sales volume

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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At least read this part of the appraisal

January 15, 2019 By Ryan Lundquist 15 Comments

I know, nobody actually reads appraisal reports. Well, except for one thing – the value. But let’s talk about a critical place to look in an appraisal that can make all the difference. I have a story to share too about why this even matters.

BONUS: Check out the new new sales volume graphs below.

Look for these boxes: The bottom of page two in the appraisal has a few important boxes the appraiser can check, and these boxes help show if the value is “as is” or if there are required repairs, inspections, or other conditions. My advice? Be sure to look at these boxes carefully as well as any commentary listed in the space below (or the addendum if it says “See Addendum”).

If the value is “as is”, the appraiser is saying the property is worth that amount without any required repairs or further inspections needed.

If a “subject to” box is checked that likely means the value has already taken into consideration certain repairs or that the property will pass a future inspection (maybe a pest inspection, foundation inspection, two-year roof certification, etc…). So if an owner does the repairs listed, it doesn’t increase the value because the value was already based on the repairs being made.

In short, if you see a box checked besides “as is”, that’s a clue there is more to understand about the value.

An example of why this matters: A real estate agent uploaded an appraisal I did into MLS. This appraisal was completed for a lawyer and the value was not “as is”. In fact, this property had extensive damage, but the attorney asked me to value the property as if it was in average condition. This was spelled out blatantly in my report by using the boxes above (and in other places).

The problem here is the selling agent may not have realized the appraisal was not “as is” because the listing said something like, “Appraised at $670,000 in August 2018.” Yet the property was listed for $100,000 less because it was being sold “as is.” So the question becomes, could this be a liability for the agent? What if an out-of-town buyer bought based on thinking he/she was getting a discount because of the attached appraisal? Also, does this expose the appraiser to liability or reputation damage if people are reading the report and not understanding the value isn’t “as is”? I’m not a lawyer, but something doesn’t quite smell right here.

I’m not trying to make a big deal out of this, but sometimes details matter, so I caution real estate friends to look closely at the appraisal to understand the value. By the way, the agent was cool about removing the appraisal when I reached out about this.

The Big Point: Please read the bottom of page two to understand if the value is “as is” or if there are repairs built into the value. That can make all the difference.

I hope this was interesting or helpful.

SALES VOLUME SLUMPING: On a different note, here are some graphs I made yesterday to tell the story of sales volume slumping 11% in the Sacramento Region. I included a graph from 2005 also in case you’re wondering what volume did when the housing market imploded.

Questions: Any stories to share? Do you look at the boxes I mentioned above? When is it okay and not okay to upload appraisals in MLS?

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The problem of not listening in a slower market

September 12, 2018 By Ryan Lundquist 9 Comments

It’s not easy to listen when the market is slowing. This is true for sellers taking in pricing advice, and it’s also true for the average person reading national headlines. Let’s talk about this. Then for those interested I have a big market update. Anything to add?

Sellers not listening: All year it seems sellers have struggled to listen to pricing advice from their real estate agents. I guess I can understand because they’ve had nothing but “hot” headlines for six years. But I think there’s another issue too. Maybe we’re seeing some of the effect of sellers having more real estate data at their disposal than ever because of Zillow, Redfin, Metrolist, blogs… So right or wrong, we have sellers who now they think they know better than anyone. Whatever the case, sellers are making real mistakes out there by not listening to pricing advice and instead pricing for a much hotter market than we actually have. In case it’s useful, I wrote an article in Comstock’s magazine with some practical advice for sellers.

Listening to national headlines: There have been sensational headlines about the market beginning to crash, and it’s difficult at times to think past these headlines and be objective. Let’s remember though that headlines are designed to get clicks, and a headline may or may not mean anything for a local market. My advice? Don’t let any headline cloud your judgement of local trends.

Listening without enough context: This sounds like such a geeky point, but hang in here with me because it matters. Lots of times in real estate we end up comparing the current year with the previous year, and that’s actually a good thing. But my sense is we’re missing something if we pay too much attention to last year only and ignore prior years. In Sacramento at least it’s been a few seasons since we’ve had a dull fall, so it’s easy to forget what that feels like. Moreover, if we look at current inventory levels beginning to push a two-month housing supply, that looks huge compared to the past couple years. But if we look at inventory from 2014 when we had a dull fall season, it was hovering between 2 to 2.75 months at the time. This reminds us it’s possible to have higher inventory at this time of year without the market utterly tanking. I don’t say this to diminish the importance of rising housing supply right now, but only to highlight the need to look to a few more years of data as we interpret what is happening. After all, sometimes pulling stats is like pulling comps. If we only look at the past 90 days of sales, that might not be enough. At times we need a much wider view to really see the market. The same thing happens with real estate data. Know what I’m saying?

I hope that was helpful. Do you “hear” what I’m saying?

