My last blog post of 2016

Almost eight years ago I started this blog, and I never imagined it would still be going after all this time. Sometimes people say, “An appraisal blog? Yeah, that sounds so uninteresting.” But I love the conversations we have each week, and in some way I hope they help us all grow in our skills and understanding. Anyway, I’m sincerely honored you take time out of your day to be here. Thank you for your insight, comments, emails, phone calls, constructive criticism, and the referrals you send my way. On behalf of the entire Lundquist family, I want to wish you Happy Holidays and Merry Christmas!!

The next two weeks: At the end of this week I’ll be taking some time to enjoy family, relax, drink ungodly amounts of coffee, lose the weight I said I was going to lose in 2016, hang out with my new nephew, and let my kids whoop me on their Xbox. I might be crazy, but this year when we visit family I’m bringing my tools so I can build my mother-in-law a bookcase. That’s either the best thing ever or maybe I’m setting myself up for a yearly tradition. Uh oh. Ultimately I hope to get refreshed in coming time and ready for 2017. This has been an amazing year, but I need a break. Can you relate? I hope you enjoy this season and I can’t wait to reconnect in early January. Thank you again for making this a tremendous year. Blessings to you and your loved ones.

pallet-trees-by-sacramento-appraisal-blog

These are some of my festive pallet trees in the front yard.

Questions: What are you going to be doing over the next week or so? Any special traditions? I’d love to hear.

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What does the market expect? (a critical question to ask in real estate)

What does the market expect? That’s one of the best questions we can ask ourselves in real estate. Why? Because it helps us keep the focus on what buyers actually demand in certain neighborhoods and price ranges. In other words, what are buyers really willing to pay more or less for in a neighborhood? Being in tune with that is definitely one of the key aspects of coming up with a credible value.

Market expectations - Sacramento Appraisal Blog

Pool Example: Take a look at the table below to see how some areas and price ranges in Sacramento have far more built-in pools than others.

Market expectations pool example by Sacramento Appraisal Blog

Key Point: When built-in pools are more common in some neighborhoods and price ranges we can probably say the market expects a pool, right? This is especially true at the higher end of the price spectrum where over 70% of homes have a pool. In contrast, some areas of town have less than 1% of homes with a built-in pool, and it’s safe to say the market doesn’t expect a built-in pool in those areas. This doesn’t mean the pool is worth nothing in those places, but if anything it’s a reminder to really consider that a pool might be worth far less or more in some areas than others. While it’s tempting to always give a token $10,000 adjustment for a pool, based on the data above alone, that adjustment probably doesn’t make sense for every neighborhood because of differing expectations.

Not Just About Pools: This conversation isn’t just about built-in pools because we have to ask what the market expects for things like upgrades, square footage, condition, lot size, architectural design, bedroom count, garage spaces, landscaping, etc… As much as we’d like instant answers, there really isn’t a quick guide to understand what the market expects without immersing ourselves in comparing sales, talking with buyers and other real estate professionals, and crunching numbers.

Two Mentions: I’m honored to share a couple of recent media mentions. I was quoted in Inman SF Bay Area in “Sacramento housing boosted by Bay Area refugees” and in RealtyTrac’s June Housing News Report (PDF – pg 17-21).

Blackstone: One more thing. A recent article talked about the private equity fund Blackstone (Invitation Homes) selling off some of its homes directly to tenants. As you probably know, Blackstone purchased thousands of homes in the Sacramento market several years ago. They continue to buy today, but their purchase volume is minimal and nowhere near what it used to be. Anyway, the article states they would likely sell about 5% of their inventory this year directly to tenants. Whether that’s true for the Sacramento market or not is to be seen, but it’s worth watching closely. Keep in mind many landlords are selling straight to their tenants right now instead of listing on MLS. In short, this isn’t just a Blackstone thing.

Questions: How do you get a sense of what the market expects in a neighborhood? Any advice you’d give on how to better understand market expectations? Did I miss anything? I’d love to hear your take.

