sacramento regional housing market

What would happen to the housing market if we went on lockdown again?

November 17, 2020 By Ryan Lundquist 19 Comments

Lots of us are wondering about the future as COVID-19 cases are rising. When will this be over? What’s it going to take to beat it? And in terms of real estate, what would happen to the market if we went on lockdown again?

This isn’t about fear or politics, but conversation. This isn’t a prediction post either. My only purpose is to consider things that might affect housing. So let’s talk.

LOCKDOWN THOUGHTS:

1) Suppressed demand: There are many things that can affect a housing market. Mortgage rates, jobs, the economy, access to financing, etc…. and even the government. A mandated lockdown, whether national or statewide, is something that can suppress demand because the market isn’t able to operate as it normally would. When I say “lockdown” I’m talking about something akin to earlier in the year where occupied properties were not allowed to be shown.

2) Buyers & agents have learned: This time around we have more experience. The real estate community has learned to show homes virtually and buyers are more used to the idea also. However, if buyers and agents don’t have full access to real estate because of imposed rules then it’s hard to imagine seeing no effect on the housing market.

3) Sellers: One thing to watch is sellers pulling their listings from the market or waiting to sell if strict rules were imposed or if COVID numbers got out of control. Throughout the pandemic we’ve seen substantially fewer listings and it wouldn’t be surprising to see fewer during a lockdown or grave situation. Yet not all sellers are the same and there will be people who list no matter what.

4) Buyers: I imagine mortgage rates below 3% will keep propelling lots of buyers to hunt for homes because that’s exactly what’s been happening these past months. In short, mortgage rates have pulled far more buyers into the market than the coronavirus has pulled people out. In other words, so far the pandemic hasn’t hampered buyer demand. But what happens if access to real estate is limited or a feeling of uncertainty about the economy, housing, or future ensues? All I’m saying is we need to continue to watch buyer sentiment because it’s not something that always stays the same.

5) It is a real market: When the pandemic first began I heard things like, “This isn’t a real market,” but that wasn’t true. Prices slowed. There were far fewer pending contracts. And the market felt dull. In other words, we had real trends and stats even though there was an element of the market feeling suppressed due to governmental regulations. That didn’t make it a fake market though.

6) No effect whatsoever: Our market has done very well within the confines of current restrictions, so if those persist we may not see too much difference as long as demand remains high. But if the rules change and access to the market changes, that’s where we might expect to see a difference in the way the market feels (or a change in the stats). As a guy who follows the market closely what I am looking for is a change in buyer or seller sentiment or a change in something that would affect access to real estate.

7) Could we see a “W”? When the pandemic began we saw a huge drop in volume and then a massive recovery. This created a “V” shape because there was a drop and then an increase. Well, if we have a second round of outbreak and a lockdown, could we see another “V” which would then form a “W”? I wrote about this a few months back in a conversation with an economist. Or would the crazy momentum we have right now simply press through a lockdown? This is the question and we’re going to have to wait to see how it pans out. If anything we ought to be wary of predictions. I don’t think anyone at the beginning of the year predicted the market we’re in right now… This doesn’t mean we need to be shy about asking questions about the future though.

8) Commercial real estate: This has been a brutal year for many business owners and a second round of lockdown could be a deathblow. What happens to business owners and commercial property owners over the next few years?

9) Other: What else do we need to consider? What is on your mind? I’d really like to hear your take in the comments or via email.

Free webinar: I’m doing a big market update this week for SAFE Credit Union on November 19th from 9-10am PST. It’s free to anyone and it’ll hopefully be some good background noise while working. Register here.

Thanks so much for reading my post today.

Any thoughts?

———————- (skim or digest slowly) ———————–

For those interested, here’s a big Sacramento market update:

MARKET SUMMARY: In short, the market has been slowing for the season, but it’s still best described as a “hot” market. I keep saying that this fall has not been normal because the market hasn’t softened like it normally does. It’s really felt more like spring than anything… With that said we have begun to see sales volume drop for the fall, but properties are still selling very quickly. In fact, half of all home sold in six days or fewer in the region last month. We literally have about 50% fewer listings right now, inventory is at historic lows, and we had 39% more multiple offers last month compared to a year ago. The big news is sales volume has finally caught up to last year after being down due to a slump at the beginning of the pandemic. What I mean is as a result of the past four months of heightened demand we’re finally back to 2019 levels. Well, Sacramento County is still down, but El Dorado and Placer County being up has effectively pushed us back to normal.

