Sacramento Appraisal Blog

Buying an island, uncertainty, & pendings

March 17, 2020 By Ryan Lundquist 18 Comments

If you’ve ever wanted to buy an island to feel like a king or queen, here’s your chance. This just might be perfect for social distancing too, right?

I wanted to start out on a light note today because news has been so heavy lately. Anyway, this 18-acre parcel is located in Stockton, CA and it’s listed for sale at $40,000. I’m guessing it’s going to get bid up, but we’ll see. The listing says the zoning is AG40 and you can use it for boating, camping, fishing, etc… Photos shared with permission by Realtor Monte Morris. WATCH video here.

I jokingly verbally offered $500 for this island, but I was laughed off. Haha.

Quick advice about land: If you ever do buy a big (or small) chunk of land, be sure you call the city or county to verify what zoning allows for the particular parcel. What can you do with it? Or in real estate terms, what is the highest and best use? I would definitely not rely on the zoning listed in Tax Records either as that might not be correct. I would 100% find out details such as allowable uses, whether it is buildable, how often it is underwater, etc…

Okay, now to market stuff.

Uncertainty in 2020: I put out a new video called Uncertainty in Real Estate to talk through recent trends and all the uncertainty we’re feeling right now. I unpack where we’ve been in 2020 and some of the things to consider right now during the COVID-19 pandemic. It’s about 30 minutes, so maybe listen in the background while working (or self-quarantining). Start the video at 12:00 if you want to get to more focused pandemic thoughts.

A new pending visual: Here is a new graph I’m going to be updating as often as I can. Do you like it? This visual only goes through the 12th of March so it doesn’t capture this past weekend yet. My sense is we need to wait about a week or maybe more until all data are present before trying to see the trend. Otherwise if we post too soon it can actually be misleading.

The market is still alive: Over the past weekend we saw strong pendings in the Sacramento Region. Pendings were just about the same as the previous weekend, but down slightly. I heard lots of stories about multiple offers too and technically 55% of all pendings had more than one offer according to MLS stats. As of today MLS shows 192 pending sales in the region compared to 210 the previous weekend. When I made this graph yesterday MLS showed 178 pendings, but I didn’t feel like updating this chart again. Yeah, call me lazy. For now pending sales have been higher in 2020 compared to last year, but the x-factor is what happens from this point forward.

UPDATED:

SPIKE IN CANCELLED LISTINGS: I just ran cancellations and it looks like there has been a spike in recent days. This is something to watch. Keep in mind some sellers will absolutely be taking their homes off the market. Some won’t. I wouldn’t make this the primary data point for what the market is doing, but it is a telling factor. Stay tuned. I’ll have more visuals soon. Per MLS “Cancellation of a listing means that the listing agreement is cancelled”. 3:00pm 3/18/2020

SPIKE IN HOLD STATUS: There has been a huge spike in properties on “hold” in MLS. This status basically means homes are removed from the market and they can be placed back Per MLS “Hold means that the listing contract is still valid, but the seller has requested that the marketing be temporarily suspended.” 3:45pm 3/18/2020

I hope that was interesting or helpful.

Questions: Would you buy this island? What are you seeing out there in the market right now?

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‘Tis the season for real estate predictions

December 12, 2019 By Ryan Lundquist 17 Comments

Buckle up. It’s real estate prophet season where everyone and their Mom has a prediction about the market next year. Here are some quick thoughts and then a deep dive into local trends for anyone interested.

1) Nothing too extreme: So far I’m not hearing too many extreme views on the housing market. What I mean is there aren’t as many voices saying, “It’s going to tank” or “We’re going to have massive increases.” For instance, here’s a forecast from Realtor.com and it’s pretty mild. Very little price growth and a dip in the number of sales too. For reference, I wouldn’t base my perception of the market on any forecast.

2) Consumer thoughts & Twitter: I asked Twitter to predict and people seemed to mostly think prices would be flat or modest. This isn’t anything scientific, but the results don’t surprise me based on conversations I’ve been having. If you work in real estate, ask people what they think. But be careful about opinions formed from headlines instead of local data.