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

Seeing the real estate market without numbers (and a big Sacramento update)

It’s not just about the numbers. Like many, I’m a huge fan of getting deep into real estate stats, but the truth is there are so many other ways to sniff out what the market is doing. Thus I’ve created a list of some of the things on my radar lately that help say something about the temperature of the market. Then for those interested, let’s crunch some numbers with my big monthly Sacramento market update. I’d love to hear your take. Any thoughts?

How to see the market moving - image purchased and used with permission from 123rf - Sacramento Appraisal Blog

Ways to see the real estate market without numbers:

  1. Facebook Posts: I can’t tell you how many posts I’ve seen lately saying, “Hey, my friend needs to rent a house. Anyone have something?” Seeing an increasing number of posts like this on Facebook or Nextdoor.com is definitely a symptom of rising rents and scarce inventory.
  2. Celebrity Flipping Seminars: Last week an HGTV flipping couple hosted a 4-day “how to flip” seminar in Sacramento, and this week a different “guru” is coming to town. If anything, this tells us the market for flipping has passed.
  3. Riskier Loans: As more lower-down payment loan products hit the market, it reminds us buyers need more options to afford higher prices.
  4. Sacramento Kings vs. Market - jokeSacramento Kings Wins: Here is an image to show the relationship between an NBA team winning and the housing market. Okay, there really isn’t a connection, but it almost looks like there is (you can make numbers say whatever you want).
  5. Less Property Tax Appeals: As the market has improved, assessment appeals have declined every year since 2008 in Sacramento County. Right now home owners are enjoying equity again and they’re hardly paying attention to their property tax bills. Here is an image to back that up.
  6. More Divorces: As the housing market has rebounded, it seems there are more divorces. I’ll admit stats are tricky in that some sources say divorces are increasing and others say they are not. It may be my personal experience, but I’ve done more divorce appraisals these past 2-3 years than I have in the previous ten years.
  7. Builders Being Less Cooperative: I’ve heard from several agents lately about local builders being less cooperative with agents representing buyers. That’s fairly normal for builders of course, though being less cooperative is certainly a luxury afforded by a market with tight inventory too. In other words, if the market had three times the housing supply, conversations might go differently at the sales office.
  8. The word “shift”: There is so much emphasis right now on the market shifting or maybe doing so in coming time. When the real estate community uses terms like shift, change, correction, or bubble, it can sometimes highlight what the market is doing (or at least what is on the mind of the real estate community).

Question: What is #9? I’d love to hear in the comments below. By the way, scroll to the bottom if you want to see some of my recent woodworking projects.

—————– 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 70 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 Market Summary: Yep, the stats show the market has been increasing. This doesn’t mean every single price range or neighborhood is going up in value, but county and regional data are definitely showing that trend overall. One of the bigger narratives is that housing inventory is still down by 15% in the region compared to last year. Sales volume has been up slightly for the year and it took 6 less days to sell last month compared to the previous month. For context, last year at the same time it was taking an average of 8 days longer to sell. This reminds us the market has been more competitive this year compared to last year, though don’t take that to mean value increases have been extremely aggressive. Last month the median price increased by nearly 2% in the region, and the average price per sq ft increased by 2.5%. Overall most value stats are up a good 8-10% since last year, though remember it’s not the same market as it was in 2005 when we’d say, “My house went up by $10,000 last month.” It’s still important to price correctly unless you want to sit instead of sell.

Sacramento County:

  1. It took an average of 27 days to sell a home last month, which is 4 days less than the previous month.
  2. The sales to list price ratio was 100% last month.
  3. It took 8 less days to sell this May compared to last May.
  4. Sales volume was up nearly 4% in May 2016 from May 2015.
  5. There is only 1.35 months of housing supply in Sacramento County.
  6. Housing inventory is 22% lower than it was last year at the same time.
  7. The median price increased by 3% last month.
  8. The median price is 9.6% higher than the same time last year.
  9. The avg price per sq ft increased by 1.8% last month.
  10. The avg price per sq ft is 9.9% higher than the same time last year.

