That awkward moment when the market changes

Have you ever met someone who looked really good on the outside, but the inside was a different story? That’s sort of like the housing market right now. Sales stats look super attractive, but if we really consider listings and other metrics we begin to see a different story. The market is slowing. Since it’s not always easy to explain that, here are a few analogies to help describe how important it is to look beyond just sales to gauge the temperature of the market. Then for those interested, let’s take a deep look at Sacramento trends. Any thoughts?

Examples to explain the market when it begins to slow:

  1. First Date: A first date is all about putting your best foot forward, and that’s exactly why we usually need more than just one good date to make up our mind about someone (gotta be sure the person is not psycho). The same thing happens with real estate. Shining sales stats are like a first date because they lure us in and make us feel good. But we can’t really judge an entire market just by the sales. We need to consider listings and other metrics too.
  2. Taking the Temperature in the Shade: If you take the temperature in the shade in the summer, you’re going to get a much different reading. The same thing happens in real estate where we can get the wrong temperature of the market if we only focus on sales instead of listings and other factors.
  3. Judging by one Tweet: These days it’s easy to judge a person by one tweet instead of looking at their wider body of work (their life). The same thing happens in real estate when we only look at sales instead of listings and other stats. If our vision is too narrow, we might not see what the market is actually doing.
  4. Pregnancy Test: I asked my author wife for an analogy and she said the market is like a pregnancy test (I wouldn’t ever have thought of that). You can technically be pregnant but an over-the-counter test won’t tell you that for a couple of weeks. Similarly, the market may have changed, but we may not see a price difference in sales for a month or two. But the change is definitely there when we look at listings and other metrics.
  5. Pokemon: I’m just kidding. I won’t go there.

In a small way, I hope this was helpful. It’s very powerful to explain the market in different ways. Any other analogies to share?

—————– For those interested, here is my big 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 80+ 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: On paper the market has been hot. We’ve seen all the normal stuff like price increases, slightly higher sales volume in 2016, and sparse housing inventory. If you didn’t know, the median price in Sacramento County is 105% higher than it was in 2012 and 16% lower than the peak in 2005. Distressed sales actually reached their lowest level since 2009 last quarter too. Cash sales volume has been hovering at a normal level while FHA sales volume has been declining. Overall the market is still really competitive, but it’s starting to turn. Keep in mind it’s common for real estate to lose some steam around mid-Summer. While the sales stats don’t show it yet, we see a slower market with the sales-to-list price ratio declining last month from the previous month, it took the same amount of average days to sell for the past two months in the region, and there has been a slightly more optimistic tone among real estate professionals about buyers getting into contract. While it felt utterly hopeless to get an offer accepted a few months ago in certain price ranges, it is starting to feel slightly more hopeful based on feedback from agents. Moreover, it seems like there has been growing price resistance lately (particularly at the higher end of the market). The market has been price sensitive all year as buyers are not fooled by absurdly high prices, but the sensitivity seems more heightened right now.

Sacramento County:

  1. FHA volume has been about 24% of the market (it was nearly 27% of the market last year at the same time).
  2. Cash volume is roughly the same as it was last year at the same time (around 16% of the market).
  3. It took an average of 25 days to sell a home last month, which is 2 days less than the previous month (and 5 less days compared to last year).
  4. REOs were only 2.9% of all sales last quarter (lowest level in years).
  5. Sales volume is up very slightly Q2 2016 compared to Q2 2015.
  6. There is only 1.38 months of housing supply in Sacramento County, which is 14% lower than it was last year at the same time.
  7. The median price increased by 3.5% last month.
  8. The median price is 13% higher than the same time last year.
  9. The avg price per sq ft increased by 1.4% last month.
  10. The avg price per sq ft is 9.7% higher than the same time last year.

Some of my Favorite Graphs this Month:

inventory - June 2016 - by home appraiser blog

CDOM in Sacramento County - by Sacramento Regional Appraisal Blog REOs and Short Sales in Sacramento - 1 inventory in sacramento county Since 2013 - part 2 - by sacramento appraisal blog

Cash & FHA sales in sacramento county

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

june market in sacramento - by sacramento regional appraisal blog 2

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

Bottom of the Market in Sacramento

SACRAMENTO REGIONAL MARKET:

  1. It took the same amount of time to sell last month as it did the previous month (though 3 less days to sell this June compared to last June).
  2. Sales volume is up slightly in 2016 compared to 2015.
  3. Cash volume is about the same this year (16% of the market for Q2).
  4. FHA volume is down 7.5% so far this year in the region.
  5. The sales to list price ratio was 98% in the region last month.
  6. There is 1.6 months of housing supply in the region right now, which is 13.5% lower than it was last year at the same time.
  7. The median price increased 3.6% last month from the previous month.
  8. The median price is 11% higher than the same time last year.
  9. The avg price per sq ft increased by nearly 1% last month.
  10. The avg price per sq ft is 8.9% higher than the same time 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

days on market in placer sac el dorado yolo county by sacramento appraisal blog interest rates inventory median price in sacramento regional market by sacramento appraisal blog - market median price and inventory in sacramento regional market 2013 median price sacramento placer yolo el dorado county Regional Inventory - by Sacramento regional appraisal blog Regional market median price - by home appraiser blog

