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

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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):

SACRAMENTO REGION (more graphs here):

PLACER COUNTY (more graphs here):

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).

Questions: What do you think of that $4.1M condo sale? What else are you seeing out there in the market? I’d love to hear your take.

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Slumping volume, too many million dollar listings, & rising rates

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We love sensational real estate headlines, but here’s what tends to happen. We talk about something like it’s the biggest thing ever, it ends up being no big deal, and then we move on to the next thing. It sort of reminds me of Y2K because there was so much fear about worldwide chaos, but then nothing happened. All bark. No bite. Anyway, let’s talk about a few issues, and you decide if these are hyped-up “Y2K real estate trends” or not. Then I have a big Sacramento market update for anyone interested. Any thoughts?

Rising interest rates:

For years we’ve heard interest rates would rise, but nothing really happened. Well, now things have begun to change. It’s like Mom & Dad were threatening a punishment, but they never followed through, so we didn’t believe them…. until now. Interest rates are finally ticking up and it’s bound to make an impact on prices if the increase hits buyers in the wallet. What I mean is if buyers in mass can afford the increase, then it’s not a big deal unless buyers start showing resistance. An increase in rates won’t hit everyone the same either as buyers at the lowest price ranges will feel it the most. Keep in mind rising rates in the near future could actually lead to buyers rushing the market instead of withdrawing from it. What will happen? Nobody knows. Heck, rates are still incredibly low, and we don’t even know if they’ll continue to rise. But the Fed has been more forthright about coming rate hikes, so that’s why this feels like more than pure hype. Anyway, let’s see how this plays out and keep an eye on creative financing from lenders too.

Are there too many million dollar listings?

Headlines are talking about the high-end market softening in portions of the country. Locally I’ve heard that sentiment since inventory seems imbalanced at the top right now in the Sacramento region. It sounds alarming to think there is a year’s worth of million dollar listings, so it’s easy to conclude the high-end market is sagging. But last year at the same time we saw nearly the same number of listings. If you need to see the numbers, at the beginning of February 2017 there were 213 listings above $1M and this year there were 220 listings at the beginning of the month. It would be insanity to see twelve months of housing inventory at the lowest prices, but it’s actually fairly normal for January stats for the high-end. In short, it could be possible the million dollar market is softening, but for now let’s not use the number of listings alone as evidence.

Is sales volume slumping?

I’ve been noticing real estate headlines talking about slumping sales volume in many markets across the United States. For Sacramento County we actually had the strongest January since 2013, yet it is true that yearly volume is down 2.5%. This isn’t shocking news because nearly all of last year volume was down 1-2% depending on the month. Here’s the thing though. Sales volume in 2017 was slightly lower than 2016, but it was actually higher than 2015. This reminds us if we only look at one year of sales we might miss the bigger trend. Anyway, volume is also down in the entire region, though only by 1%. Overall it’s fair to talk about lower volume because that’s a fact, but it’s probably not fair to hype the issue too much – especially since volume is actually higher than 2015. Let’s keep watching though because it would be a huge deal if sales volume really did start to decline significantly.

Overpricing because the market is so “hot”:

In case you wanted some background noise while working, I did a Facebook Live Q&A last week with Realtor Justin Vierra and we talked about pricing for the “unicorn.” Overpricing is a real issue in today’s market. By the way, if anyone wants to do podcasts and interviews, I love that stuff. You can listen to our hour-long conversation here too in case you wanted more than just this clip.

I hope that was interesting. Anything to add?

–——-——- Big monthly market update (it’s long on purpose) ———–——-

Right now we’re in that weird place where sales stats are sagging from a slower fall season, but the market is heating up. For January stats we saw all the typical signs we’d expect to see. Sales volume declined, it took an extra day to sell, most price metrics sloughed, and inventory increased. The median price in Sacramento County actually has been fairly flat, but last week I talked about how the market really did slow down despite the flatness. Anyway, I have quite a few visuals below to help show how the market has moved in recent time.

Housing supply: Inventory is up a bit right now. It’s not much, but this January was up 6.5% in the region compared to last year at the same time. Over the past few months inventory has actually ticked up slightly, and that’s welcome news for the market. Yet before writing home to say the housing shortage is over (it’s not), let’s wait to see what happens during the spring market. I’m not overly impressed at a few months of slightly higher inventory around the slower fall months. Let’s watch the spring market, which will be the bigger test.

