Making the numbers say what we want (and a Sacramento market update)

We can make numbers say whatever we want. We see this all the time in the media, politics, and even in real estate. Sometimes it’s a matter of intentionally fudging the numbers, but other times we might be honest about sharing something but actually still get it totally wrong. Today I want to highlight a real life example how we can end up saying something totally different about the market depending on the numbers we’re looking at. Whether you’re local or not, I hope you can take something away from this post. Then for those interested we’ll dive into a big Sacramento market update. Any thoughts? I’d love to hear your take.

Example 1: Sales price to list price ratio:

sold-vs-list-price-percentage-in-sacramento-county

The sales vs. list price percentage is the ratio between the sales price and whatever the most recent list price was before a property got into contract. For example, imagine a property listed at $100,000, was reduced to $98,000, and then went into contract at $98,000. The sales to list price would be 100% (98/98). If we look at this metric alone and see a county average of 100%, it looks like properties are selling for whatever they’re listed for. Woohoo, the market is hot!!!

Example 2: Sales price to ORIGINAL list price ratio:

sales-price-to-original-list-price-in-sacramento-county-by-sacramento-appraisal-blog

The sales to original list price ratio is the relationship between the original list price and the final sales price. For example, imagine a property listed at $100,000 but was reduced to $98,000, and then went into contract at $96,000. The sales to list price ratio would be 96% (96/100). This metric takes into account ALL price reductions, and in my mind tells a more fuller story of the market.

KEY QUESTION: Which one above does your CMA report?

BIG POINT: If we look at the sales price to list price ratio the market seems like it’s NOT softening. But if we take a deeper look at the sales price to ORIGINAL list price ratio, we see properties on average sold for 4% less than their original list price last month. This is definitely a more telling stat because it reminds us how many properties have been overpriced lately. Remember, there were nearly 1800 sales last month, so an average 4% decline is a big stat. But it’s easy to miss that if we don’t know what to look for and end up reporting the first stat above.

—-—–—– And here’s my big monthly market update  ———–—–

big-monthly-market-update-post-sacramento-appraisal-blog-image-purchased-from-123rfTwo ways to read the BIG POST:

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

DOWNLOAD 70 graphs HERE: Please download all graphs in this post (and more) here as a zip file. Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Quick Market Summary: The market feels like it should at this time of year. It’s taking slightly longer to sell than it was a couple of months ago, the sales to original list price ratio has been declining, and prices are softening as the hot summer fades away. This doesn’t mean the market is dull at every price range though. In fact, the bottom of the market under $300,000 is definitely more aggressive than properties above $500,000. Right now housing inventory is 11% lower than it was the same time last year and a whopping 35% lower than it was in 2014. If you remember, two years ago the market felt extremely dull and there were about 400 price reductions every day when logging in to MLS (this year price reductions are hovering around 200 tops every day (that’s for the entire MLS coverage area)). This reminds us some fall markets are softer than others. Sales volume this year has been about the same as it was last year, though it’s important to note FHA is down 6% and cash is down over 8% so far. Celebrity house flipping seminars are coming to town frequently in Sacramento, but keep in mind only 2% of all sales in the region last month were bank-owned, which reminds us low-priced fixer deals on MLS are pretty much a thing of the past. Lastly, there has been lots of talk about the market having shifted or beginning a downturn, but right now the stats look to be showing a normal seasonal slowing. We often hear things like, “the market is starting to tank”, but unless we see a real change in the stats or hear something more definitive from the real estate community about values declining, let’s be in tune with the slowing seasonal market. In case it’s useful, here is a video tutorial I did a couple of weeks ago to walk through the slowing season and what it looked like in 2005 also.

Sacramento County:

  1. The median price is 102% higher than it was in early 2012.
  2. Sales volume was up 8.5% this August compared to August 2015.
  3. There were only 4 sales under $100K last month (single family detached).
  4. Sales volume is up about 4% this year compared to last year.
  5. Housing inventory is 11% lower than the same time last year (only 1.57 months of inventory).
  6. FHA volume is down about 6% this year compared to 2015 (though they were 26% of all sales last month).
  7. Cash sales were only 14% of all sales last month.
  8. It took an average of 26 days to sell a home last month, which is 1 day less than the previous month (and 8 less days compared to last year).
  9. REOs were only 3% of all sales last month and short sales were 2.8%.
  10. The median price increased by 1% from last month, is down 3% from two months ago, and is up nearly 12% from last year at the same time.