WAY TOO MANY VISUALS:

You are welcome to use these in newsletters and social media with proper attribution. Scroll quickly or digest slowly.

SACRAMENTO REGION:

SACRAMENTO COUNTY:

PLACER COUNTY:

EL DORADO COUNTY:

Other visuals: I have lots of other graphs. Check out my social media in coming days and weeks. I am posting daily stuff.

Thanks for being here.

Political comments: I will not approve any comments that are exclusively political because this is a blog about housing. We can touch on politics as it affects real estate, but overt political rants are best for other blogs.

Questions: Do you think we’ll go on lockdown? What are you seeing out there right now?

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

Solar panels & a normalish spring market

May 15, 2019 By Ryan Lundquist 17 Comments

Every week I get asked about solar panels. Do they add value? Should I price my listing higher? Will buyers pay for it? These are big questions and there’s no quick answer. But here are some things I think through and bring up when people call. This is just over ten minutes. Then for those interested, I have a huge market update to talk through the kinda sorta normal spring market.

Solar Video: Watch the video by clicking the image above (or here).

A Podcast I did with Norm: If solar isn’t your thing and you need a podcast to listen to, I just talked with Norm Shriever about appraisals, owning islands, Zillow, my Dad bod, etc… Listen directly on YouTube if you wish.

As always, thanks for being here.

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

Spring is feeling fairly normal so far. What a difference from the doom we felt in the latter half of 2018. Let’s talk about it.

THE SHORT VERSION:

Prices are up from the fall
Prices aren’t up much from last year
There’s lots of competition if priced right
Sales volume has slumped for 11 months
There are 2,500 less sales this year
So far the spring has felt fairly normal
This post is long on purpose. Skim or pour a cup of coffee.

DOWNLOAD 80+ 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 LONGER VERSION:

Here are some of the bigger topics right now:

It feels flat around here: Prices are definitely up from the big lull we had during the fall season, but they’re not up by much compared to last year. This is why I’ve been describing the market as flat. Most price metrics in the region are up only 2-3% over the year. In the region we’re seeing prices about level with the height of last year, though in Sacramento County we’re slightly above. This could obviously vary by neighborhood.

A more normal spring: I was talking to a real estate agent today and she said, “You know, it just feels like a normal spring.” I tend to agree. Stats are showing normalcy and we’re seeing what we’d expect to see at this time of year. Prices are up, inventory is down, sales volume has ticked up from the fall, it’s taking less time to sell, and pending sales have been strong. This doesn’t mean the market is perfectly healthy, but from a stats perspective it’s been fairly normal.

2,500 less sales this year: On one hand sales volume has recovered this spring to almost normal levels, but over the past year volume is actually down 8.5% in the region. I know that doesn’t sound like much, but think about it this way. There were 2,500 less sales this year in the region compared to last year. While this isn’t the sign of a market meltdown, it’s definitely something we have to watch. At best I would say this is an off year, and at worst it’s a symptom of the market starting to change in more significant ways (which we will only know as time unfolds). In short, don’t write home over this yet, but keep an eye on it.

Zillow: Last week Zillow announced they’ll be entering the Sacramento market by the end of the year. This is huge news, but it’s really what we expected. These days there are a handful of tech companies trying to challenge the traditional real estate model by buying privately from sellers and then re-listing on the open market. There’s lots to say about this and I’ll have some posts in the future. For now I just wanted to say I find it ironic that as much as Zillow loves to tout their accuracy rate, they won’t be buying properties based on the Zestimate. Otherwise I imagine lots of overvalued owners would jump at the opportunity, right?

Low rates are the x-factor: At the end of 2018 it seemed like the market was ready to take a dive, but lower rates this year have helped bring buyers back into the market and sustain higher prices.

Real estate is like the stock market: When I say the market is slower I get a little pushback at times. The idea is, “Dude, I just had 14 offers on my house. How dare you say the market is slow!!!” Look, it’s impossible to describe every neighborhood and price range with just one statement. This is why I say the real estate market is like the stock market. While the market as a whole might be doing one thing, not every stock is experiencing that same exact trend. In the same way, not every neighborhood, price range, or property type can be explained the same way.

