Picky buyers, the housing crash, and a Sacramento market update

How did the previous housing crash affect buyers? In other words, how are buyers different today because of what they went through years ago? Without writing a dissertation, let’s consider a few thoughts below. Then for anyone interested, let’s take a deep look at the Sacramento market. Any thoughts?

56718353 - careful and picky choice of properties with a magnifying glass

Three ways the housing crash seems to have impacted buyers:

  1. Getting into Contract: Despite inventory being low, buyers seem to be picky about price. In other words, if the price isn’t right, they won’t make an offer (in Sacramento at least). Sellers haven’t fully embraced this yet, but it’s very real. You’d think buyers would feel desperate and offer on anything since housing inventory is sparse, but it’s simply not the case. There could be many reasons for this, but one of them is buyers are being cautious about what they offer because they don’t want to feel like they are making the mistake of overpaying like they did a decade ago. Of course prices today are much higher than they were just four years ago and buyers are willing to pay these prices. It’s just buyers are generally more cautious about overpaying. Also, keep in mind buyers are much more informed about prices because of Metrolist, Zillow, Redfin, etc…. This means buyers can often sniff out something that’s overpriced.
  2. Staying in Contract: Many real estate agents in Sacramento have been reporting contracts falling out of escrow much more often. It’s like buyers are picky about getting into contract in the first place and then they are picky about staying in contract. I’ve heard some say contracts falling apart is a sign the market is beginning to crash, but there have actually been more sales this year than last year in Sacramento. Thus the truth is more contracts are actually closing regardless of however many are falling out.
  3. Sensitive about Location & Condition: Buyers seem to be exhibiting a sensitivity to adverse locations and properties that are not in pristine condition. In other words, buyers have higher expectations about what they are buying and they aren’t overlooking the true condition of a home or paying top dollar for junk. Lenders and appraisers certainly aren’t overlooking the condition either (or at least they shouldn’t be). Also, consider how HGTV and other networks have exploded in popularity this past decade. I have to think constantly seeing the latest designs on TV (and Pinterest) only helps foster a more finicky buyer when looking for a home.

What do you think? Any further insight? Let’s talk. Please comment below.

—-—–—– And here’s my big monthly 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 79 graphs HERE: Please download all graphs in this post (and more) here as a zip file. 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 is softening just like we’d expect to see during the fall. Sometimes we talk about real estate in only hyper-positive terms as if values do nothing but increase, but that’s simply not realistic. Almost every year values soften as a part of the normal real estate cycle, and that seems to be what we’re seeing right now. It’s starting to take longer to sell, prices are down a few percent from the summer, housing inventory is up from a few months back, and sales volume is beginning to slough off. Keep in mind one year ago it was taking an average of 6 days longer to sell, which reminds us the fall market this year has been more aggressive so far. Overall single family housing feels flat and the market is very price sensitive, so sellers ought to be very cautious about pricing according to properties that are actually getting into contract in their neighborhood and price range. On a different note the 2-4 unit market has been somewhat subdued for a number of years as values have recovered much more slowly than the single family market, but it seems to be heating up as news of higher rents is spreading to investors. Let’s keep an eye on that and of course keep hoping the economy and wage growth can drive values more than low interest rates and freakishly low housing inventory. Check out specific stats and graphs below for Sacramento County, the Sacramento Region, & Placer County.

Sacramento County:

  1. The median price was $317,000 in September. It dipped 2% from the previous month, but is 9% higher than last year.
  2. The average price per sq ft was $201 last month (down 2% from the previous month, but still 7% higher than last year).
  3. There were only 25 short sales in the county last month.
  4. Sales volume was 3% higher this September compared to September 2015.
  5. It took 4 days longer to sell a house last month compared to the previous month (though one year ago it was taking 6 days longer to sell).
  6. Sales volume is up 7% this year compared to last year.
  7. FHA sales volume is down 7% this year compared to 2015 (keep in mind nearly 26% of all sales were FHA this past quarter).
  8. Cash sales are down 7.6% this year (they were only 13.6% of all sales this past quarter).
  9. Housing inventory is 5% lower than the same time last year.
  10. The average sales price at $346,000 softened by 2% last month (but is 10% higher than last year).