Some of my Favorite Graphs this Month:

inventory-in-sacramento-county-since-2013-part-2-by-sacramento-appraisal-blog

median-price-context-in-sacramento-county

median-price-since-2013-in-sacramento-county

price-metrics-since-2015-in-sacramento-county-look-at-all

inventory-august-2016-by-home-appraiser-blog

cdom-in-sacramento-county-by-sacramento-regional-appraisal-blog

sales-volume-in-sacramento-county-since-2012

SACRAMENTO REGIONAL MARKET:

  1. The median price is 98.5% higher than it was in early 2012.
  2. It took the same time to sell last month compared to the previous month (but 8 less days compared to August 2015).
  3. Sales volume is about the same as it was last year at the same time (very slightly more this year so far)
  4. Cash sales were 15% of all sales last month.
  5. Cash sales volume is 6.4% lower this year than last year.
  6. FHA sales were 22% of all sales last month.
  7. FHA sales volume is down nearly 7% this year so far.
  8. There is 1.77 months of housing supply in the region right now, which is over 13% lower than the same time last year.
  9. The median price increased last month, but it’s down from two months ago. The median price is up nearly 9% from last year at the same time. The average sales price and average price per sq ft are both up about 8% from last year too.
  10. REOs were only 2% of all sales last month and short sales were the same.

Some of my Favorite Regional Graphs:

median-price-sacramento-placer-yolo-el-dorado-county

regional-inventory-by-sacramento-regional-appraisal-blog

sacramento-region-volume-fha-and-conventional-by-appraiser-blog

days-on-market-in-placer-sac-el-dorado-yolo-county-by-sacramento-appraisal-blog

number-of-listings-in-sacramento-regional-market

interest-rates-inventory-median-price-in-sacramento-regional-market-by-sacramento-appraisal-blog-market

number-of-listings-in-placer-yolo-el-dorado-sacramento-by-home-appraiser-blog

PLACER COUNTY:

  1. Today’s median price is 70% higher than it was in early 2012.
  2. It took 4 more days to sell a house last month than the previous month (but 6 less days than last year at the same time).
  3. Sales volume was down less than 1% in August 2016 compared to last August and is down slightly for the year about 3%.
  4. Both FHA sales were 16% and cash sales were 19% of all sales last month.
  5. There is 2.05 months of housing supply in Placer County right now, which is down nearly 13% from the same time last year.
  6. The median price declined about 1% from the previous month, but for a better context it’s up 7% from last year at the same time.
  7. The average price per sq ft was $214 last month (was $202 last year at the same time).
  8. The average sales price was $472K last month (up about 4% from last year).
  9. Bank owned sales were only 1% of all sales last month.
  10. Short sales were 2% of sales last month.

Some of my Favorite Placer County Graphs:

placer-county-median-price-since-2014-part-2-by-home-appraiser-blog

placer-county-housing-inventory-by-home-appraiser-blog

months-of-housing-inventory-in-placer-county-by-sacramento-appraisal-blog

number-of-listings-in-placer-county-2016

days-on-market-in-placer-county-by-sacramento-appraisal-blog

placer-county-sales-volume-by-sacramento-appraisal-blog

DOWNLOAD 70 graphs HERE: Please download all graphs in this post (and more) here as a zip file. Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

how-to-think-like-an-appraiser-class-by-ryan-lundquistAppraisal Class I’m teaching: On September 29 from 9am-12pm I’m doing my favorite class at SAR called HOW TO THINK LIKE AN APPRAISER. This is a tremendous time where we’ll talk about seeing properties like an appraiser does. We’ll look at comp selection, using price per sq ft properly, and so many issues. My goal is to help you walk away glad you came and full of actionable ideas for business. Register here.

Question: Did I miss anything? Any other market insight you’d like to add? What are you seeing out there? I’d love to hear your take.

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

Stepping on the real estate scale (at the right time of day)

Values are starting to decline. The market is sliding. Price reductions are increasing. This is exactly what we start to hear around August as the market has transitioned from spring to summer. But is the market really crashing? It could be, but sometimes the issue is simple in that we’re not weighing the market in the right context. Today let’s look at a helpful scale analogy and then unpack the Sacramento market in depth (for those interested). Any thoughts?

42512389 - white scale on a wooden table top view, fitness and weight loss concept

A Scale Analogy: Imagine being on a diet and stepping on a scale in the morning before breakfast and then again at night after eating all day. What would happen? Well, it’s going to look like you gained some weight during the day because the body is light and empty in the morning and naturally heavier at night after a day of eating. Unless you want to punish yourself with thoughts of weight gain, the key for using a scale would be to weigh yourself every day around the same time so you are comparing the same context each day. Otherwise when comparing one context (morning) with a different context (night), it might look like you gained weight when you might have actually lost some.

