Selfies, market hotness, & waiting to sell (and a Sacramento update)

Have you ever taken a selfie from a particular angle to make sure you look as good as possible? Be honest. Of course you have, and so have I. Well, housing stats can be just like selfies. It’s easy to pick the best angles (stats) to share while missing the real picture. Let’s keep this in mind as it’s tempting in real estate to gravitate toward “hot” headlines while missing the full story. Let’s kick around some ideas below and then take a deep look at the Sacramento market. Any thoughts?

56299814 - young pretty woman taking selfie outdoors - female winter fashion portrait - teenager student holding mobile phone for selfi photo next to brick wall background - soft and hazy vintage filtered look

1) Market hotness: It’s been blasted all over the news that Sacramento is going to be one of the hottest markets in the nation next year. The SacBee wrote about this a couple of weeks ago and I was actually quoted in the piece. In short, Realtor.com predicts we will see a 7% increase in value. The irony is price stats showed a 7% increase in 2015 and we’re on track to see something similar for 2016 in Sacramento. Thus I suppose Realtor.com could have just said “Sacramento will do what it’s done for two years in a row.” Zing. Remember, just because the median price went up 7% doesn’t mean actual values increased by that much. This is a huge point and we can talk about it in the comments if you wish.

2) Deciding to wait to sell: When sellers hear the market is “hot” or sense values are increasing, they sometimes wait to list their homes. Last week an agent told me an owner who was ready to get her property on the market called and said, “We’re going to wait because we just saw a story on TV that said the market is going to be the hottest in the nation next year.” On a related note I spoke with a client who is now concerned about his home increasing in value too much since he is going through a divorce. This reminds me of a video John Wake shared on Twitter. He was talking about San Francisco values and how sellers tend to wait to list their homes when values are increasing. The thought is, why list now when values are going to be higher next year? But then when values do eventually turn there can be a flood of houses hit the market as a “race to the exit”. Really good stuff from John.

3) VA appraisal fees just increased: If you haven’t heard, VA increased their appraisal fees from $450 to $600 in the Sacramento area. Unlike other loan programs, VA pays a standard fee for every appraisal. Just a heads-up.

4) Fannie Mae waiving appraisals: A few days ago Fannie Mae officially began a program to waive appraisals for certain refinances. In the background Fannie has been mining data from appraisal reports for the past two years for their Collateral Underwriter program, and with a database of millions of appraisals they can now eliminate the use of appraisals in some transactions. It’s like Fannie Mae in a small way is helping appraisers dig their own grave. I understand efficiency and how this makes reasonable sense for some transactions, but let’s not forget the very important role appraisers are supposed to play in a transaction.

Any thoughts?

skateboard-from-ryan-lundquist-sacramento-appraisal-blogSKATEBOARD GIVEAWAY: If you didn’t know, I love woodworking. Anyway, I made a skateboard and I’m giving it away in two days to someone local (or not local if you know we’re going to see each other soon). Keep it or re-gift it for Christmas. Leave a comment on Facebook if you want to enter the contest and I’ll pick a random name in two days (we don’t have to know each other).

—-—–—– 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 71 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.

NEW: I created a one-page market sheet to print and keep handy when talking about real estate. I’ll keep it around if it seems relevant (not sure yet). Is this a step in the right direction? Download here.

Quick Market Summary:

The market normally softens each year in the fall and we are definitely seeing that right now, but this fall isn’t as dull as some of the seasons we’ve seen in the past. Yes, it took 4 days longer to sell a home compared to the previous month and prices are down from the summer, but sales volume was up a whopping 18% in the region last month. If you didn’t know, sales volume has actually been higher for four months in a row in the Sacramento region. On the other hand, one of the big issues that just won’t go away is housing inventory is anemic as it’s about 20% lower than it was the same time last year. Of equal importance is interest rates have been ticking up, so buyers are anxious to get their rates locked and their appraisals in on time. As rates presumably rise more next year it will naturally soften values because higher rates take away purchasing power from buyers. Yet the big question is whether lenders will get more creative with financing to help buyers artificially afford higher prices. This reminds us how much power lenders have right now to direct the market.

Check out specific stats and graphs below for Sacramento County, the Sacramento Region, & Placer County.

Sacramento County:

  1. The median price is the same as it was in August 2007.
  2. Housing inventory is 22% lower than the same time last year (there is only a 1.36 month housing supply).
  3. Sales volume was 17% higher this November compared to November 2015 (up 2.5% for the year).
  4. There were only 36 short sales and 34 REOs in the county last month.
  5. It took 3 days longer to sell a house last month compared to the previous month (one year ago it was taking 3 days longer to sell).
  6. FHA sales volume is down 6% this year compared to 2015 (24.4% of all sales were FHA last month).
  7. Cash sales are down 11% this year (they were 11% of all sales last month).
  8. The median price is $325,000 and is down 2% from the height of summer, up 1.5% from last month, and 12% higher than last year.
  9. The average price per sq ft was $202 last month (down 1% from a few months ago, but 7% higher than last year).
  10. The average sales price at $349,659 is down about 2% from the height of summer (but is 8% higher than last year).

