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Lot size mistakes & pent-up demand

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Two things. Let’s talk about a very easy mistake to make with lot sizes and then let’s look at pent-up demand right now.

LOT SIZE MISTAKES: I’ve seen it happen twice lately where Tax Records lists the lot size, but it’s actually incorrect. In one instance Realist showed the lot was five acres when in fact it was only two acres. In another example it said two acres when it was less than one. Yikes.

My advice? Thankfully most of the time we can trust the lot size in Tax Records, but it’s still a good idea to quickly double-check just to be sure. After all, listing the wrong lot size in MLS or an appraisal could lead to litigation, right? What we can do is view the plat map to see if there is anything abnormal as well as try to piece together the lot size (easy to do if it’s a rectangle). Also, when viewing a property in MLS we can click on “See Map” and then “Layers” to view the lot size. All I’m saying is taking an extra minute to do these steps is a good habit that can be a safeguard. How would you handle it though if the lot size was different in Tax Records, MLS, and the plat map? Which one are you going with? I’d love to hear your take in the comments.

NOTE: A land surveyor is going to be the definitive source. I’m just saying my advice above helps give us clues into when something is not right with a lot size.

Moving on to trends…

WEEKLY VIDEO: I’m really excited for this week’s video. On one hand it looks like the seasonal market has begun to crest, BUT it’s as if real estate has sped up a little after slowing down. Watch below (or here).

PENT-UP DEMAND: Check out these visuals to show some serious pent-up demand being expressed. For eleven weeks now the market has been rebounding after an initial dip when the pandemic began. And for five weeks in a row we’ve literally had MORE pending contracts than new listings in Sacramento.

VOLUME NO LONGER DOING THE LIMBO: A big trend we’ve been seeing is sales volume is starting to come back. In fact, this past week is only down about 10% from the same time last year. This is huge because a couple months ago we were consistently down 30-40%. The x-factor is having more pending contracts from 4-6 weeks ago finally starting to close.

LET’S WATCH THE COVID-19 NUMBERS: Unfortunately we’re starting to see COVID-19 cases tick up again in quite a few states. As it relates to real estate it’s going to be important to stay in touch with the psyche of buyers and sellers since a trend of more cases can shape whether people engage or sit out of the market. Moreover, it’s a wonder if different areas and states will have some form of lockdown again too.

ONE MORE THING: If you need some background noise, here’s a 30-minute Q&A I did with Rachel Adams Lee to talk about the Sacramento market. And yes, I mentioned my love for Breaking Bad and that I don’t like Downton Abbey (sorry). Enjoy if you wish.

Thanks for being here.

Questions: Have you ever seen that lot size mistake in Tax Records? What are you seeing in the market right now? I’d love to hear your take.

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Don’t hold your breath for a Covid discount

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“Why is there not a pandemic discount? I don’t get it. The market has been going down.” Someone was angry with me recently after an estate appraisal didn’t come in low enough in his mind. The thought was prices should be dipping because we’re in a pandemic, but that hasn’t been happening.

The Truth: Lots of people expect the market to be weak right now.

The Takeaway: Let’s be careful not to impose ideas on the market about what we think should be happening. Instead, let’s look to the numbers to form our understanding. Likewise, it’s critical to be objective about the present and keep an eye on glaring uncertainties regarding the future. But let’s do this without viewing stats through a rose-colored lens or painting every conversation with a doom and gloom brush.

Anyway, that’s what’s on my mind…

———————— big monthly update below ————————

BIG MONTHLY UPDATE:

This is long on purpose. Skim or digest slowly. Your call. 

FREE MARKET UPDATE: On Monday June 22nd at 10am PST I’m giving a one-hour free market update via Zoom through the Sacramento Association of Realtors. Please sign up here.

WEEKLY VIDEO: Here’s my weekly video update to talk through the latest trends (shorter this week too). Watch below (or here).

Now some big topics…

FLAT PRICES: When we look at the latest price trends, it’s pretty flat. As you can see, the stats show modest price gains since last year. Granted, this month was more subdued than last month, so before writing home about this trend we need a few more months of data to fully understand the market. Remember, this doesn’t mean the market is dull because it’s actually quite competitive. It doesn’t mean every price range and neighborhood are flat either. But it does remind us prices haven’t been going insane despite the market feeling ultra-competitive. 

CRESTING FOR THE SEASON: Based on the next three images, it looks like the spring season has started to crest. We’re seeing a dip in prices and we’re having less multiple offers.

NEXT MONTH THOUGH: When sharing about flat prices, I’ve been tending to get reactions saying price metrics in a couple months may show an uptick again because mortgage rates have gone down lately. Look, that’s possible and we can adapt our narrative if that happens. To be fair, there’s nothing normal about life and real estate lately, so anything is possible for the future and we’re certainly experiencing some abnormal pent-up demand right now.

SALES VOLUME DOING THE LIMBO: Here’s a brand new visual to show most counties in May were down 30% or more in volume from 2019. Do you like this one? Should I keep making it?

LEARN TO MAKE A GRAPH: In case you didn’t see this on my YouTube channel, I put out a new tutorial for how to make a graph with three price metrics. This can be made for a zip code, city, county, etc… My advice? Set aside an hour in your schedule to make learning this happen. Becoming more visual changed the way I see the market and it frankly changed my career.

LOW RIDING: We had the second lowest month of sales volume for May in Sacramento County over the past twenty years.

BUT VOLUME IS ACTUALLY INCREASING: When we look at sales volume by the week instead of the month, we’re starting to see more sales close. In fact, for four weeks now we’ve seen an uptick. This change reflects pending contracts from about 4-6 weeks ago finally starting to close. I suspect in coming months we’ll keep seeing volume increase since pendings have been on fire lately.