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

The market has been slowing. Duh, we know that. Everyone’s talking about it. Let me unpack what I mean below with some comments on some of the bigger themes right now:

Coffee vs. skimming: This post has lots of information. It’s designed to skim until you find something you want to read, or pour a cup of coffee and really spend some time digesting stuff.

BIG ISSUES IN SACRAMENTO:

Prices softening: Most price metrics in the region softened between 1-2% last month, though the median price in Sacramento County was flat. Around this time of year we normally see prices dip (as graphs show below).

Slowing momentum: We know the market is slowing for the season, but it’s also slowing down in terms of overall momentum. What I mean is in years past we’d look at stats and see price metrics were up a good 8-10% over the year, but these days they’re only up closer to 4-6% instead.

Slowing rent: Rent growth has been flattening lately, which is a good thing since rents sprinted way ahead of actual wage growth. Keep in mind this doesn’t mean rents have declined. It just seems the rent trend is flattening.

Sales volume is not crashing: One of the bigger issues to watch to know if a market is crashing is a change in sales volume. In other words, if properties stop selling, we have a big problem. Last month sales volume was down about 6% in the region and 2.6% in Sacramento County. Uh oh, is that a warning sign? Look, this is important to watch over time to know if we have a trend on our hands, but before making too much of one month of data, let’s look to the bigger picture. The truth is sales volume is actually higher so far this year in the region than last year and it’s up 1% in Sacramento County too. No mater how we look at it, volume has actually been strong. This isn’t spin, but fact. Please see my charts below. So on one hand let’s watch these next months carefully because it could be a problem if monthly sales volume does start to come in lower, but let’s also not give laser focus to a weaker August while ignoring the bigger context either.

Inventory is definitely up: It’s really noticeable to see more inventory right now. Even my non-real estate wife has said she’s seeing more listings when driving around town. Housing supply is actually up 25% compared to the same time last year, and it’s literally the first time in three years since we’ve had more than a two-month supply of homes for sale. Obviously if the rate of increase keeps climbing and the market doesn’t absorb new listings, we could have a problem on our hands. But let’s also remember when the market was very dull in the fall of 2014 we saw inventory hover between 2 to 2.75 months at the time.

Taking longer to sell: It took five days longer to sell last month compared to the month before. And this year it took 4 day longer than last year at the same time. So the market has slowed down from last year, but it’s definitely slowing from the past few months too. Sellers, did you hear that? You are losing power in this market and buyers are gaining it. My advice? Price according to listings that are actually getting into contract rather than the highest glowing sales from the spring. This week I talked with an agent about the market feeling really soft in a particular area because listings weren’t moving. But sometimes I wonder if it’s the market or just overpriced listings. From my vantage point almost every listing in the neighborhood was priced 5-10%+ too high, so it wasn’t a real shocker they weren’t selling.

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

DOWNLOAD 72 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).

BIG QUESTIONS:

1) How did the market change from last year?

2) How did the market change from July to August?

3) Is sales volume really crashing right now?

4) How does the current market compare to the previous peak?

2005 vs CURRENT: A few months ago I talked about peak prices because some metrics were showing 2005 levels. But with the market softening right now prices are growing further apart from the “top” so to speak.

SACRAMENTO COUNTY (more graphs here):

SACRAMENTO REGION (more graphs here):

PLACER COUNTY (more graphs here):

I hope that was helpful.

DOWNLOAD 72 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: Do you think sellers are struggling to listen right now? What are you seeing out there in the market? I’d love to hear your take.

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How would you know if the market was starting to tank?

August 14, 2018 By Ryan Lundquist 29 Comments

Is the market starting to tank? Or is it just a seasonal slowing? I’m getting asked this question all the time, so I wanted to share some thoughts. Then I have a big local market update for anyone interested.

How would you know if the market was sliding? I wish this was a 10-second answer, but it’s a big conversation, so let’s unpack some thoughts.

1) Change in inventory: It’s normal for housing inventory to increase as a market begins to cool for the season, but when a market starts to make a big turn we’d likely notice new listings aren’t being absorbed and the number of listings keeps growing beyond a normal pace.

2) Change in sales volume: Sales volume usually slows down as the market cools, but during a big shift we’d expect to see a more substantial change in sales volume over time. I’m talking about a market where buyers put on the brakes and properties stop selling. Currently in many areas throughout the country we’re seeing some smaller changes in sales volume. Could it be the start of something? Sure. But in my mind we need more time to see if this is a consistent pattern or just a slower end of the year.

3) Word on the street: What are people saying? How does the market feel in the trenches? We can learn so much when talking with informed local buyers, sellers, agents, appraisers, and other real estate professionals. Ask things like, “What are you seeing out there?”, or “What’s the market doing?” This is important because before we see a change in stats we’ll hear of change in the trenches. As an FYI, here’s a Twitter poll from a few days ago.