The Big Point: In real estate we have to consider what it looks like to weigh the market. Often at this time of year we start hearing things like, “Values are starting to tank”, when in reality the market may simply be softening for the season. The problem is we don’t see the softening though because we’re stepping on the scale at the wrong time of day so to speak. For example, if we compare stats from June to July, it looks like the market is declining in value since stats have sagged. Yet if we step back and weigh the market in context by comparing June/July 2016 data vs June/July 2015 data, we see stats also sagged last year. Bingo! This helps us see it’s normal for the market to soften up at this time of year (of course it could be declining, but that’s a different post). In short, if we want to get better at seeing the market it’s critical to compare the latest month of data with the same month last year. Otherwise it’s very easy to start making market claims when the truth is we just might be misreading the trend. If you want to use bigger chunks of data like quarters, that’s fine too. Just compare the past quarter today with the same time period last year. You can also look at many years of data to get an even better sense of seasonal trends.

—-—–—– And here’s my big monthly market update  ———–—–

Big monthly market update post - sacramento appraisal blog - image purchased from 123rfTwo ways to read the BIG POST:

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

DOWNLOAD 62 graphs HERE: Please download all graphs in this post (and more) here as a zip file. Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Slowing Market (Quick Summary): The hot spring season is definitely transitioning to a slower market. What do I mean? It’s taking slightly longer to sell today compared to last month, the median price and average sales price declined from the previous month, inventory saw a 20% increase from June (it’s still really low though), and price reductions have been more common. Yet at the same time the market is actually stronger this year as it was taking 4 days longer to sell last year and price metrics are a good 7-10% higher this year too. Overall the market feels fairly “hot” under $300,000, but there has been notable price resistance at higher price levels. These days well-priced properties are going quickly, but otherwise buyers can smell a high price from a mile away – and they’re not biting. It’s easy to think the market is starting to turn or tank, but it’s normal for the market to soften at this time of year. Unless we begin to see otherwise, right now it looks like we are seeing what seems like the start of a typical seasonal downtrend.

Presidential Election & the Market: We’re hearing lots of talk about how the market is strong because it’s a presidential year, but let’s remember the market is doing what it is doing as a result of years of unfolding trends. The presidential election doesn’t all of a sudden trump (no pun intended) the factors that have been driving the market for years and have caused the market to be where it is today. For context, values in Sacramento were increasing rapidly in 2004, utterly tanking in despair in 2008, recovering in 2012 (due to cash investors and 4% rates), and now the market is figuring out how to be normal after modest value increases this spring. Sure, there could be some impact because it’s a presidential year, but let’s defuse the hype and not overstate it. Take a look at the stats and graphs below and see if you can discern any real difference because this year is a presidential year.

Sacramento County:

  1. The median price is 100% higher than it was in early 2012.
  2. There were only 4 sales under $100K last month (single family detached).
  3. Sales volume has been about the same this year compared to last year.
  4. FHA volume is down about 8% this year compared to 2015.
  5. FHA sales were 26% of all sales last month.
  6. Cash sales were only 12% of all sales last month.
  7. It took an average of 27 days to sell a home last month, which is 2 days more than the previous month (and 4 less days compared to last year).
  8. REOs were only 2% of all sales last month and short sales were 2.7%.
  9. There is only 1.69 months of housing supply in Sacramento County, which is 11% lower than it was last year at the same time.
  10. The median price declined by 2.7% last month and the average sales price also declined, though both are 10% higher than they were last year at the same time.

Some of my Favorite Graphs this Month:

Median price since 2013 in sacramento county

price metrics since 2015 in sacramento county - look at all

inventory - July 2016 - by home appraiser blog

CDOM in Sacramento County - by Sacramento Regional Appraisal Blog

Bottom of the Market in Sacramento

inventory in sacramento county Since 2011 - by sacramento appraisal blog

seasonal market in sacramento county sales volume 6

Interest Rates Since 2001 layers of the market in sacramento county - by sacramento appraisal blog

SACRAMENTO REGIONAL MARKET:

  1. The median price is 97% higher than it was in early 2012.
  2. It took 1 day longer to sell last month compared to June (but 4 less days compared to July 2015).
  3. Sales volume is about the same as it was last year at the same time.
  4. Cash sales were 14% of all sales last month.
  5. Cash sales volume is 6% lower this year than last year.
  6. FHA sales were 22% of all sales last month.
  7. FHA sales volume is down nearly 8% this year so far.
  8. There is 1.96 months of housing supply in the region right now, which is just about the same as last year during this time.
  9. The median price, average sales price, and avg price per sq ft all declined last month from June, though they’re all up 7-8% from last year.
  10. REOs were only 2% of all sales last month and short sales were the same.