3) Beware of the prophets: Spoiler alert. Nobody knows what the market is going to do, so beware of false real estate prophets who predict the same thing every year and then repackage their predictions for the new year. My advice? Don’t lose credibility by trying to predict the future. It’s okay to say, “My crystal ball is broken, but I can tell you what the market is doing right now.” This doesn’t mean we don’t have ideas where things might go based on current data, but it does mean we’re ultimately humble about our ability to predict the future.

And now ironically here’s a piece from the Sacramento Bee on where the market is heading in 2020 (behind a paywall). I was asked to pitch in some thoughts and I did. Of course like a broken record I always start a media interview like this with, “My crystal ball is broken…. Here are some things to consider.”

Any thoughts?

—–——– Big local market update (long on purpose) —–——–

This post is designed to skim or digest slowly.

Summary: Some fall seasons are really dull, but this hasn’t been one of them. In fact, if you’re looking for a slogan right now it could be, “Hey man, it’s not that dull.” The numbers look pretty hot too, but there’s a reason for that (which I’ll get into below). Yesterday when speaking in a real estate office someone asked, “Ryan, has the market not been as slow this year? It seems like it.” And my answer was, “You’re exactly right.” Granted, we’re still seeing signs of a traditional seasonal slowing, but the market has felt more vibrant than usual. This is actually the type of trend we had in 2017 where many real estate professionals said things like, “It seemed like the market just kept going.” Well, technically the market did slow, but I understand why people said that.

DOWNLOAD 90 visuals: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

THE SHORT VERSION:

It’s not that dull
The numbers are hot technically
A new tech company in town
FHA on the prowl
Stop waiting for multiple offers
Rent control communication
Kurt Cobain’s house
Fewer multiple offers this season
How to find school boundaries
California price record
Sellers are still disconnected

THE LONGER VERSION:

Here are some of the bigger topics right now:

Not that dull: Last year many thought the market was at a tipping point because it just felt dark. Sales volume was slumping in a big way and inventory was spiking as buyers stepped back from the market. But today things feel much different in light of low mortgage rates changing the feel of the market. In fact, most price metrics have seemed flat this fall and it took eight less days to sell this November compared to last year at the same time.

Sifting hot numbers: Price metrics have been more glowing lately, but I advise taking these with a grain of salt. The thing is last year the stats were depressed, so when we compare normal numbers today with dismal stats then, it tends to make things look really hot. My advice? Over these next few months be aware of more sensational data due to lackluster stats from last year. Otherwise if we’re not careful we might end up thinking the market is much hotter than it actually is.

A new tech company in town: There’s yet another new tech company playing the local market. This time it’s an outfit called Reali, which appears to be a discount brokerage, but they say they have AI too. Thanks to Mudge on Twitter for the photo of this listing in East Sac.

FHA has been up: For years FHA has been shrinking because there are more conventional products that can readily compete with FHA. But these past few months we’ve seen a bit of an uptick in FHA. This is nothing massive, but it’s worth noting and maybe indicative of an appetite among first-time buyers to get into the market. Last month 21% of sales were FHA in Sacramento County and this past month we saw 19% of all sales. This is up slightly from FHA tending to hover closer to 17-18% or so for the past couple of years. Again, this isn’t something major, but my curiosity is at least piqued.

Accept the offer: We are not in a market with a crazy number of multiple offers. This is exactly what the stats show. Here’s a look at the number of offers among all current pending sales. My advice to sellers? If you get one reasonable offer, it’s probably time to accept it rather than waiting for a mythical unicorn buyer to swoop in and pay more.

Uh, rent control communication: Rent control is a new dynamic and there is going to be a learning curve when it comes to communicating about it. Just yesterday I spotted several listings that mentioned how rents can be raised or how rent control didn’t apply. My advice? Know the letter of the law and how it’s going to be different in the City of Sacramento as well as California. Locally we have two different sets of rent control to consider, and they are similar but not the same. In case it’s useful I did a rent control Q&A a few weeks back. This isn’t a super sexy topic to read about because it’s technical. But these details matter and for anyone who works in real estate it’s time to know the fine print.