4) Less pendings: When a market starts to slide we can expect to see less pending sales, which is a big sign of waning demand. Let’s just remember though around this time of year we usually see fewer pendings as the market cools. This means we have to be cautious about saying the market is crashing just because pendings soften. My advice? Look for abnormal changes beyond a regular seasonal dip in pending sales.

5) Price changes aren’t the big issue: When a market shifts directions we often look to prices to tell us if things are changing, but it takes time for prices to catch up with the trend. For example, in Sacramento in 2005 we saw housing inventory triple and sales volume drop 43% in one year. Yikes! Those are insane stats, but price changes weren’t all that dramatic during this time period.

6) Other metrics: Lots of experts say to watch the number of new homes built as an indicator of the market changing. That’s huge. Others say it’s the GDP or economy, easy credit, housing affordability index, or flux capacitor sales (kidding on that one). There are definitely important indicators out there, and we should tune in, but for a local market I might suggest paying the most attention to inventory, sales volume, and the word on the street. If new construction is booming in your market though, definitely watch that too.

7) A closing dating analogy: Just like a dating relationship needs time to figure out what it’s going to be become, the same thing happens in real estate. Right now in many areas of the country we’re seeing inventory increase and sales volume starting to slump. At the least these are signs of a slowing market for the season, but it also makes us wonder if it’s something more. What does it really mean? Where will things go? The truth is we don’t fully know yet because the future hasn’t happened and we need more time to see how things unfold. I realize that’s frustrating to hear, but it’s honest.

CLOSING TIPS:

1) Crystal balls: If you don’t have a crystal ball that works, be careful about making very specific real estate predictions.

2) Watch local data closely: More than ever it’s critical to watch local data. Lots of articles are talking about “national” trends, but what’s happening locally?

3) Don’t just regurgitate headlines: It’s easy to read headlines and let the titles become our talking points. Be careful of that since headlines are designed to get clicks and they may or may not reflect the market.

4) Know the season: It’s not always easy to understand what a market is doing at this time of year when things usually slow down. My advice? Understand normal seasonal trends by studying past years. What does the market normally do at this time of year? This will help us spot normal vs abnormal trends.

I hope that was helpful.

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

The market has been slowing for the past few months in Sacramento. We’re seeing what we’d expect to see at this time of the year like softer prices, more price reductions, a lower sales-to-list price ratio, and it’s taking longer to sell. We’ve had a hefty uptick in housing inventory though, and that’s something to watch – especially if it continues over time (that would be a problem). But for context, housing inventory is actually still historically low, so it’s not like we have a crazy high level right now. Some have wondered if the market is a bit stalled right now, but sales volume is still looking pretty strong and so are pendings. But I’d say there is some shock in the market because of the rise in inventory. Keep in mind one of the problems is so many sellers are overpricing, and that only makes inventory increase because these properties end up sitting instead of selling. On the other hand homes that are priced well are moving quickly, and 48% of all sales in the region last month had more than one offer. So despite a slowing narrative, the market isn’t painfully dull either.

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

DOWNLOAD 64 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).

JULY 2017 vs JULY 2018: So how did this past month do? One of the ways we find the answer is to compare last month with the same month in 2017.

JUNE 2018 vs JULY 2018 (NEW CHARTS): The problem is if we only look at July this year versus July last year, we’ll miss what the market is doing right now. So that’s why I have new charts to show the previous month vs the most recent month. But there’s still an issue because if we only look at this chart and don’t understand that the market normally softens around this time of year, we might walk away with the idea that the market is utterly tanking when it’s normal to see inventory increase, sales volume decline, etc… Look at graphs below to help see seasonal changes (or check out this older YouTube video where I talk about seeing the seasonal market).

SALES VOLUME: One of the things we need to watch is sales volume because if we start to see a trend of slumping sales, it could be a sign the market is in trouble. The truth is we’ve technically had a couple of months in a row of lower sales volume in the region. But volume was only off by 4% in June and it was barely off at all this past month (which is why I said “technically”). When you really look at it, sales volume this year in 2018 so far has been stronger than last year. But when we look at the past 12 months as a whole it’s clear volume is down (still only slightly though). Ultimately volume is not crashing right now based on the stats, so let’s be careful about saying it is.

NOTE on Trendgraphix: I have some thoughts on the way Trendgraphix is pulling stats. This month their stats show sales volume in Sacramento County is down by 6%, but that’s not accurate. I can explain why if anyone wants to know. And I love Trendgraphix. What an incredible resource. I just find when we’re looking at the market carefully in a time like this, it’s critical to know how the numbers work.

2005 vs CURRENT: In case you wanted to compare current price metrics with 2005, here you go. A couple of months ago I talked about peak prices because some metrics were showing 2005 levels. But with the market softening right now we’ll expect over the fall season to see current prices grow further apart from the “top” so to speak.