

What happened: In late June I began to have an ulcerative colitis flare and it got really bad to the point I had to be hospitalized for six nights. Fourteen years ago I was diagnosed with UC and this is frankly the worst it’s ever been. Thankfully my flare is subsiding and I’ve since been slowly regaining energy.

I’m blown away at your support: This has been a difficult season for my family. It’s hard to not feel well and it was scary being in the hospital. But in the midst of this it’s been incredible having an army of support rise up. The cards, flowers, meals, text messages, advice, gifts in the mail, DoorDash, emails, prayers… It all meant so much.

An army of support: While I was in the hospital a GoFundMe was started by my friends Erin Stumpf and Joe Lynch. I’m honestly a guy who hates accepting help. I would never in a million years have asked for something like this because I always want to be the giver. So it was humbling to see my face online and to have my colon become internet famous (haha). I received a text message basically saying, “We’re going to do this and your peeps are going to take care of you.” And that’s what happened. Everyone, I cannot put into words how grateful I am for you carrying my family during this time. As the hospital bills start rolling in and I haven’t had income for over two months, your generosity has been a tremendous blessing. It’s frankly taken off some pressure and given me space to adequately heal. I still have lots of individual thank yous to say and I will get to those over time, so please be patient. But for now I want to publicly thank everyone for your support. I have no words to express how deeply grateful I am.

NOT ASKING FOR MONEY: I wanted to clarify that I am NOT asking for anything. I did not link to the GoFundMe on purpose. We have received plenty and I think we are good in terms of finances.

I’ll be back: I was hoping to be back to work the day after Labor Day, but these past couple of days I’ve been exhausted, so we’ll see. In the meantime I’m posting some visuals on Facebook, Twitter, and LinkedIn.

Okay, enough about me and my colon….

THE MARKET WENT CRAZY

While I was gone the market went absolutely nuts. In short, competition has been fierce and we’ve begun to see one of the most competitive markets we’ve had.

WAY TOO MANY VISUALS FOR YOU:

Multiple offers: They were up 25% this August compared to last year at the same time. As you can see, the percentage of multiple offers is at its highest point in recent years too since the metric began to be included in MLS. We started to see the market soften during the beginning of the pandemic, but then it sped up to create a V shape as mortgage rates went down.

Here is a new visual. What do you think?

Price reductions: This is another brand new visual. About 9% of the market had a price reduction last week. This isn’t much, but it reminds us the price has to be right – even in the midst of such low inventory.

Sales volume: We’ve seen a recovery in volume lately after a slump during the beginning of the pandemic. Usually volume tops out around July or August each year too and it looks like that may be starting to happen. This topping is normal for the season and we’ll know more in the next few weeks how the market is moving. Stay tuned.

Prices: Prices have been ticking up and preliminary stats for August so far show another increase from July. For a while the market was subdued and we were seeing year over year growth anywhere from 2-4%, but it’s been more like 8% and higher lately from last year.

Listings: It’s as if listings have been cut in half from last year. When I pulled stats at the beginning of September last year there were over 4,700 listings on the market in the region, but yesterday there were just over 2,200. Isn’t that crazy?

Six years of listings: Here’s another way to look at the number of listings. These are listings from 2015 through 2020 pulled on the first day of September each respective year.

Inventory doing the limbo: Inventory has been shrinking as I mentioned above. Here is a look at a few local counties.

Distressed sales have bottomed out: We are not seeing more distressed sales hit the market. There is talk about a new wave of foreclosures coming, but if that ends up happening it would take a while before anything actually shows up on MLS. Moreover, many owners are in distressed situations, but they are sitting on equity and could sell instead of give the house back to the bank. Let’s keep watching.

Unemployment: Let’s keep watching the job market and economy.

Other visuals: I have lots of other graphs. Check out my social media in coming days and weeks. I am posting daily stuff. I may or may not put up a weekly blog for now, but I probably will since I have so much to share.

Thanks for being here.

Questions: What are you seeing out there in the market right now? I’d love to hear your take.

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The danger of overpricing & chasing real estate unicorns

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Overpricing. It happens all the time in real estate – especially in today’s market. I get where sellers are coming from because we’ve had so much glowing real estate news for more than five years. But that doesn’t mean we’re in a market where you can command whatever price you want. 

Chasing the unicorn: Many sellers are pricing their properties too high. It’s as if they expect record-breaking prices and multiple offers every time because of how “hot” the market is. Homeowners get so fixated on the idea of a fiery market that they price for that one unicorn buyer who’s going to mysteriously pay more than anyone else. This “unicorn” will ignore all recent sales and listings and magically offer 10% higher than anything. In Sacramento the idea is a Bay Area “unicorn” will swoop in with fat stacks of cash and totally ignore similar comps that are selling for less. It’s nice when sellers get lucky like that, but in today’s market buyers are actually much more finicky about price. Despite a legitimate housing shortage we don’t have a market where buyers are willing to pay crazy prices that are totally disconnected from reality. In other words, we don’t have a market where pricing for the “unicorn” makes good sense (unless you want to sit on the market instead of sell). Take a look at the image below that shows price reductions over the past 24 hours in the Sacramento region. These 78 properties have been priced too high for the market.