Some of my Favorite Graphs this Month:

median-price-since-2013-in-sacramento-county

price-metrics-since-2015-in-sacramento-county-look-at-all

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

distressed-sales-since-2009-in-sacramento-county

inventory-september-2016-by-home-appraiser-blog

fha-and-cash-sales-by-quarter-in-sacramento-county

cdom-in-sacramento-county-by-sacramento-regional-appraisal-blog

sales-volume-in-sacramento-county-since-2012

seasonal-market-in-sacramento-county-4

seasonal-market-in-sacramento-county-sales-volume-6

SACRAMENTO REGIONAL MARKET:

  1. The median price was $355,000 in September. It’s down less than 1% from the previous month, but is 9% higher than last year.
  2. The average price per sq ft was $207 last month. It went down 1.5% from the previous month, but is 7% higher than last year.
  3. It took 4 days longer to sell compared to the previous month (but 6 less days compared to September 2015).
  4. Sales volume was 3% higher this September compared to September 2015.
  5. FHA sales volume is down 7.5% this year compared to last year.
  6. Cash sales were 16% of all sales last month (FHA sales were 22%).
  7. Cash sales are down 6% this year compared to last year.
  8. Housing inventory is 9% lower than the same time last year.
  9. REOs were 2.5% and short sales were 1.3% of all sales last month.
  10. The average sales price was $393,000 in September. It softened by 1% last month but is 9% higher than last year.

Some of my Favorite Regional Graphs:

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

sacramento-region-volume-fha-and-conventional-by-appraiser-blog

median-price-sacramento-placer-yolo-el-dorado-county

regional-inventory-by-sacramento-regional-appraisal-blog

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

regional-market-median-price-by-home-appraiser-blog

median-price-and-inventory-in-sacramento-regional-market-2013

PLACER COUNTY:

  1. The median price was $432,000 last month, which is up 11% from last year.
  2. The average price per sq ft was $212 last month. It softened by 1.5% from the past couple months, but is 4.7% higher than last year.
  3. It took 1 day longer to sell compared to the previous month (but 5 less days compared to September 2015).
  4. Sales volume was similar this September compared to September 2015.
  5. FHA sales volume is down 15% this year compared to last year.
  6. Cash sales were nearly 16% of all sales last month (FHA sales were nearly 16% also).
  7. Cash sales are down 1.7% this year compared to last year.
  8. Housing inventory is 16% lower than the same time last year.
  9. REOs were 1.3% and short sales were 1.1% of all sales last month.
  10. The average sales price was $483,000 and is 8.5% higher than last year.

Some of my Favorite Placer County Graphs:

days-on-market-in-placer-county-by-sacramento-appraisal-blog months-of-housing-inventory-in-placer-county-by-sacramento-appraisal-blog number-of-listings-in-placer-county-2016 placer-county-housing-inventory-by-home-appraiser-blog placer-county-median-price-since-2014-part-2-by-home-appraiser-blog placer-county-sales-volume-by-sacramento-appraisal-blog

DOWNLOAD 79 graphs HERE: Please download all graphs in this post (and more) here as a zip file. 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.

Classes I’m teaching in Lake Tahoe: On October 21st I’ll be teaching two classes in Lake Tahoe for an Appraisal Institute Conference. This is an enormous honor and I look forward to mingling with appraisers and sharing ideas. Click here for details.

Question: Did I miss anything? Any other market insight you’d like to add? What are you seeing out there? I’d love to hear your take.

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10 sentences to describe Sacramento’s regional housing market

Have you ever attended a presentation and thought, “Wow, there wasn’t any reason why that needed to be an hour. The speaker could have said everything in 15 minutes.” This is why speaking is an art form. It takes real skill and time to hone a presentation, yet still pack the same punch in a shorter amount of time. The same holds true for writing. Twice a month I have two big market posts, but today instead of writing paragraphs below each graph, I’m simply sharing an image and then one sentence. Here are 10 sentences to describe Sacramento’s regional housing market (and Placer County). Any thoughts? Enjoy.