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

DOWNLOAD 62 graphs HERE: Please download all graphs in this post and more here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

SACRAMENTO COUNTY (more graphs here):

SACRAMENTO REGION (more graphs here):

PLACER COUNTY (more graphs here):

NOTE: I cut out a few graphs and data this month. If you miss something, let me know.

DOWNLOAD 62 graphs HERE: Please download all graphs in this post and more 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 in the market? Is the top softening? What are buyers saying about interest rates? Anything I missed? I’d love to hear your take.

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My last blog post in 2017, Bitcoin, & a big market update

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I started this blog almost nine years ago, and this is my last post for the year. After next week I’ll be lying low, enjoying family, doing some woodworking, staying on my diet (I’m down 30 pounds), and taking some time to get recharged. But first I have two things on my mind. 

Thank you: Thank you so much for hanging with me for another year. I cannot tell you how much I appreciate your support, friendship, comments, emails, insight, and the business you send my way. It might sound cheesy, but I get so much joy out of writing once a week and I’m grateful for you. It’s been a dynamic year for business too, and I honestly could not be doing this without your support. Here’s to continuing to grow together. Please don’t stop asking questions, pitching in thoughts, and challenging my thinking.

Big market stats: Secondly, if you’re looking for the latest market trends for Sacramento, you’ve come to the right place. Check it out below. 

From my family to yours, Merry Christmas and Happy Holidays.

–——-——- Big monthly market update (it’s long on purpose) ———–——-

The market is often dull during the fall, but that’s not the case this year. I mean, we’re definitely seeing slightly lower prices, it’s taking longer to sell, and sales volume is sloughing, so clearly the signs of a slower market are here. Yet this fall season isn’t really incredibly slow or painfully dull either.  

Sideways: Price metrics were more or less sideways last month, though some metrics either showed a slight uptick or a slight decline. Overall there wasn’t much change from the month before in terms of price, but it took an average of three days longer to sell. This November saw almost the same amount of sales as last November for the region. Housing inventory is slightly higher than the same time last year, but it’s still hovering at 1.60 months for the region – which is still low. In other words, the housing shortage didn’t go anywhere.

Bitcoin & Modest Appreciation: The rapid increase of Bitcoin has been the talk of town lately, and it’s also seemed to fuel some conversations about quickly rising values in real estate. I get the comparison, but we’re really not seeing Bitcoin type huge increases in real estate. In fact, this year in Sacramento values have seemed more modest in many price ranges, which means somewhere around 5-7% upticks. I realize “modest” in California would be huge in other areas of the country, but that’s not really the case on the west coast. Yet the bottom of the price market easily saw 10-15% increases in many areas of Sacramento. That’s not so modest.

Our “Bitcoin” real estate market in 2012 & 2013: The closest to rapid appreciation we’ve seen in Sacramento in recent years took place between 2012 and 2013 in which we saw price metrics change by 35-40% over the course of one year. During that time both real estate agents and appraisers said it wasn’t easy to keep up with how quickly prices were changing.

$7M Sale: Did you see the sale in Granite Bay that closed two days ago at $6.95M? What the? This is one of the highest residential sales ever in the Sacramento area. You can watch a video tour of it here. Also, that $4.1M condo listing Downtown has been pending since November. I don’t know what it’s in contract for yet, but let’s talk about it when it closes.

Rents: Sacramento made a list again on the fastest growing rents. Yardi Matrix reports a 9.1% uptick in rent year over year in November. Now if we can only get wages to grow by 9.1% too.

Price Sensitive: Lastly, the market may not be incredibly dull like it is during some fall seasons, but it’s still price sensitive. This means buyers are tending to be logical, well-informed, and often not so desperate as to offer any amount. My advice? Don’t just look to the high sales from the spring and summer. What is getting into contract right now? That will give you a good picture of the current market and a hint for how to price too (possibly lower than the height of spring / summer).

I could go on, but let’s get visual.