MORE PENDINGS THAN NEW LISTINGS: For the fourth week in a row we literally had more pending contracts than new listings hit the market in the Sacramento Region. This shows buyers have been coming back to the market more quickly than sellers. Let’s remember buyers have strong incentive to get into contract quickly to lock in a historically low mortgage rate, but sellers just don’t have that same sense of urgency.

CHANGE BY THE RANGE: Here’s a look at what’s happening with different price ranges. These two images compare the change in April and May from 2019 to 2020. I don’t know that there’s anything revolutionary here, but what we want to watch over time is whether different price segments are slowing or speeding up. I think with a few more months of data we might have more to consider.

INVENTORY AT DIFFERENT PRICE POINTS: What’s happening with inventory in different price segments? Well, it’s actually pretty tight, but let’s watch above one million closely because it’s trending a little higher. Granted, it’s pretty normal to have 8-10 months of housing supply at the highest prices, but still we’ve seen more of an uptick lately.

2,651 FEWER LISTINGS SINCE THE PANDEMIC: Over the past three months there have been over 2,500 fewer listings compared to the same time last year. No wonder why it feels so competitive…

Now here are more visuals. As if this post wasn’t long enough already…. See my sharing policy for 5 ways to share my content (please don’t copy my posts verbatim).

SACRAMENTO REGION:

SACRAMENTO COUNTY:

PLACER COUNTY:

EL DORADO COUNTY:

Okay, let’s wrap this thing up.

Questions: What stands out to you about the market right now? What are buyers and sellers saying? I’d love to hear your take.

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Bigger Things, Zooming Out, & Buyers vs Sellers

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There are way bigger things happening in the world than real estate. So this post won’t have much text. For now let’s listen to what’s happening around us and find ways to heal as a country.

Zooming into weekly videos: I was doing five to seven Zoom sessions per week for months and I’m feeling burned out, so I’ll be scaling back after an incredible ride. I’m actually still available for digital speaking gigs, but they’re mostly for associations or for hire. However, I’ve shifted things to YouTube where I’ll be doing a weekly update. Would you join me there? 

More buyers than sellers? For two weeks we’ve seen more pending contracts than new listings. I think this market has surprised lots of people who expect big price declines and dullness. Subscribe to my channel.

Highlight reel:

  • Sales volume is starting to increase again
  • Pendings have crested pre-pandemic levels
  • Listings were lackluster last week
  • Canceled listings are fairly normal again
  • Hold listings are getting closer to normal
  • Prices have been somewhat flat lately

I hope this was interesting or helpful. Thanks for being here.

Questions: What are you learning about life right now with all the protests going on? As far as real estate, I’d love to hear your take also.

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Moving money, duplexes, & unicorns.

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Moving money, duplexes, and unicorns. This sounds like a seriously boring blog post, but this is fascinating stuff and I hope you walk away with insight and maybe some ideas for where to focus business if you work in real estate. If you’re not local, are these trends happening in your market? I challenge you to find out.

Increasing 1031 Exchange Sales: Here’s an image to show all 1031 Exchange sales in the Sacramento region over the past two decades. In short, a 1031 Exchange is a way an investor basically swaps one property for another to minimize the tax burden. Often investors from outside a market will move money into a lower-priced market too, but that’s not always the case. Anyway, here are all 1031 Exchange sales on one graph. I know, there are way too many dots here. But do you see two main clusters? There were more sales in the last rising market cycle and there are more in today’s market.

I spoke with a 1031 Exchange guy and he echoed this is exactly the trend he is seeing out there. When a market is rising, investors tend to move money. I will say the stats here are not perfect because these are only sales where agents have input a 1031 happening. However, I believe most importantly we still have an accurate trend to see about the frequency of 1031s happening. For what it’s worth, about 85% of these exchanges were single family homes, so clearly investors wanting to park money in Sacramento aren’t just looking to the 2-4 unit market.

Brand new duplexes: This might not seem like a big deal, but here are four recent duplex builds in Sacramento. This hardly seems like a trend or worth mentioning, but being that there are literally about a dozen new duplex sales over the past ten years, it’s a big deal to see four right now. The good news for today is it’s possible in some situations to build a duplex and make the numbers work. We have a severe housing shortage in California too, so seeing more multi-unit properties is definitely something we desperately need.

Unicorn advice: If you are going to build a duplex, keep your costs down somehow and do something modern as it seems like units with a modern / contemporary feel are the ones selling at the top. Also, sometimes we see out-of-town investors pay more for two-unit properties. That’s a very real dynamic. Know that unicorn buyers are out there and when I see 2-4 unit properties sell for too much it’s often a Bay Area buyer (or 1031 Exchange). But be careful about pricing too high because that’s a quick way to get zero offers (seriously). My advice? Price for the market instead of the unicorn.

REGIONAL DUPLEX SALES: Here’s a quick look at two-unit (duplex) sales over the past two decades in the Sacramento region. I committed graph sin by not explaining “region” on the image (it’s Sacramento, Placer, Yolo, El Dorado county). What do you see?

A DIFFERENT TREND: When looking at Midtown and Downtown there is clearly a different trend. The rest of the two-unit market hasn’t quite seemed to eclipse where prices were in 2005, but that’s absolutely not the case in Midtown. It just goes to show the market isn’t showing the same trend everywhere. 

Anyway, I hope that was helpful. Thanks for being here.

Questions: What stands out to you about the images above? What have you noticed about the duplex market? Anything to add?

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