GRAPHS

SACRAMENTO’S REGIONAL MARKET

1) The median price has been the same for 5 months in a row ($310,000).

median price and inventory in sacramento placer yolo el dorado county

2) Housing inventory increased last month to 2.72 months (inventory isn’t the same at every price level).

months of housing inventory in region by sacramento appraisal blog

3) It took an average of 45 days to sell a house last month.

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

4) Sales volume is down about 9% this year compared to last year.

SALES volume in sacramento region - by home appraiser blog

5) There have been 36% less cash sales in 2014 compared to last year.

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

6) The number of listings increased again last month.

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

PLACER COUNTY

7) The median price has been fairly flat in Placer County ($386K).

Placer County median price and inventory - by home appraiser blog

8) Inventory is hovering just below 3 months in Placer County.

Placer County housing inventory - by home appraiser blog

months of housing inventory in placer county by sacramento appraisal blog

9) It took an average of 47 days to sell a home last month in Placer County.

days on market in placer county by sacramento appraisal blog

10) Sales volume is at fairly normal levels in Placer County.

Placer County sales volume - by sacramento appraisal blog

wright-reportThe Wright Report: By the way, I contributed a few thoughts to The Wright Report, which is the most exhaustive local real estate report I know of. If you need some resourceful bathroom reading, I suggest downloading it. You can read it carefully or maybe take a quick stroll through the graphs. I’m honored to pitch in a few thoughts, but that’s not why I’m sharing it. I really like what Joel Wright puts together, and it’s a great service to the real estate community. When we understand the market and how it’s moving, it’s good for business and for our clients. Download and enjoy.

Sharing Trends with your Clients? If you want to share graphs online or in your newsletter, please see my sharing policy. Thank you for sharing.

Questions: Do you like the format for this post? I’d love to hear your feedback. How else would you describe the market?

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

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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Three things to keep in mind about real estate during the Fall months

How does the real estate market usually behave during the Fall? Let’s take a look today at three quick talking points to help explain the market in Sacramento. It’s not like I’m revealing mysterious truths below, but it’s powerful to be confident that the trends we tend to talk about are actually backed up by data.

1) Prices tend to cool off during the Fall months:

fall in sacramento county 2 - by sacramento appraisal blog

fall in sacramento county - by sacramento appraisal blog

The median price very often sees a dip during the Fall months. This is normal, it’s what happened last year, and it is probably what is going to happen this year since the market tends to slow down after August. However, keep in mind sometimes the market really doesn’t see a seasonal price dip if values are experiencing explosive appreciation (see 2004 and 2012). At the same time, if the market is declining, the decline will very likely persist all the way through the fourth quarter of the year. We all know this since it’s Real Estate 101, but it’s good to actually see the trend.

2) Sales volume tends to decline during the Fall months:

fall in sacramento county sales volume - by sacramento appraisal blog

sales volume 2008 to 2014 - by sacramento appraisal blog Real estate is definitely cyclical, so it’s no surprise there are more sales during the Summer than the Fall. This is true every year in Sacramento County and really throughout the United States. Last year we saw a freakishly low number of sales as the market struggled to adapt to cash investors exiting the market and the looming government shutdown. This year we are entering the Fall market with more of a “normal” market, but one that already has a higher level of inventory as well as many overpriced listings.

3) Housing inventory tends to increase slightly during the Fall months:

housing inventory in fall 2008 to 2014 - by sacramento appraisal blog

housing inventory in fall - by sacramento appraisal blog

Housing inventory tends to show a slight increase or at least hover at summer levels for a short period of time before ALWAYS showing a drop in December. Remember, inventory can increase in two ways: 1) More listings hit the market and outpace the number of sales; or 2) The number of sales declines while listings stay relatively the same. Case-in-point: Last year housing inventory saw a big increase from September to November, but not because so many more listings hit the market. The reality was sales volume hit a 6-year low during this time period.

Question: What do you think the best month of the year is to buy a home? I’d love to hear your take in the comments.

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