DOWNLOAD 69 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

SACRAMENTO COUNTY (more graphs & stats here):

SACRAMENTO COUNTY:

  1. The median price is currently $349,450. It’s the same as last month but down 1% from summer.
  2. The median price is 7.5% higher than the same time last year.
  3. Sales volume in November was 4.5% lower this year than 2016. There were 1354 single family detached sales last month.
  4. It took an average of 32 days to sell a home last month (one year ago it was taking 4 days longer).
  5. The median days on market last month was 18 days.
  6. It took 3 more days to sell in Nov. compared to October (median days).
  7. FHA sales were 20% of all sales last month in the county.
  8. Only 1.4% of sales last month were bank-owned & 0.9% were short sales.
  9. The avg price per sq ft was about $224, which increased last month (11% higher than last year).
  10. The avg sales price softened slightly last month and is currently $385,778. This is 10% higher than last year.
  11. Cash sales were 13% of all sales last month.

SACRAMENTO REGION (more graphs & stats here):

SACRAMENTO REGION:

  1. The median price is $389,000. It softened nearly 1% last month.  
  2. The median price is 9.5% higher than the same time last year.
  3. Sales volume in November was nearly the same as Nov 2016. There were 2220 single family detached sales last month.
  4. It took an average of 36 days to sell a home last month (one year ago it was taking 5 days longer).
  5. The median days on market last month was 19 days, which means properties are selling really quickly.
  6. The median days on market increased by 1 day last month, which shows a slowing in the market.  
  7. FHA sales were 17.2% of all sales last month.
  8. Only 1.5% of sales last month were bank-owned & 0.8% were short sales.
  9. The avg price per sq ft was about $230, which increased last month (10% higher than last year).
  10. The avg sales price increased less than 1% last month and is up 10% higher than last year.
  11. Cash sales were 14% of all sales last month.

PLACER COUNTY (more graphs & stats here):

PLACER COUNTY:

  1. The median price is currently $451,000 and decreased about 1% last month.
  2. The median price is 5.6% higher than the same time last year.
  3. Sales volume in November was 3.6% lower than 2016. There were 473 single family detached sales.
  4. It took an average of 40 days to sell a home last month (one year ago it was taking 9 days longer).
  5. The median days on market last month was 19 days, which means properties are selling really quickly.
  6. The median days on market deceased by 3 days last month (don’t read too much into that). 
  7. FHA sales were 12.6% of all sales.
  8. There were only 9 bank-owned sales last month and only 2 short sales.
  9. The avg price per sq ft was $236, which is slightly higher than last month (9% higher than last year).
  10. The avg sales price is currently $513,280. This is 6.8% higher than last year.
  11. Cash sales were 17% of all sales last month.

DOWNLOAD 69 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: What are you seeing out there in the market? Anything I missed? I’d love to hear your take.

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

A slowing market & value by Starbucks cups

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Imagine not being able to see home prices. How would we measure value? In other words, could we determine higher values in one area compared to another based on things like school ratings, owner occupancy rates, or the income of residents? Let’s consider that, talk about the market in terms of Starbucks cups, and then dig deep into Sacramento trends for those interested. Any thoughts?

If we couldn’t see prices, what would be the best indicator of value?

1) Income of residents.
2) School ratings.
3) Percentage of owner occupied units.
4) Crime rates.
5) Length of grass.
6) Walking score.
7) Proximity to Downtown.
8) Proximity to coffee shops.
9) Number of cats in the neighborhood (thanks Gary).
10) What else?

The Takeaway: If we didn’t have access to prices in an area we could probably analyze some of the list above to get a sense of higher or lower values in certain areas. Ultimately we have to remember value is about the stuff behind the price, so it’s key to be in tune with what’s making value move in various places.

Here is a Twitter poll I ran:

Starbucks cups instead of price: Keeping with the theme, let’s talk about the market in terms of the cost of Starbucks cups (tall size) instead of price.

Real stats in the Sacramento region (but with coffee):

1) The median price softened by 2,512 cups of Starbucks coffee last month.
2) Since summer the median price has softened by 5,128 cups of coffee.
3) The median price will likely decline by 10,000 cups of coffee this fall.
4) The median price is up 15,384 coffee cups compared to last year.

Okay, don’t take me too seriously on this. But isn’t it interesting to think about value beyond just price? Next week: Avocado toast price metrics… (kidding).

I hope that was interesting. Anything to add?