Do cannabis dispensaries increase residential value? I did an interview last week with CBS 13 to talk about a study that claims cannabis dispensaries increase the value of surrounding residential properties. You can click the link to hear my take. In short, it’s true that vibrant commercial sectors can help increase value. But I’ve never met a buyer who said, “I’ll pay more because of a dispensary down the street.” In my experience locally at least, many people don’t even know dispensaries are there unless they’re cannabis connoisseurs. In short, I tend to be skeptical of studies like this.

Hey girl, let’s have bubble talk: Prices are just about back to where they were fourteen years ago when the market collapsed in 2005. In fact, most price metrics in Sacramento are within 1-3% of the peak. This means with just a little more modest price growth we might be having “Hey girl, we’re back” (yes, that was a Ryan Gosling reference (sorry)).

Keep in mind the market in 2005 was much different than today and there is no such thing as a formula where the market “pops” if we reach 2005 levels. Technically speaking, current values aren’t actually anywhere near 2005 when we consider inflation. But you know, very few buyers actually think about inflation like this – unless they’re economists, grad students, real estate geeks, etc…. In case it helps, here’s a post I wrote about buyers worried about another housing bubble.

Appraisals coming in lower: I’m hearing from some contacts of appraisals coming in lower than the contract price. As the market slows, this is something we’ll likely see more frequently if properties are getting into contract at prices that cannot be supported by market data. Of course some appraisals may legitimately come in too low, and I’m not naive about that. Whatever the case, I’d advise sellers to price realistically and in some cases pick the strongest offer instead of the highest one.

Price sensitivity: Literally half of all homes last month had multiple offers in the Sacramento Region. This reminds us buyers need to bring strong offers. But sellers ought to price correctly too. Buyers are not desperate and willing to pay unrealistic prices, so I advise aiming for the market instead of that one mythical buyer who will overpay for some reason. Remember, the market is very competitive, but that doesn’t mean prices are going crazy.

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

FOUR BIG ISSUES TO WATCH:

1) SPRING GETTING HOT: The market is heating up for 2019. We’re seeing price changes, lower inventory, and increased sales volume. So prices are up from the dull fall, but they’re also flat as you can see under #4.

2) SLOWING MOMENTUM: Despite the heating, stats show the market is slowing down when we look at the rate of change by year. Looking at monthly, quarterly, and annual numbers helps give a balanced view of things.

3) SALES VOLUME SLUMP for 11 months: It’s important to look at sales volume in a few ways to get the bigger picture. Here it is by month and year.

SACRAMENTO REGION:

Key Stats:

April volume down 8.2%
Volume is down 8.5% over the past 12 months

SACRAMENTO COUNTY:

Key Stats:

April volume down 6.8%
Volume is down 7.2% over the past 12 months

PLACER COUNTY:

Key Stats:

April volume down 4.3%
Volume is down 8.9% over the past 12 months

EL DORADO COUNTY:

Key Stats:

April volume down 2.4%
Volume is down 12.5% over the past 12 months

4) LAST YEAR VS THIS YEAR: Check out the price metrics below. Can you see why I’m saying prices seem flat lately? This may not be true in every single price range or neighborhood of course, but this shows us price momentum is slowing. With that being said, it’s still okay to say the market is “hot”. It is. But I’d say competition is hotter than price appreciation.

NOTE: Take El Dorado County data with a grain of salt. Stats change significantly month by month.

Quick note on how NOT to use my content: Please don’t copy my post verbatim or alter the images in any way. I will always show respect for your original work and give you full credit, so I ask for that same courtesy. Here are 5 ways to share my content.

Now here are a bunch of images. Please enjoy.

SACRAMENTO COUNTY (more graphs here):

SACRAMENTO REGION (more graphs here):

PLACER COUNTY (more graphs here):

EL DORADO COUNTY (more graphs here):

DOWNLOAD 80+ 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 are you seeing out there? What do you think prices are doing? What are you hearing from buyers and sellers lately?

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Is it just me or is the market slowing?

November 12, 2018 By Ryan Lundquist 24 Comments

The market is slowing. We’ve been hearing that all over the place lately and it’s been a common clickable headline. But it’s not just hype because there’s some truth to it. Today I want to show this reality with a few visuals, mention three takeaways, and unpack a huge Sacramento market update for those interested. I hope this is helpful – whether you’re local or not.

Tighter Prices: Is the market slowing? How would you show that? Take a look at the rate of price changes in the images below and let me know what you see.