My advice? Price for the real market instead of the unicorn. Give the most weight to similar sales and similar listings that are actually getting into contract.

Aspirational pricing: If you aren’t familiar with the term aspirational pricing, Jonathan Miller coined this phrase. It’s a great way to describe the phenomenon of sellers fixating on prices that are simply disconnected from the real market.

10 reasons why sellers overprice:

1) Hot headlines are imposed on the price instead of looking at comps. 

2) Dissimilar sales are used as “comps” to price the home.

3) Too much emphasis is put on price per sq ft instead of actual comps.

4) A property is priced like it doesn’t have a busy street or adverse location.

5) Sales from a higher-priced area are “cherry-picked” to price the property.

6) The seller is too subjective and feels “my house is better.”

7) The owner believes the cost of any upgrades should be paid for by buyers.

8) A more aggressive trend from a lower price range is assumed to be present at a higher price range.

9) It’s a tricky property and not easy to come up with a price.

10) What else?

My article in Comstock’s: By the way, I wrote an article in Comstock’s Magazine this month on the value of upgrades. Check it out if you want.

I hope this was interesting or helpful.

Questions: Are you seeing sellers price for “unicorns”? What reasons do you think sellers overprice? Did I miss something?

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Six temptations to avoid when the market slows down

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At this time of year the weather begins to change, the kids are finally back in school, AND pumpkin spice lattes come back on the menu at Starbucks. Oh, and it’s normal for the real estate market to slow down.

sacramento real estate market- image purchased from 123rf and used with permission by sacramento appraisal blog

The Truth: Real estate is usually very seasonal, meaning the market heats up in the spring and begins to slow down later in the year. This is normal, and we know this intellectually, yet it’s still easy to freak out when properties start taking longer to sell or demand changes. This is why I hope this post will be relevant.

NOTE: There is a difference between a market being slow and showing signs of a seasonal slowing. 

Six temptations to avoid when the market slows down

  1. Freaking out: Just as we expect the weather to change during the fall, let’s expect real estate to change too. The public likes hearing positive news (“values are increasing”), so reporting a market slowing seems negative or anti-climatic, but it’s actually normal almost every single year (see this post and look at the fall graphs compared to the spring). On the positive side, a slower seasonal market might provide space for a vacation, relaxation, and most significantly an opportunity for the real estate community to communicate seasonal dynamics to clients. Of course when a market slows it’s not always easy to be self-employed since paychecks also slow. Yet when we start realizing the market slows during the end of the year, it helps us adjust our expectations and make plans for life and business. There has to be more to the last quarter of the year than being stressed until the market picks up again in the spring.  🙂
  2. Projecting the aggressive spring on summer: It’s easy to look back in time to a more aggressive market and want to price according to sales from the hot spring. But when the market has changed, be careful to look at values for what they are right now instead of projecting hotter seasonal trends of the recent past onto a fading summer or cool fall. This is just the same as not dressing for summer if it is winter (I do wear flip flops year round though). We have to do what makes sense for the current time.
  3. Putting too much weight on sales: Sales tell us what the market used to be like when the sales went into contract several months ago, but listings and pendings tell us what the current market is like right now. When values begin to soften during the fall, this makes it all the more important to look at listings / pendings instead of only sales. If the listings are priced at a similar level to recent sales, but not selling, this tells us the market has changed, and we might need to adjust our expectations (and prices). The same is true with the stock market. We wouldn’t use stock prices from three months ago as our gauge for today’s prices, but instead look at what stocks are actually selling for right now.
  4. Targeting that one magical buyer: We all want to attract the highest price ever, so it’s easy to hold out for that one cash buyer from outside the market who is going to pay more than anyone has ever paid. Yet we have to consider what the rest of the local market is willing to pay (this is what the appraiser is going to be considering too). If you lined up 100 buyers who are interested in the neighborhood, what is the most probable price most buyers would be willing to pay? That’s a good picture of what market value looks like.
  5. Refusing to reduce the list price: It can sting to reduce the list price, but if the price isn’t right, it’s time to change that, right? If you had something for sale on Craigslist and it wasn’t selling, would you keep the price the same? No, you’d change it if you really wanted to sell. How do you know if the price is wrong? If there aren’t any offers, you’re not “in the market”, but only “on the market” (Jay Papasan). An honest question: If the market is telling you to reduce the price, but you aren’t willing to do so, do you really want to sell?
  6. Not listening to your real estate agent: If you are an owner and your real estate agent keeps encouraging you to do something to the property or change the list price, but you’re not listening, ask yourself why you are not listening.

I hope this was helpful.

Social Media Podcast: By the way, a few weeks back I did a podcast with The Appraiser Coach on using social media. Here it is in case you want to give it a listen in the background. It’s geared toward appraisers, but there are probably relevant nuggets in there for anyone in the real estate community. Listen here or below.

Questions: What’s temptation #7? Did I miss anything? I’d love to hear your take.