Doesn’t smell like teen spirit (hopefully): Kurt Cobain’s former house in Seattle is for sale at $7.5 million. As a guy who loves 90s music I’m definitely watching this. If you’re interested, here’s a history of sales, permits, and other stuff from the Assessor. Remember, if you buy a house that is famous because of a former occupant or something that happened there, you might have people coming by. In fact, here’s a picture I took while visiting Seattle a couple years ago. By the way, think of the marketing opportunities…. “Come as you are,” or “Nevermind about other homes…”

Fewer multiple offers: There’s been fewer multiple offers lately, but that’s a normal part of the fall season. At this time of year there’s simply not as many eyeballs on listings which means there’s also fewer offers. This underscores exactly how important it is to price for the market that actually exists today rather than the more aggressive trend in the spring.

School boundaries: Here’s a quick screencast I put together for a friend on how to find school boundaries. This can come in handy to be able to quickly find boundaries for all schools (not just the district). This can matter at times for pulling comps too.

California new high price record: We have a new record in California as the “Beverly Hillbillies” mansion sold for about $150M. No, this doesn’t mean your property is worth more now. The highest residential sale ever in the United States is an apartment in New York at $238M (it was several apartments combined actually). I’ve read about a flip in SoCal that is supposed to come to the market eventually for $500M…. We’ll see.

Disconnected sellers: Last but not least, sellers are still lagging behind the trend. What I mean is the market has slowed, but sellers are stuck in the past and expecting to command lofty prices from super hungry Bay Area Buyers. They think everything is selling cash too when in fact only 15% of the market was cash last month. It’s like sellers are showing up to a party with Z Cavaricci pants and “Can’t Touch This” t-shirts. They didn’t get the memo that style has changed… Okay, that got weird.

News 10: If you think this post is absurdly long already, you’re right. Here’s a piece I did on News 10 this morning though on gentrification in Oak Park. I pulled some cool stats and honestly I was pretty excited to see my stats so large on the screen too. Haha.

I could write more, but let’s get visual instead.

FIVE THINGS TO TALK ABOUT:

1) SLOWER GROWTH (with an asterisk): Price growth has been slowing. It’s what the stats are telling us. Though technically the monthly and quarterly data below show higher price growth this year. But take this with a grain of salt because the market was REALLY dull last year. So when we compare numbers this year with dismal stats from the last half of 2018 it tends to inflate the numbers today.

2) PRICE CYCLES: Here’s a look at the past few price cycles in various counties. This is a fascinating way to see the market. What do you notice?

3) LAST YEAR vs THIS YEAR: All year long most price metrics have been up about 2-4% each month compared to last year, but these past two months they’ve been higher. This is likely due to stats sagging last year during a really dull 2018 fall season. Additionally, mortgage rates went down a few months ago and we’re likely seeing some of the effect of that.

4) VOLUME SLUMP: We’ve been having a definitive sales volume slump since mid-2018, but lately volume has been stronger. In other words, sales volume has been up for three out of the past five months. This is something to keep on the radar. It’s not a volume meltdown, but it’s definitely been a slower year.

5) LAST MONTH vs THIS MONTH: The market looks pretty flat in some categories from October to November. But in other ways we still see the market slowing. For anyone who says we are not having a seasonal slowing, please look closely at all the images in this post. We are. It just hasn’t been as dull as some other fall seasons.

NOTE: Take El Dorado County data with a grain of salt. Stats change significantly month by month. Also, if you’re in Placer, be careful about only looking to Placer data because limited sales can mean numbers jump around quite a bit from month to month.

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Please enjoy more images now.

SACRAMENTO REGION (more graphs here):

SACRAMENTO COUNTY (more graphs here):

PLACER COUNTY (more graphs here):

EL DORADO COUNTY (more graphs here):

DOWNLOAD 90 visuals: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: What sort of predictions are you hearing (or making) right now? What stands out to you about the market? Anything to add?