OCTOBER:

PAST 90 DAYS:

ENTIRE YEAR:

TAKEAWAYS:

1) Slowing: Prices are still up, but they’re not up by as much this year. What I mean is in years past we’d regularly see 7-10% price increases when running stats, but over the past few months we’re starting to see 4-6% increases instead. This helps show the market as a whole is slowing.

2) Dull fall & critical thinking: Stats have begun to change more significantly these past few months since a slower feel hit the market. A few months back sales volume dipped, but now after multiple months of lower volume this is becoming a trend (at least for the fall). As we watch this unfold and see that prices are much tighter together as I showed in the charts above, let’s consider two things: 1) Price stats today are more subdued in light of a much duller fall season (duh); and 2) Last year’s fall season ended up being a little more flat than usual, so higher prices from then could be helping this year’s numbers appear a little more depressed. I know, it sounds like I’m trying to soften the idea of the market slowing, but that’s not it at all. I’m thinking critically through the numbers and explaining in part why they are the way they are. Ultimately I find myself interpreting these numbers cautiously, and I think we need to get beyond this fall to see the bigger picture of what the numbers show us and where the trend is going to go.

3) Wide & narrow view: I chose to share stats in three ways on purpose to show something important. Did you notice a difference in the price change depending on how wide or narrow the dates were – whether 30 days, 90 days, or 12 months? Basically the more data we considered, the tighter the price gap was. This is a good reminder to look at the market in different ways to try to discern the trend. It’s also a good reminder to be careful of pulling older data because sometimes that can mask a trend that is happening right now.

The future: Naturally when hearing about momentum slowing in a market it’s easy to start predicting the future as we see price gaps tighten. Many say the market is going to crash, others say it will correct by 10%, and some say it will level off and progress into a state of balance. All three of these ideas have one thing in common. They’re guesses.

I hope that was helpful.

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

Last year the fall season felt more flat than not, but this year is a different story. We are definitely having more of a dull seasonal lull that reminds us how the market felt in 2014 when the fall season was definitively soft. Here are some of the things I’m watching right now. I’d love to hear what you are seeing. Please comment below or send me an email.

Graphs for your newsletter and social media: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy my post verbatim).

Adjusting to rates: Buyers have seemed to back off the market a bit lately, and we’re seeing the effect of that with lower sales volume. What’s up with this? The culprit could be increasing interest rates and a growing lack of affordability.

Balancing of power: Buyers have gained more power in recent months, though I don’t think sellers got the memo since they are still struggling with overpricing and pretending it’s an aggressive market from 2013 instead of a slower market in 2018. This doesn’t mean buyers have total control though. Keep in mind 41% of all sales last month had multiple offers, which tells us it’s not the type of market where buyers can lowball sellers and get whatever price they want.

Pricing lower this fall: Since the summer the median price has softened by 4% in Sacramento County, 5% in the region, and 7% in Placer County. This doesn’t mean every neighborhood lost 4-7% in value. These are county stats and they don’t translate into every area or price range. Keep in mind it’s normal to see a 5% or so reduction in the median price during a given fall season, but this year it wouldn’t be surprising to see a more pronounced price difference between spring and fall (we’ll see how it pans out).

The story of sales volume: In September volume was down a whopping 16% in the region, and that raised lots of eyebrows to make people wonder if the market was starting to tank. This past month sales volume was not as weak, but it was still down nearly 9% in the region and about 4% in Sacramento County. Over time we need to keep watching this trend to better understand if it’s a sign of a definitive change in the market or if it’s the byproduct of a dull fall season (or both). One thing to remember is despite a few months of gloomy sales volume recently, volume is only down 2% in 2018 in the Sacramento region.

Listings did peak: I’ve been talking about listings looking like they were peaking for the past couple months, and the stats now definitely show listings have crested for the season. This is normal for the time of year as sellers tend to pull back from the market and wait until spring to list. This is why the fall sometimes feels like a market of leftovers since many sellers are waiting until the next year.

Concessions and credits: Buyers have more options today, so they’re tending to ask sellers more often for credits, repairs, and concessions. It would be wise for sellers to listen to buyers and be aware they may need to give something to get the deal done.

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

BIG QUESTIONS:

1) How did the market change from last year?

2) How did the market change from September to October?

3) Where are we in relation to peak prices in 2005?

4) What’s happening with sales volume?