Some of my Favorite Graphs this Month:

Median price since 2013 in sacramento county

monthly inventory is sacramento county since 2001 - by sacramento appraisal blog

inventory - May 2016 - by home appraiser blog

CDOM in Sacramento County - by Sacramento Regional Appraisal Blog

price metrics since 2015 in sacramento county - look at all

market in sacramento - sacramento appraisal group

SACRAMENTO REGIONAL MARKET:

  1. It took 6 less days to sell last month compared to the previous month.
  2. It took 8 less days to sell this May compared to last May.
  3. The sales to list price ratio was 99% in the region last month.
  4. Short sales and REOs were both 3% of sales last month.
  5. There is 1.6 months of housing supply in the region right now.
  6. Housing inventory is 15.6% lower than it was last year at the same time.
  7. The median price increased 1.7% last month from the previous month.
  8. The median price is 6.8% higher than the same time last year.
  9. The avg price per sq ft increased 2.5% last month.
  10. The avg price per sq ft is 8.4% higher than the same time last year.

Some of my Favorite Regional Graphs:

median price sacramento placer yolo el dorado county

sacramento region volume - FHA and conventional - by appraiser blog

sales volume 2015 vs 2016 in 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

median price and inventory in sacramento regional market

Regional market median price - by home appraiser blog

PLACER COUNTY:

  1. It took 2 less days to sell a house last month than April.
  2. It took 1 less day to sell this May compared to last May.
  3. Sales volume was up 3% in May 2016 compared to last May.
  4. FHA sales were 16% of all sales last month.
  5. Cash sales were 17% of all sales last month.
  6. There is 1.84 months of housing supply in Placer County right now.
  7. Housing inventory is 12.4% lower than it was last year at the same time.
  8. The median price is about the same as it was the previous month.
  9. The median price is up 7% from May 2015.
  10. Short sales were 2.1% and REOs were 1.7% of sales last month.

Some of my Favorite Placer County Graphs:

number of listings in PLACER county - 2016

Placer County sales volume - by sacramento appraisal blog

months of housing inventory in placer county by sacramento appraisal blog

Placer County price and inventory - by sacramento appraisal blog

days on market in placer county by sacramento appraisal blog

Placer County housing inventory - by home appraiser blog

I hope this was helpful and interesting.

My Latest Woodworking: By the way, I know this post has been ridiculously long already (on purpose since it’s my big monthly market update), but here are some of my recent woodworking projects. If you didn’t know, I like to tinker and create.

Ryan woodworking 2

Ryan woodworking 1

DOWNLOAD 70 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.

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

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

4 things to remember about increasing values and low inventory

Let’s talk about increasing values and low inventory. ‘Tis the season for this conversation because the market is heating up right now as we are on the cusp of spring. Here are a few things that have been on my mind, and then a huge local market update after that (for those interested). I’d love to hear your take in the comments below. Any thoughts?

values in real estate - sacramento appraisal blog - image purchased and used with permission from 123rf

  1. Front Loaded Market: In a normal market prices tend to heat up in the spring and soften in the fall. While this isn’t true everywhere in the United States (or for every year or type of property), this general reality reminds us that value increases are often loaded into the front part of the year rather than throughout the entire year. For instance, if values increased by 6% last year, it doesn’t mean value went up by 0.5% each month. Instead, any increase in value might actually have occurred from February to June.
  2. Rapid Appreciation: I’ve been hearing lots of chatter about rapid appreciation lately. The idea is the market has increased substantially in value over the past couple months and appraisals are lagging behind the trend. I know low appraisals are a reality, and if appraisers aren’t giving upward adjustments for value increases (when warranted of course), it can lead to conservative appraisals that probably reflect the market two months ago rather than right now. Whatever the case, the Sacramento market has felt extremely competitive lately because of freakishly low inventory, though actual value increases seem more nominal for the spring rather than exponential. Yes, there are some properties that have been bid up 10% or so, but those properties were probably priced far too low since increases that large have not typified this market. Moreover, sometimes markets feel more aggressive than they actually are, so a market’s mantra might be: “Aggressive demand, modest appreciation.”
  3. Not Every Neighborhood: Some neighborhoods and price ranges are trending differently than others. I know that sounds obvious, but it’s worth mentioning because it’s easy to lump all areas and price ranges together. For instance, the median price in the regional market last month increased by 2.5%, but that doesn’t mean values increased by 2.5% in every single neighborhood or price range. When valuing a property, we can keep an eye on trends from the wider area, but at the end of the day we need to look at competitive sales and listings in the subject property’s particular neighborhood. What is the competitive market doing in the neighborhood? If we impose the notion that “values increased by 2.5% last month” on every neighborhood, we’re probably going to make some valuation mistakes.
  4. Less New Construction is Starting to Matter: When the economy collapsed, new home construction sloughed off and has not yet recovered anywhere close to where it was during the glory years from say 2003 to 2005. This might not seem like a big deal, but now imagine the population has grown over the past 10 years, which essentially means there are now less available housing units for a larger population. On top of this, institutional investors bought homes in recent years and are holding on to them instead of selling. Moreover, some owners purchased several years ago are sitting on a sweet 3.5% interest rate and a low mortgage payment. Why would they sell in today’s market unless they really had to? Not all areas in the country are struggling with low inventory, but a lack of new home construction in recent years is actually a big deal, and it’s certainly contributing to a lower housing supply in many markets including Sacramento. Lastly, when there are less housing units for the population, it tends to create an environment where rents increase. This is an important trend to watch.