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5 trends to watch in Sacramento’s flattening real estate market

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Let’s take a wider view of real estate today. I shared by big monthly post last week about Sacramento County, but what is regional market doing when we consider multiple counties surrounding Sacramento? Let’s look at five quick trends below.

Taking a wide view of real estate - image purchased by sacramento appraisal blog

Two ways to read this post:

  1. Briefly scan the 5 talking points and graphs below in 1 minute.
  2. Take a few minutes to digest the graphs and commentary.

Enjoy and let me know what you think.

free market trend graphs from sacramento appraisal blog

THE SACRAMENTO REGION:

1) Prices have been flat for 4 months:

median price sacramento placer yolo el dorado county

The median price has been the same for four months in the Sacramento Region, which is why so many in the real estate community have been talking about a flat market. As you can see on the graph, values cool off when inventory increases.

But Trendgraphix says… Trendgraphix shows the median price increased over the past few months from $310,000 to $315,000 for the Sacramento Region, but they seem to have pulled their sales data too early. When running stats in MLS for the past four months, the median price is clearly stable at $310,000 for each respective month. This is not to bash Trendgraphix at all because I am an enormous fan of their work. I only wanted to point out the importance of waiting long enough to publish stats, and how publishing even a few days too early can make a big difference.

2) Inventory is steadily increasing in the Sacramento Region:

months of housing inventory in region by sacramento appraisal blog

Housing inventory has been increasing and is helping fuel a greater sense of confidence among buyers (they’ve become more picky too), as well as many price reductions. Housing inventory increased from 2.50 months to 2.64 months over the course of the past month. Inventory is still not very high, but many sellers seem to have an unrealistic mindset about what their properties are worth, which is only leading to inevitable price reductions. Moreover, we are seeing weaker demand than in years past in light of less cash investors playing the market. My advice? Consider pricing according to the most recent competitive listings, that is, ones that are actually getting into contract (as opposed to the highest sale in the neighborhood three months ago).

number of listings in Placer Yolo El Dorado Sacramento - by home appraiser blog

The graph above is a slightly different way to look at inventory. As you can see, the bulk of listings are between 200-400K, but there are quite a few from 400-750K too. Remember, not every price range, neighborhood, or property type is experiencing the same exact trend.

3) It took 2 days longer to sell a home last month:

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

In July it took three days longer to sell a home, and last month it took days longer. When days on market increases, it’s a sign the market is slowing down. Yet at the same time this is a very normal trend because the hot buying season does fade away as summer closes. Generally speaking, the higher the price, the longer it is taking to sell.

4) Sales volume is down 10% in 2014 compared to 2013:

SALES volume in sacramento region - by home appraiser blog

number of listings in Placer Sacramento Yolo El Dorado county - July 2014 - by home appraiser blog

Sales volume is down by slightly more than 10% this year compared to last year, and less sales is definitely one of the factors helping to cool the housing market. Less sales has led to increased inventory and a transfer of power from sellers to buyers.

5) Cash is down by 37% this year in the Sacramento Region:

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

I mentioned already that the sales volume is down by 10%, but the X-factor for lower volume is really less cash sales. There have only been about 50 more non-cash sales in 2014 compared to 2013, but almost 2000 less cash sales this year. Having this many fewer sales has made certain months in the year feel sluggish, and it’s certainly contributed to the flattening trend we’ve seen over the past several months.

BONUS MATERIAL: PLACER COUNTY

Placer County median price and inventory - by home appraiser blog

median price in placer county and sacramento county by sacramento appraisal blog

Uptick, but still flat in Placer County: Placer County saw an uptick in median price last month, but it’s not really anything to write home about. One month of data does not mean the market is now increasing after being flat. Moreover, when talking with real estate agents, Placer County is very similar to Sacramento County in that the market is very price sensitive. If it’s not priced right, it’s going to sit.

Placer County housing inventory - by home appraiser blog

months of housing inventory in placer county by sacramento appraisal blog

Inventory in Placer County increased last month: Monthly inventory saw an increase last month from 2.72 months to 2.91 months. This effectively means there are 2.91 months worth of houses for sale in Placer County right now. Generally speaking, the higher the price, the more inventory there is.

days on market in placer county by sacramento appraisal blogIt’s taking two days longer to sell compared to last month: On average it is taking 47 days to sell a home in Placer County compared with 45 days last month. For context it is taking 40 days in Sacramento County and 42 days in the entire region. There were only 2 sales under $100,000, so disregard the 97 days listed above.

Placer County sales volume - by sacramento appraisal blog

Sales volume was fairly similar to last month: Sales volume was similar to last month, and is overall approaching more normal levels (though volume is still down slightly from 2013).

Sharing Trends? It’s a huge joy to put together these graphs each month, and I hope they’re helpful for you and your contacts. If you want to share graphs online or in your newsletter, please see my sharing policy. I hope you reach out for the graphs I didn’t post here too as I’d love to make those available to you. Fill out the form above or send me an email.

Thank you for being here.

Question: How else would you describe the market? I’d love to hear your take no matter what your level of interest or knowledge is about the housing market.

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