SACRAMENTO COUNTY VOLUME:

Key Stats:

October volume down 4%
2018 volume down 1% (January to October)
Annual volume is down 1.9% (past 12 months)
Volume has been strong this year, but it’s definitely been down over the past 4-5 months.

SACRAMENTO REGION VOLUME:

Key Stats:

October volume down 8.8%
2018 volume down 2.1% (January to October)
Annual volume is down 2.5% (past 12 months)
Volume has been strong this year overall, but it’s been down over the past 4-5 months.

PLACER COUNTY VOLUME:

Key Stats:

October volume down 20.6%
2018 volume down 4.9% (January to October)
Annual volume is down 5.4% (past 12 months)

SACRAMENTO COUNTY (more graphs here):

SACRAMENTO REGION (more graphs here):

PLACER COUNTY (more graphs here):

I hope that was helpful.

DOWNLOAD 60 graphs HERE: 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 do you see happening in the market right now? What are you hearing from buyers and sellers? I’d love to hear your take.

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It’ll never sell that high (but then it did)

May 17, 2018 By Ryan Lundquist 8 Comments

There’s no way it’s going to sell that high. Have you ever thought that in real estate? Well, let’s talk about a property that many said would never sell at $4.1M, but then it did. I definitely have some takeaways about this lofty condo in Downtown Sacramento, and I hope non-locals will relate to the commentary. Then for those interested I have a huge market update below. Any thoughts?

A few things on my mind about this one sale:

1) Outlier: This sale is a total outlier. It is a big deal, but it’s also completely disconnected from the rest of the market. Can you tell based on the graph?

2) Thin history above $4,000,000: There have literally only been four residential sales ever above $4M in Sacramento County. EVER. So yes, it’s huge news to have a condo close this high, but at the same time let’s not think everything is now worth four million. Here are the sales:

a) Governor’s Mansion in Carmichael in 2004 at $4.1M
b) Sierra Oaks home in 2013 at $4.7M
c) Elk Grove estate in 2005 at $4.6M (sold $1.3M in 2011)
d) Downtown Condo at $4.1M

3) Lamborghini & Camry: Some have said things like, “I can’t afford the market any longer.” But this one “lone ranger” sale isn’t the new comp for everything in town. It’s tempting for sellers to price higher now, but it’s not like someone ten miles away is going to pay more at the $300,000 level because of a multi-million dollar condo sale. If my neighbor bought a Lamborghini, that doesn’t all of a sudden mean I have to pay more for a Camry…

4) An emerging market: There is definitely an appetite for high-end condos in Sacramento, so let’s expect to see this niche market find more expression in coming time. Ultimately the sales office at the Kimpton Sawyer Hotel has done well so far to sell units far above what many locals imagined. Of course the eventual test for these properties will be to see what happens when they hit the resale market in coming years without the benefit of marketing from a Beverly Hills sales agency.

I hope that was interesting or helpful. Anything to add?

-—-—- Big monthly market update (absurdly long on purpose) ———–

The market feels very normal for the spring. Well, I guess what I mean is all the stats are normal, but buyers are pulling the trigger very quickly and we’re seeing multiple offers on just about anything that is priced correctly. One of the bigger stories is sales volume so far in the beginning of 2018 is up 5% in the region. In fact, we’ve seen the strongest start to the year since 2013. Buyers have been starving for more inventory, so they’re gobbling up anything in site as long as it’s not overpriced. But part of the growth in volume these past few months could also stem from some buyers trying to get a slice of real estate pie before interest rates rise.

New recap images: Last month I introduced recap images. Here’s round two, though this month my data from last year is less complete since I tore my knee a year ago (I’m all better now). Anyway, what do you think?

Two quick things:

1) Inventory is increasing: We’re starting to see inventory increase a bit. For years it did nothing but decline, but toward the end of last year it seemed to flatten out, and so far this year we’ve seen some slight upticks. Granted, inventory this past month was only up 3% in the region compared to the same time last year, but that’s better than being perpetually down every single month.

2) The wrong comps with new construction: With more new construction lately, it seems like some sellers are using brand new nearby homes as “comps” for their older homes. Let’s remember the new ones often sell with a hefty price premium, so they really don’t make adequate comps. My advice? Don’t get distracted by the brand new stuff. Try to find older sales that are similar rather than assuming buyers are going to pay the same amount as a new home.

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

DOWNLOAD 52 graphs HERE: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

SACRAMENTO COUNTY (more graphs here):