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.

The slowish real estate market in January

January is usually a slow real estate month. That’s nothing shocking. Yet it’s always interesting to see how the market begins to maybe get a sense for where it might go during the year. Today let’s take a look at 6 specific areas of the market in Sacramento, which will help us understand and explain the way things are moving.

Longer on purpose: If you’re new to subscribe (thank you), most of my posts are not this long. But twice a month I break down the trends so we can better see the market. Most of my other posts are general enough to apply anywhere in the United States. Is your market similar though? I’m curious.

Two ways to read this post:

  1. Scan the talking points and graphs quickly.
  2. Grab a cup of coffee and spend a few minutes digesting what is here.

the story of the market in january

Email me if you want the graphs: If you would like all the graphs in this post (and 15 more), send me an email (make sure to write “I want the market graphs” in the header). You can use some of these in your newsletter, on your blog, and in other social spaces. See my sharing policy for 5 ways to share.

1) The reality of the slower seasonal market right now:

seasonal dip in sacramento

It’s easy to freak out this time of year when values take a dip. It can feel the market is falling apart when we see price figures decline. Yet the market almost always softens at the end of the year and in the very beginning of the year. Knowing this can help you communicate well with clients and even plan for business. Remember that sales stats usually see a huge uptick in March, and this signifies the Spring market. Technically most of the sales in March actually get into contract in February though, which reminds us the Spring market hits its stride in February.

2) The median price softened by 3% last month:

price metrics since 2014 in sacramento county

context for median price since the real estate bubble by sacramento appraisal blog

median price and inventory since 2013 - by sacramento appraisal blog

The median sales price took a 3% dip in January to $256,000. It might sound extreme to see the market soften this much, but last year saw the same exact 3% dip as you can see in the image above.

3) It took an average of 60 days to sell a house in January:

DOM in Sacramento County

On average it took 60 days to sell a house last month in Sacramento County. This is up from 48 days one year ago in January 2014, but down from about 90 days in January 2012.

CDOM in Sacramento County - by Sacramento Appraisal Blog

It’s important to realize the market is not the same at every price range. In other words, some price ranges tend to take longer to sell than others. Generally speaking, the higher the price, the longer it takes to sell. Keep in mind there were only 9 sales at 750K-1M and two above 1M, so take those stats with a grain of salt.

4) Sales volume hit its lowest point in 8 years:

sales volume in Sacramento County

Sales volume was at its lowest point in 8 years last month. On one had that sounds alarming, but it’s really the story of the market these days. Last year saw slightly more sales at this time, so this year isn’t anything out of the ordinary for the current market. Volume is simply down right now as a whole, and we can look at this as the new norm for a while until the market can handle more inventory and more demand (when the economy improves).

january sales in sacramento county

It’s easy to get sensationalistic about having such a low volume of sales last month, but the graph above shows 15 years of January sales in Sacramento County. What do you notice? January almost always comes in last place for sales volume. In short, don’t freak out.

sales volume in fall and winter through 2015 - by sacramento appraisal blog

Lastly, remember to consider what usually happens in February. Sometimes February is right in sync with January, but other times there is slightly more volume. We’ll see what this year brings, but knowing how the market works makes you an asset to clients.

5) Housing inventory increased last month (technically):

inventory in sacramento county  Since 2013 - by sacramento appraisal blog

Inventory increased last month to 2.61 months of housing supply. This is slightly higher than it was one year ago, and exponentially higher than 2013 when there was only one month’s worth of homes for sale. Remember that inventory is the relationship between the number of active listings as of the first of the month divided by sales from the previous month. This means if there are VERY few sales in a month, inventory will actually sound much higher than it actually is. In short, an inventory at 2.61 months sounds like it’s on the higher side, but being that sales volume was really low last month, this figure at 2.61 doesn’t really mean the same thing as it would in the summer when there are far more sales.

months of housing inventory by sacramento appraisal blog

Housing inventory is never the same at every price range. This reminds us yet again there are many markets within a market. In this case, the higher the price, the more inventory there is.

inventory during fall and winter 2 - by sacramento appraisal blog

number of listings in sacramento - January 2015 - by home appraiser blog

6) Interest rates continue to decline:

interest rates by sacramento appraisal blog since 2011

Low interest rates are like fuel for the housing market since they create more demand by drawing buyers into the market. That is what happened in 2012 when rates went below 4% (for the first time ever), and it’s likely going to get some buyers off the fence right now.

interest rates by sacramento appraisal blog

Real estate is never just about supply and demand. There are so many “layers of the market” that are working to impact the direction of values. I hope this was helpful to create some context and conversation.

Share: Please feel free to share this link with clients, and see my sharing policy for 5 ways you can share my content so we’re on the same page about what it means to “share”.

Questions: What are you seeing out there? How does the market feel to you? Anything you’d add?