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Zillow has officially entered the market

October 9, 2019 By Ryan Lundquist 44 Comments

Zillow is here. As of two days ago they’ve officially entered the market in Sacramento and they have big plans to expand to other territories too. Let’s talk about this. Here’s what’s swirling through my mind. Anything to add?

Corporate flipper: Zillow is basically going to be flipping homes. Their website doesn’t use this language because “flipping” has a negative connotation sometimes. But they’ll be buying below market value, doing repairs as needed, and then selling higher. If it looks like a duck, quacks like a duck…

Narrow focus: Like many tech companies we’re going to see Zillow with a buy list. I’ve yet to see something published, but they’ll likely focus on conforming homes in a specific price range rather than unique or high-priced homes that might be more difficult to sell. This reminds us of Blackstone from 2012 and 2013 as they had specific standards for what they were looking to purchase. On a side note, if you work in real estate and you’re worried about the invasion of tech companies, then diversify into places and price ranges where iBuyer models aren’t going.

There is a place for tech: This may be an unpopular opinion and I may have a few people want to fight me, but there is a place for big tech companies in real estate. This doesn’t mean I’m excited about Zillow and Opendoor, but the world has changed and speaking objectively there are other models beyond the traditional model that will appeal to certain buyers and sellers.

Trust & getting a pass: Consumers tend to trust anything that’s online, so there’s already a high degree of trust with a brand like Zillow, and they’re now here to capitalize off of it. It’s as if they get a pass though because they’re not real estate agents or flippers (and they’re trying hard not to be seen that way). But let’s remember the obvious. They are here to work the system to their advantage and make money off consumers.

Tech is the minority: Tech companies are getting a ton of press, but these brands are the minority in the market right now by a long shot. For instance, Opendoor has 70 listings in the Sacramento region. That’s impressive for a start-up, but at the same time it’s only 1.4% of all listings. My guess is Zillow will be aiming to represent 2-3% of the market this year in terms of sales volume. Again, this is impressive, but let’s remember the vast bulk of sales in coming time are going to be sold traditionally.

The irony of the Zestimate: Zillow won’t be using their Zestimate as a basis for making offers. I get it, but I also find it ironic since they’ve built their brand around the legitimacy of the Zestimate.

Affordability: The unfortunate thing here about big corporations entering local real estate is it doesn’t help affordability. I’m not saying tech companies are going to cause prices to rise, but when the focus is on flipping homes, this won’t help keep prices lower.

Service fee vs commission: Lots of tech companies say stuff like, “Hey, we don’t charge commissions like real estate agents,” but this is disingenuous because there is a “service fee” that is basically the same amount or even more than we find in a typical real estate transaction.

The narrative of convenience & profit: Like many tech firms, Zillow is preaching the idea of convenience rather than profit. Their goal is to make escrows easier and smooth rather than helping a seller net the most money. If you listen carefully, few of these companies are saying sellers will actually make more because it’s simply not true in most cases. Remember, these corporate real estate machines have to buy low in order to make a profit. They’ll also be asking for credits for repairs, which makes sellers net even less.

Doing math: I strongly recommend for consumers to do the math when it comes to selling to a tech company vs selling on the open market. You’ll likely yield more profit on the open market if money is your concern.

Data issues: The data geek in me is thinking about numbers. I’m worried about properties being listed off MLS and data being watered down because there are missing sales. The good news here is I’m told homes bought by Zillow are going to be listed for sale on MLS (fingers crossed this happens). By the way, Zillow is going to be using a local brokerage for their acquisitions and sales.

Small investors: Corporate flippers coming to the market will make it more difficult for small investors because there’s an extra layer of competition now.

The price cycle: We are closer to the top of a price cycle, so I find it ironic to see tech brands jumping into the game. My guess is it’s much easier to find success in an up market than a down one. We’ll see how it pans out.

Other: What else? Please comment below.

Closing thoughts for real estate friends: It’s not easy when change happens and I know lots of people are worried about the future of real estate because of what we’re seeing right now. If I could offer any advice though, I’d say to accept the reality that tech companies are going to be a part of the real estate scene. For now it looks like the vast bulk of homes are going to be sold traditionally though, so I recommend focusing your time and energy on the larger portion of the population that won’t be working with these tech brands. Most of all, prove your worth. Why should someone hire you instead of a tech firm? What is your value proposition in a changing market? Prove it with uncommon service, deep knowledge, and results.