Some of my Favorite Regional Graphs:

days on market in placer sac el dorado yolo county by sacramento appraisal blog interest rates inventory median price in sacramento regional market by sacramento appraisal blog - market median price and inventory in sacramento regional market 2013 median price sacramento placer yolo el dorado county Regional Inventory - by Sacramento regional appraisal blog Regional market median price - by home appraiser blog sacramento region volume - FHA and conventional - by appraiser blog

PLACER COUNTY:

  1. Today’s median price is 72% higher than it was in early 2012.
  2. It took 3 more days to sell a house last month than the previous month (but 4 less days than last year at the same time).
  3. Sales volume was down about 11% in July 2016 compared to last July and is down slightly for the year about 3%.
  4. Both FHA sales and cash sales were each 15% of all sales last month.
  5. There is 2.25 months of housing supply in Placer County right now, which is up very slightly from last year at the same time (but up 30% from last month).
  6. The median price increased about 1% from the previous month, but for a better context it’s up 10% from last year at the same time.
  7. The average price per sq ft was $216 last month (was $202 last year at the same time).
  8. The average sales price was $480K last month (up about 11% from last year).
  9. Bank owned sales were only 1% of all sales last month.
  10. Short sales were 0.07% of sales last month.

Some of my Favorite Placer County Graphs:

days on market in placer county by sacramento appraisal blog interest rates inventory median price in placer county by sacramento appraisal blog months of housing inventory in placer county by sacramento appraisal blog number of listings in PLACER county - 2016 Placer County housing inventory - by home appraiser blog Placer County price and inventory - by sacramento appraisal blog Placer County sales volume - by sacramento appraisal blog

DOWNLOAD 62 graphs HERE: Please download all graphs in this post (and more) here as a zip file. Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Question: Did I miss anything? Any other market insight you’d like to add? I’d love to hear your take.

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

Packing a market punch in Sacramento

It’s easy to say things like, “The market is on fire” or “Buyers are hungry out there”. Yet I find vague statements don’t pack much of a punch. It’s far more powerful when we get specific. For instance, did you know sales volume is up almost 10% this year so far? Or FHA buyers were 28% of all sales this past quarter in Sacramento County? Those stats carry some weight and bring me pause.

sacramento appraisal blog - image purchased and used with permission from 123rf dot com

Goal of the Big Monthly Post: The goal of this big market update is to help highlight what the market is doing and help us describe it a bit better. If you’re local, absorb what is here and share some of the talking points below with your contacts. If you’re out of town, I’d love to hear about your market also. Email subscribers, I recommend reading this post on the blog instead of email.

Two ways to read this post:

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

One Paragraph to Describe the Sacramento Market: The first half of 2015 is now over, and all year buyers have expressed a huge appetite for the market. Sales volume is up about 10% in the region, and pendings have routinely been 20%+ higher each month this whole year. Sales volume in June was actually higher than it’s been in about three years. More sales has led to inventory declining, though it’s important to note more listings have definitely been hitting the market (and there have been more price reductions too). While many properties are generating multiple offers and selling very quickly, buyers are also finicky about pulling the trigger on anything that is not well-priced or with an adverse location or condition. Some sellers are severely overpricing their homes too. The median price stayed about the same last month compared to the previous month. One of the biggest factors shaping this market is the power of FHA buyers who now represent 23% of all sales in 2015 in the Sacramento region (and 27.5% of all sales last month in Sacramento County). The byproduct of more FHA buyers is stiff competition at the lower end and higher offers too (this makes overall housing stats look more impressive). As housing inventory presumably begins to increase over the next few months (as it did last year), watch out for price reductions, unrealistic expectations from sellers, and buyers gaining more power.

DOWNLOAD 64 graphs HERE (zip file): Please download all graphs in this post (and more) here as a zip file (or send me an email). Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share.