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 70 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 February was fairly normal in Sacramento. Values saw a modest seasonal uptick, sales volume increased, and inventory declined. This was all expected because it’s what we normally see at this time of year. But while market stats are more on the tame side, the market has felt anything but that in the trenches of house hunting. Multiple offers are commonplace and buyers are seeming to exude a 2004-ish frenzy to get into contract before values rise too quickly (does that concern anyone?). Despite housing inventory being extremely tight, properties that are priced too high are sitting instead of selling, and that reminds us how price sensitive buyers have become. The market is definitely a sellers’ market, though that doesn’t mean sellers can command any price they want. It’s interesting to note it took 12 less days to sell a house this February compared to last February, and only 3.4% of all sales in the region last month were short sales. 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 an average of 46 days to sell in both February and January.
  2. It took 12 less days to sell this February compared to last February.
  3. Sales volume was nearly identical in February 2016 compared to last February.
  4. FHA sales were 24% of all sales last month.
  5. Housing inventory is 25% lower than it was last year at the same time.
  6. The median price increased by 6.7% last month (take that w/ a grain of salt).
  7. The median price is 6.7% higher than the same time last year.
  8. The avg price per sq ft increased by about 1% last month.
  9. The avg price per sq ft is 6% higher than the same time last year.
  10. Sales volume in 2016 is roughly the same as the same time last year.

Some of my Favorite Graphs this Month:

Median price since 2013 in sacramento county

inventory - February 2016 - by home appraiser blog

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

CDOM in Sacramento County - by Sacramento Appraisal Blog

Median price and inventory since 2001 by sacramento appraisal blog

market in sacramento - sacramento appraisal group

SACRAMENTO REGIONAL MARKET:

  1. It took 1 day longer to sell a house last month than January.
  2. It took 12 less days to sell this February compared to last February.
  3. Sales volume was 2% lower in February 2016 compared to last February.
  4. FHA sales were 22% of all sales last month.
  5. Short sales were 3.4% and REOs were 4.8% of sales last month.
  6. Housing inventory is 20% lower than it was last year at the same time.
  7. The median price increased 2.5% last month from the previous month.
  8. The median price is 3% higher than the same time last year.
  9. The avg price per sq ft declined slightly last month (less than 1%).
  10. The avg price per sq ft is 7.9% 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

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 7 more days to sell a house last month than January.
  2. It took 6 less days to sell this February compared to last February.
  3. Sales volume was 4% lower in February 2016 compared to last February.
  4. FHA sales were 20% of all sales last month.
  5. Cash sales were 19% of all sales last month.
  6. Housing inventory is 17% lower than it was last year at the same time.
  7. Sales volume is up 2.5% this Jan/Feb compared to last Jan/Feb.
  8. The median price increased 2.5% from the previous month.
  9. The median price is up nearly 11% from February 2015.
  10. Short sales were 1.5% and REOs were 4.3% 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 - January 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

I hope this was helpful and interesting.

DOWNLOAD 70 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.

Questions: Any other points to add about increasing values or low inventory? 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.