PLACER COUNTY:

  1. It took 4 less days to sell a house last month than the previous month (and 3 less days than last year at the same time).
  2. Sales volume was up about 1% in June 2016 compared to last June and is down slightly for the year (about 2%).
  3. FHA sales were 17% of all sales last month and cash sales were 13% of all sales last month.
  4. There is 1.7 months of housing supply in Placer County right now.
  5. Housing inventory is 8.5% lower than it was last year at the same time.
  6. The median price increased 0.5% from the previous month and is up 7% from last year at the same time.
  7. The average price per sq ft was $212 last month (was $200 last year at the same time).
  8. The average price per sq ft is up 1.4% from the previous month and 6% from last year at the same time.
  9. Bank owned sales were only 1% of all sales last month.
  10. Short sales were 1.9% of sales last month.

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 price and inventory - by sacramento appraisal blog Placer County sales volume - by sacramento appraisal blog

DOWNLOAD 80+ 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.

Question: Any other market insight you’d like to add? I’d love to hear your take.

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Paying attention to the mood of the market

The other day a home owner was upset because he thought his appraisal came in too low. Yes, he was hung up on price per sq ft, which was a big issue, but most of all he believed the home should have been worth way more since there were almost no other homes listed for sale on the market. His thought was, “There’s no inventory, so I’m going to command top dollar.” After all, isn’t real estate about supply and demand? Well, yes. But there’s so much more.

the mood of the market sacramento appraisal blog - image purchased and used with permission by 123rf

The Market’s Mood: The truth is there are many factors that make value move in a market, and supply and demand is only one cog in the system (or “layer of the cake” as I like to say). Granted, it’s one of the more important metrics, but at the end of the day we can’t forget to ask how buyers and sellers are feeling about the market. Or in other words, what is the mood? For example, in early 2013 housing inventory in Sacramento was incredibly low, and buyers were pretty much willing to offer at list price or above on anything that hit MLS. In fact, if something didn’t have multiple offers, I wondered what was wrong with the property. At the time there was a real desperate mood, yet despite inventory still being low today, buyers are exhibiting more discretion by not pulling the trigger unless the price is right. Like the owner above thinks, this seems irrational because there aren’t many homes for sale. But the mood has changed. Likewise, if a house backs a busy street or has some adverse issue, buyers are tending to wait rather than offer. Again, this seems illogical because on paper it looks like buyers should be making offers all day long because of how low inventory is. Lastly, it’s worth mentioning the owner above did not realize his home valued toward the higher end of the neighborhood range was simply not experiencing the same demand as the lower end of the price spectrum in the neighborhood. Thus the mood at the top was different than the bottom.

Action Step: At the end of the day, let’s not forget to talk with clients about the mood of the market. We can do this by sharing the latest numbers, thinking about what is driving some of the numbers (the mood), reading articles from several local and national publications, and having conversations as often as possible with others in the real estate trenches (not just with people in your office or field). Also, since market moods are constantly changing, we have the opportunity to continually say something different about the local market.

Any thoughts? I’d love to hear your take below.

—————– For those interested, here is my big 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 a few minutes digesting what is here.

DOWNLOAD 73 graphs HERE:
Please download all graphs in this post (and more) here as a zip file (or send me an email). 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 Sacramento Market Summary: The market in January was fairly normal. It took 3 days longer to sell a house than the previous month. That’s normal. The median price and other price metrics generally declined from December. Yep, that’s normal too for the time of year. Sales volume declined by 39% from December to January, but that’s common since sales volume ALWAYS declines from December to January (yes, I said always). Actually, the real trend is January 2016 had a 2.5% higher sales volume than January 2015. Housing inventory increased, which is also normal. Okay, I apologize because I’m repeating one word too often here. But do you catch my drift? However, I will say the bottom of the market and “entry-level” neighborhoods have felt a little more aggressive in terms of values, number of offers, and demand. In short, some neighborhoods have seemed to have more of a feel of a budding spring real estate market, while others have been cruising along waiting for the spring season to further ripen. As I said last month, if I had to sum up the market in 2015 I would say: Modest value appreciation, but aggressive demand. Yes, demand is very aggressive out there, but sellers really need to price realistically unless they want to sit on the market. One last thing, there is a big difference in the mood among buyers when mortgage interest rates are closer to 3.5% compared to even 4.0%, so watch rates and the market closely.