–——-——- Big monthly market update (it’s long on purpose) ———–——-

We’re at that time of year. Sales volume has likely peaked for the season. The median price probably climaxed in the summer. Housing inventory is increasing, and each month it’s taking longer to sell in Sacramento. Overall the market has a slower feel compared to a few months ago, values have begun to soften in many areas, and even rents have been flat for a few months according to Yardi Matrix. We’re seeing a seasonal softening in county-wide stats (especially regional stats), but we’re also observing slowness in many neighborhoods as homes are tending to have less offers, less traffic, and even sell for slightly less than the highest prices from a few months back. News like this sometimes freaks people out because they think the market is tanking, but like clockwork the market almost always softens during the fall.

A huge stat to know: Every year the median price and average sales price in Sacramento County tend to soften by about 5%. This doesn’t necessarily mean values decline by 5% in every neighborhood or price range, but it does mean we can expect price softening in most areas during the fall season.

A word to sellers: Don’t be that stereotypical person who doesn’t listen to the market when it comes to price. Right now the market is slowing and the number of price reductions is higher than it’s been all year. As long as you’re priced reasonably you’re going to get offers, but be cautious not to price unrealistically high because you’re hearing the market is blazing “hot”.

I could go on, but let’s get visual.

DOWNLOAD 73 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

SACRAMENTO COUNTY (more graphs & stats here):

SACRAMENTO COUNTY STATS:

  1. The median price is currently $347,500 and dipped 0.1% last month.
  2. The median price is 9.6% higher than the same time last year.
  3. Sales volume in September was 6.8% lower this year than 2016. There were 1499 single family detached sales last month.
  4. It took an average of 26 days to sell a home last month (one year ago it was taking 4 days longer).
  5. The median days on market last month was 14 days.
  6. It took 2 more days to sell in September compared to August (median days).
  7. FHA sales were 19.4% of all sales last month in the county.
  8. Only 1% of sales last month were bank-owned & 1.1% were short sales.
  9. The avg price per sq ft was about $223, which is slightly higher than last month (11% higher than last year).
  10. The avg sales price increased about 1.3% last month and is currently $384,000. This is 10.9% higher than last year.
  11. Cash sales were 13% of all sales last month.

SACRAMENTO REGION (more graphs & stats here):

SACRAMENTO REGION STATS:

  1. The median price is $385,000 and declined about 1% last month.
  2. The median price is 8.4% higher than the same time last year.
  3. Sales volume in September was 3.6% lower this year than 2016. There were 2422 single family detached sales last month.
  4. It took an average of 31 days to sell a home last month (one year ago it was taking 4 days longer).
  5. The median days on market last month was 15 days, which means properties are selling really quickly.
  6. The median days on market increased by 2 days last month, which helps shows a slowing in the market.  
  7. FHA sales were 16.1% of all sales last month.
  8. Only 1.1% of sales last month were bank-owned & 0.8% were short sales.
  9. The avg price per sq ft was about $228, which increased about 1% last month (10% higher than last year).
  10. The avg sales price declined about 1% last month and is currently $425,516. This is 8.3% higher than last year.
  11. Cash sales were 14.9% of all sales last month.

PLACER COUNTY (more graphs & stats here):

PLACER COUNTY STATS:

  1. The median price is currently $450,000 and declined about 3% last month.
  2. The median price is 4% higher than the same time last year.
  3. Sales volume in September was 1.3% less this year than 2016. There were 524 single family detached sales.
  4. It took an average of 34 days to sell a home last month (one year ago it was taking 7 days longer).
  5. The median days on market last month was 18 days, which means properties are selling really quickly.
  6. The median days on market increased by 3 days last month, which helps shows a slowing in the market. 
  7. FHA sales were 12.9% of all sales.
  8. There were only 3 bank-owned sales last month and only 2 short sales.
  9. The avg price per sq ft was $231, which is slightly higher than last month (9.1% higher than last year).
  10. The avg sales price decreased about 3.5% last month and is currently $490,615. This is 1.6% higher than last year.
  11. Cash sales were 17.1% of all sales last month.

DOWNLOAD 73 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: Besides price, what do you think the strongest indicator of value is for a neighborhood? Anything else you’re seeing in the market? Should we start a Starbucks Cups Price Index maybe? I’d love to hear your take.

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