I hope this was interesting or helpful.

MY COMSTOCK’S ARTICLE: I wrote a piece in Comstock’s magazine this month on the invasion of tech companies in real estate. I can’t believe it happened to be published on the same day Zillow made their big announcement.

Questions: What stands out to you most above? What are your thoughts about tech companies entering real estate? I’d love to hear your take.

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Dude, my house is worth more now, right? Because of that one thing.

June 19, 2019 By Ryan Lundquist 12 Comments

My house is worth more now, right? Or maybe it’s worth less because of that one thing? I get questions like this all the time, so here’s some thoughts swirling through my mind. Skim the headings or dig in. Anything to add?

Questions I’ve heard recently:

Will prices rise because a nearby restaurant got a Michelin Star?
Did my value go up because of the new arena in Downtown Sacramento?
My house is worth more because Lady Bird was filmed here, right?
Is my house worth more because of that $5M record sale?
Would values decline if a new hotel is constructed 1.5 miles away?
A new Starbucks down the street makes value go up, right?
Will it damage neighborhood values if there’s a cannabis facility nearby?
Will a new gas station impact neighborhood prices?
Will the Golden State Killer’s house affect my value?
Are values going to decline if the school district is taken over by the state?
How will adding a casino nearby affect value?
Will prices go down if that new teaching hospital happens?

Not a dissertation: Many of these questions are truly complex and they could be research papers. At the same time we read some of these and think, “C’mon man, there’s no way that impacts value.”

Quick truth: We can get so trigger-happy about thinking everything makes a difference for value, but that’s just not the case. It’s like when a home owner says, “Yo, I got a new faucet in the bathroom. How much does this add to value?” Probably nothing. The market just isn’t that sensitive.

My Michelin Star poll: I ran a poll on Twitter after getting a fantastic question about whether Sacramento’s first Michelin Star would be a positive for the surrounding residential neighborhood.

This wasn’t a scientific survey, but it’s interesting to hear what people think. I tend to agree with the majority too. My sense is the Michelin Star will give bragging rights to neighbors, but I’m not sure buyers would truly pay more in an entry-level area to be closer to a top-tier restaurant. Keep in mind if this restaurant did begin to help the commercial market thrive, then maybe that could spill over into the residential market. Otherwise let’s not overthink this.

Generally speaking: If something has little impact on an area, it’s probably not going to affect value much. Let’s remember that when making value claims and thinking through issues. But if something persuades or dissuades buyers, then it could be a big deal for the market. In other words, will people buy or rent for more or less because of the thing? This is the type of market-based thinking we need to consider.

The arena: As an example, the new arena in Downtown Sacramento has been a game-changer because it’s drawn people and other businesses into the city. It’s been a catalyst for development in the immediate market. But that doesn’t mean a buyer ten miles away would pay more for a house because of the new arena. I say fat chance.

Lady Bird: Would someone pay more for a house because the movie Lady Bird was filmed in the neighborhood? I’m not saying the answer is NO, but I just haven’t met a buyer yet who said, “I totally paid more because of Greta Gerwig’s cinematic masterpiece.” Objectively speaking, I can only find four listings that mention the movie too, and that may be telling.

Two takeaways:

1) One thing: Let’s be cautious about looking for value under every rock. What I mean is it would be wise to remember not everything we encounter is going to sway buyers to pay more or less.

2) Support: Let’s think critically and be sure to look to data to support our value conclusions. At the end of the day we can make claims about how a certain something impacts the market, but what do stats and data actually show? That’s what matters most.

“Beyond the Bubble” article: I wrote a piece for Comstock’s Magazine this month called Beyond the Bubble. These are things on my mind lately with so much talk about whether we’re in a bubble or not.

Questions: What questions have you been asked lately? Have you seen one type of business or something else impact an entire area? What do you think of any of the questions above? Let’s chat.

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