SACRAMENTO COUNTY:

  1. It took 3 more days to sell a house last month than December.
  2. It took 14 less days to sell this January compared to last January.
  3. Sales volume was 2.5% higher in January 2016 compared to last January.
  4. FHA sales were 26.8% of all sales last month.
  5. FHA sales under $200,000 were 29% of all sales last month.
  6. Housing inventory is 30% lower than it was last year at the same time.
  7. The median price declined by 5.3% last month.
  8. The median price is 9.4% higher than the same time last year.
  9. The avg price per sq ft declined by about 1% last month.
  10. The avg price per sq ft is almost 11% higher than the same time last year.

Some of my Favorite Graphs this Month:

inventory - January 2016 - by home appraiser blog

median price and inventory since jan 2013 - by sacramento appraisal blog

January market in Sacramento real estate - by sac appraisal blog - since 2008

sales volume in January

inventory in sacramento county Since 2011 - by sacramento appraisal blog

price metrics since 2014 in sacramento county

SACRAMENTO REGIONAL MARKET:

  1. It took 2 more days to sell a house last month than December.
  2. It took 15 less days to sell this January compared to last January.
  3. Sales volume was 7.9% higher in January 2016 compared to last January.
  4. FHA sales were 23.6% of all sales last month.
  5. Short sales were 3% and REOs were 3.5% of sales last month.
  6. Housing inventory is 28% lower than it was last year at the same time.
  7. The median price declined by 1.3% last month.
  8. The median price is 10.8% higher than the same time last year.
  9. The avg price per sq ft increased 2% last month.
  10. The avg price per sq ft is 11.6% higher than the same time 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

months of housing inventory in region by sacramento appraisal blog

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

median price and inventory in sacramento regional market 2013

number of listings in sacramento regional market

PLACER COUNTY:

  1. It took 4 less days to sell a house last month than December.
  2. It took 16 less days to sell this January compared to last January.
  3. Sales volume was 13.8% higher in January 2016 compared to last January.
  4. FHA sales were 16.7% of all sales last month.
  5. Cash sales were 19% of all sales last month.
  6. Housing inventory is 28% lower than it was last year at the same time.
  7. Sales volume is over 13% higher these past 12 months compared to the previous one year.
  8. The median price, average price per sq ft, and average sales price increased last month, but Placer County data seems to fluctuate quite a bit since there are fewer sales, so I don’t recommend putting too much emphasis on these increases unless they become prolonged over time.

Some of my Favorite Placer County Graphs:

Placer County price and inventory - by sacramento appraisal blog

number of listings in PLACER county - January 2016

months of housing inventory in placer county by sacramento appraisal blog

days on market in placer county by sacramento appraisal blog

Placer County sales volume - by sacramento appraisal blog - January volume

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

I hope this was helpful and interesting.

DOWNLOAD 73 graphs HERE (zip file): Please download all graphs in this post (and more) here as a zip file (or send me an email). 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: How would you recommend for someone to find the mood of the market? Are there certain metrics you think best show the mood? Also, what stands out to you about the latest stats in Sacramento? I’d love to hear your take and what you are seeing in the trenches.

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

The big and little story of inventory in Sacramento

Do you want to see the market? Let’s look at some specific price ranges in a few local counties. I know many readers are outside of Sacramento, so I’m curious if these trends are anything like your market. Overall inventory declined this past month, which is common during Spring. Properties are still selling quickly, though definitely not as fast as last year.

Quick: I suggest scrolling down to your primary county and taking a minute to digest the latest trends. Or check out my video with commentary here or below.

Sacramento County:

number of listings in sacramento - May 2014 - by home appraiser blog

months of housing inventory by sacramento appraisal blog

days on market for april 2014 by sacramento appraisal blog

Talking Point: Inventory is very thin in Sacramento County right now and properties under $300,000 are tending to sell more quickly than higher-priced listings. Remember too there are many more listings and sales in Sacramento County each month compared to many surrounding counties.

Placer County:

number of listings in PLACER county - May 2014 - by home appraiser blog

months of housing inventory in placer county by sacramento appraisal blog

days on market for placer county by sacramento appraisal blog

Talking Point: Inventory is a tad higher in Placer County compared to Sacramento County, though it is still very low. There really isn’t much for sale under $300,000 when looking at the entire market. High dollar homes are definitely taking longer to sell than the lower half of the market (which is normal).

Sacramento Region:

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

months of housing inventory in sacramento region by sacramento appraisal blog

days on market for sacramento region by sacramento appraisal blog

Talking Point: The higher the price, the longer it took to sell last month (generally speaking). Listings below $200,000 are definitely shrinking. Have you noticed how the quality of homes available at the low end has really changed over these past months? Options for first-time buyers to get into a good quality home under $200,000 have definitely diminished lately.

My Video: Check out my commentary on housing inventory below (or click here):

More Placer County by Request: I’ll be sharing a bit more Placer County trends in light of many requests. I’ll also be taking a wider focus at times to discuss the overall market in Sacramento, Placer, Yolo & El Dorado County. Graphs will always be clearly labeled. Sound good?

Question: What stands out to you from above?

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