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A bit less cash and a slightly different smell in the Sacramento market

Cash stats showed a decline last quarter and properties are taking slightly longer to sell. What do you make of that?

I mentioned in early June that cash sales in Sacramento County were down slightly from the previous quarter. Since the data at the time was based on sales in only April and May though, I wanted to see how the last month of the quarter would steer the stats. Let’s take a look below to see what the numbers tell us now that the month of June has closed.

Cash sales in Sacramento Placer Yolo County through 2013 Q2 - by Sacramento Appraisal Blog

As you can see, there were definitely less cash purchases in Sacramento County from April to June 2013 (Q2) since cash sales decreased from 36.3% to 31.8% of the market. Stats in both Placer and Yolo County were also down.

cash sales in Sacramento County through 2013 Q2 - by Sacramento Appraisal Blog

The market under $200,000 still continues to be a cash feast though and has not changed much as 50% of all sales continue to be cash for the third quarter in a row. In light of the median price skyrocketing over the course of the year, the market under $200,000 has become far more competitive for first-time buyers and investors. I don’t see this letting up any time soon so long as rates remain relatively low and inventory continues to hover around one month of housing supply. The vast bulk of cash purchases are still under $200,000 in Sacramento County, though keep in mind about 25% of all sales between $200,000 to $300,000 were cash in Q2. That’s a strong market segment.

cash sales in Sacramento County - price levels - by Sacramento Appraisal Blog

What does this mean for the market? Ultimately less cash has seemed to create SLIGHTLY more opportunity for owner occupants. Take that with a grain of salt of course because the market is still HEAVILY in favor of sellers since there is only a one-month supply of inventory available. I don’t know about you, but I’ve been noticing in my appraisals over the past few weeks that the Days of Market (DOM) for current listings has been slightly higher than the DOM for closed sales over the past quarter. This means properties are taking a bit longer to sell than they were during previous months. I’ve been hearing a similar thread from some Realtor and investor contacts also. Yes, there are still properties being sold in days of being listed and there are multiple offers too. There is just a very subtle dynamic going on right now as explained above, and we’ll see where it leads.

By the way, I appreciate Realtor Doug Reynold’s take on the market in one of his recent YouTube videos as it compliments some of what I’m seeing. Give it a watch or listen above (or here) and let me know what you think.

UPDATED ON 07/05/2013: I wanted to clarify that these stats do not apply to every single neighborhood and every single niche market in Sacramento County. When determining trends for a neighborhood, it is very important to look at hyper-local neighborhood data.

Any thoughts?

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“Two Truths and a Lie” & Cash in Sacramento

I taught my kids how to play the game “Two Truths and a Lie” recently and we’ve been having fun with it. Here’s how the game works. One player shares two things that are true and one that is a lie, while other players try to guess which statement is the lie. Since I know virtually everything about my boys, this game is a breeze for me. But since there is so much they don’t know about me, I can usually win by pulling out two things that shouldn’t be true (usually things I did as a teenager) and then one equally obscure lie to match.

Let’s play the real estate version of “Two Truths and a Lie” (cash style):

  1. Image purchased at 123rf dot com and used with permission - 14688774_s - smallerCash sales have represented about 50% of all sales under $200K for the past eight months in Sacramento County.
  2. The past two months are the first time in four years where REO sales have been less than 10% of all sales in the market.
  3. Cash sales have begun to see a steep decline since Blackstone has been purchasing less.

Check out the charts below and read a few sentences to see which two statements are true and which one is the lie.

cash sales in sacramento placer yolo county - by Sacramento Appraisal Blog

Cash is still very strong in the Sacramento real estate market. When we parse numbers, 34.75% of all single family DETACHED sales have been cash in 2013. When including condos and other attached units, the number jumps to 37.46% (which tells us there is a greater percentage of cash in the condo market). Yes, there has been a very slight decline in county-wide cash sales during these past two months, but let’s finish out the month of June to complete an entire quarter to getter a better feel of any real decline. Some in the real estate community have said Blackstone is purchasing less lately, so cash sales have declined, but the numbers don’t tell that story – especially since Blackstone has been primarily focused under the $200,000 price level. Keep in mind it’s been eight months steady where roughly 50% of all sales under $200,000 have been cash purchases in Sacramento County. If anything, the market under $200,000 for cash has not flinched at all because it’s been very strong.

chart of cash sales by month in sacramento county - by Sacramento Appraisal Blog

We’ll take a deeper look at the cash market under $200K and distressed properties in the next few days, but for now it’s worth noting that foreclosures and short sales have seen blatant declines in 2013. In fact, April and May 2013 were the first two months in over four years where foreclosure sales represented less than 10% of all sales in the market. How does that strike you?

ANSWER: In case you missed it in the paragraphs above, #3 is the lie.

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