Some of my Favorite Graphs this Month:

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

sales-volume-in-sacramento-county-since-2012 inventory-in-sacramento-county-since-2013-part-2-by-sacramento-appraisal-blog

inventory-november-2016-by-home-appraiser-blog cdom-in-sacramento-county-by-sacramento-regional-appraisal-blog

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

layers-of-the-market-in-sacramento-county-2-by-sacramento-appraisal-blog

median-price-and-inventory-since-2001-by-sacramento-appraisal-blog

SACRAMENTO REGIONAL MARKET:

  1. Housing inventory is 26% lower than the same time last year.
  2. It took 4 days longer to sell compared to the previous month (but 4 less days compared to November 2015).
  3. Sales volume was 18% higher this November compared to November 2015.
  4. FHA sales volume is down 6% this year compared to last year.
  5. Cash sales are down 8% this year compared to last year.
  6. REOs were 2% and short sales were 2.1% of all sales last month.
  7. The median price was $355,000 in November. It went down slightly from October but is down 3.5% from the height of summer (up 8% from last year).
  8. The average price per sq ft was $208.6 last month. That’s down about 1% from the height of summer and 8% higher than last year.
  9. Cash sales were 13.3% of all sales last month (FHA sales were 22%).
  10. The average sales price was $392,500 in November. It’s down about 3.5% from the height of summer but 8% higher than last year.

Some of my Favorite Regional Graphs:

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

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

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

inventory-in-sacramento-regional-market

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

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

interest-rates-inventory-median-price-in-sacramento-regional-market-by-sacramento-appraisal-blog-market

PLACER COUNTY:

  1. The median price was $438,000 last month (highest point of year, but take that with a grain of salt).
  2. The average price per sq ft was $213 last month (down very slightly from the height of summer and up 6% higher than last year).
  3. It took 41 days to sell last month (same as previous month but 6 days less than one year ago).
  4. Sales volume was about 3% lower this October compared to October 2015.
  5. FHA sales volume is down 16% this year compared to last year.
  6. Cash sales were 17% of all sales last month (FHA sales were 13%).
  7. Cash sales are down 3.6% this year compared to last year.
  8. Housing inventory is 13% lower than the same time last year.
  9. Both REOs and short sales were each 1% of sales last month.
  10. The average sales price was $481,000 and is 8.5% higher than last year.

Some of my Favorite Placer County Graphs:

placer-county-housing-inventory-by-home-appraiser-blog

days-on-market-in-placer-county-by-sacramento-appraisal-blog

months-of-housing-inventory-in-placer-county-by-sacramento-appraisal-blog

placer-county-sales-volume-by-sacramento-appraisal-blog

number-of-listings-in-placer-county-2016

interest-rates-inventory-median-price-in-placer-county-by-sacramento-appraisal-blog

DOWNLOAD 71 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.

Questions: Did I miss anything? What are you seeing out there? How would you describe the market? I’d love to hear your take.

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

7 reasons why buyers offer more than a house is worth

Have you noticed how some listings are receiving multiple offers at list price even though they are priced way too high for the neighborhood? I’m talking about the type of listings where agents and others all think, “There’s no way in heck it’s going to appraise that high.” But buyers are still offering at list price and even above. What does this tell us about the market?

Possibilities for why buyers offer full price even when the list price is REALLY high for the neighborhood:

  1. Value: The market has increased in recent months.
  2. Strategy: Since inventory is so tight in the Sacramento area, buyers feel the need to offer at list price or above to get into contract.
  3. Rejection: Buyers have become burned-out from getting their offers rejected, so they’re offering at higher levels to help compete with other buyers.
  4. Cash Competition: There is so much cash in the market, so financed offers need to find a way to be more attractive to sellers (higher offers can help).
  5. Money: It’s really cheap to borrow money right now, so taking out a larger loan is not as big of a deal.
  6. Financing: When buyers finance nearly all of their purchase (FHA), they’re essentially spending someone else’s money. It’s a whole lot easier to offer more when you’re not spending your own money, right?
  7. Good Deals: Many buyers still remember how high prices used to be, so offering more in today’s market still feels like a deal because current values are far lower in the post real estate “bubble” burst.
  8. Other: What do you think?

Housing Inventory in Sacramento County - Graph by Trendgraphix - posted on Sacramento Appraisal Blog

My take as an appraiser: Having multiple offers can be one indicator for how the market sees a property, but it’s not the end-all fool-proof metric for determining value. For example, 10 offers at list price sounds sincerely convincing on paper to establish value, but we also must sift through factors above to try to understand the motivations of buyers – not to mention consider competitive sales and other market metrics. After all, as mentioned above, there are many reasons why a buyer or group of buyers might offer more for a property than it is actually worth.

Listing a property at any price level: I was talking to an investor friend recently about how he could pretty much list his properties at any price level right now (relatively speaking), yet still generate multiple offers due to scarcity of supply. This isn’t true in every case of course, but it’s definitely a realistic dynamic in the Sacramento area real estate market.

All things considered, it’s easy to blame appraisers when appraisals come in “low”, and there are certainly scenarios where appraisers should be blamed. However, in cases like this where offers are unrealistically high for the market, the appraisal probably should come in “low”, right? By the way, check out a previous article if you need help challenging a low appraisal.

Anything you’d add? Any stories to share? Realtors, have you seen listings get into contract far above what you think is realistic? What advice would you give to buyers trying to get an offer accepted these days?

SacBiz Journal Mention: By the way, I was quoted in a Sacramento Business Journal article last week on a related topic of “Homebuyers starting to pay higher prices as investor market dominance wanes.”

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