Sacramento County Market Trends for June 2015:

  1. The median price at $290,500 is 7.5% higher than one year ago (June 2014).
  2. It took an average of 30 days to sell a house last month (35 in May).
  3. Cash sales were 16% of all sales during Q2 2015 (31% in 2013).
  4. Short sales were only 5.1% of all sales in Q2 2015.
  5. REOs were only 5.3% of all sales in Q2 2015.
  6. FHA sales were 27.9% of all sales in Sacramento County in Q2 2015.
  7. Sales volume is 17.5% higher this June compared to last June.
  8. There is 1.6 months of housing inventory (2.1 months last June).
  9. The average price per sq ft is 186 (8% higher than last June).
  10. The average sales price is $323,082 (9.8% higher than last year).

price metrics since 2014 in sacramento county

inventory - June 2015 - by home appraiser blog

REOs and short sales in sacramento county - by sacramento appraisal blog

CDOM in Sacramento County - by Sacramento Appraisal Blog

cash sales - sacramento appraisal blog

cash and fha under since 2009 - sacramento appraisal blog

sales volume in Sacramento County

Median price and inventory since 2011 by sacramento appraisal blog

Sacramento Regional Trends for June 2015 (Sac, Placer, Yolo, El Dorado):

  1. Sales volume was up 17% in June 2015 compared to June 2014.
  2. Sales volume for the year is up 9.6% compared with 2014.
  3. The median price at $332,250 is 7.1% higher than one year ago (June 2014).
  4. FHA sales are up 31% this year so far.
  5. Cash sales were roughly 16% of all sales last month.
  6. It took an average of 33 days to sell a house last month (37 days in May).
  7. FHA sales were 23.7% of all sales in the region last month.
  8. There is 1.85 months of housing inventory (1.92 months in May 2015).
  9. The average sales price is $370,013 (7.9% higher than last year).
  10. It took 4 less days to sell a house this June compared to June 2014.

median price and inventory in sacramento placer yolo el dorado county

volume cash and conventional in region by sacramento appraisal blog

months of housing inventory in region by sacramento appraisal blog

days on market in placer sac el dorado yolo county by sacramento appraisal blog

median price and inventory in sacramento regional market

interest rates inventory median price in sacramento regional market by sacramento appraisal blog

Placer County Market Trends for June 2015:

  1. The median price in Placer County is $401,000.
  2. The median price is 5.5% higher than one year ago (June 2014).
  3. It took 36 days on average to sell a house last month.
  4. Cash sales were 14% of all sales last month.
  5. FHA sales were 17.8% of all sales in Placer County last month.
  6. Sales volume was 31% higher this May compared to last May.
  7. Sales volume is up 18% in 2015 compared to last year.
  8. There is 1.88 months of housing inventory (2.76 months last June).
  9. The average price per sq ft is is 200 (up from 184 last June).
  10. The average sales price is $454,643 (8% higher than June 2014).

Placer County sales volume - by sacramento appraisal blog

months of housing inventory in placer county by sacramento appraisal blog

days on market in placer county by sacramento appraisal bloginterest rates inventory median price in placer county by sacramento appraisal blog

Placer County median price since 2012 - by home appraiser blog

Placer County median price and inventory - by home appraiser blog

I hope this was helpful. Thank you so much for being here.

DOWNLOAD 64 graphs HERE (zip file): Please download all graphs in this post (and more) here as a zip file (or send me an email). Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share.

Home Office Progress: I’ve been sharing some progress on my new home office. It’s been so much fun to build and now customize. Last week I finished some cork boards and hung crown moulding. Yes, I know I need to upgrade my chair (coming soon) and have multiple monitors (coming soon).

my home office

Questions: How do you think sellers and buyers are feeling about the market right now? What are you seeing out there?

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

Where the market went last year and where it is now in Sacramento

Not sensational, but fairly normal. That’s a great way to describe last year’s real estate market in Sacramento. There was a nominal uptick in value during the first part of the year, but otherwise values were very flat. Let’s take a look at the year as a whole below and delve into some December trends too.

Two ways to read this post:

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

Email me for the graphs: If you would like all the graphs in this post (and many more), send me an email. You can use these in your newsletter, some on your blog, and some in other social spaces. See my sharing policy for ways to share.

Sacramento County 2014 Year in Review - smaller

Sacramento County Year-End Stats:

1) Median Price ended at $265,000
2) Average Sales Price ended at $293,646
3) Average Price per sq ft ended at $170
4) Sales volume was down 7.7% in 2014 compared to 2013.
5) FHA sales increased by 11.3% from 2013.
6) There were 38% less cash sales this year.
7) Short sale volume was down 64% from 2013 level.
8) Bank-owned sale volume was down 18.9% from 2013.

1) Values increased only a few percent over the year:

price metrics since 2014 in sacramento county

How much did values rise last year? The median price increased 6% from December 2013 to December 2014, the average price per sq ft increased by 3.5%, and the average sales price increased by 4.5%. It’s easy to look at the median price at 6% and think, “Sweet. Values increased by 6%”, but an increase in median price at 6% doesn’t necessarily translate into an actual 6% boost in value to every property. When we look at other metrics such as price per sq ft and average sales price, those metrics are even lower than 6%. All things considered, the actual increase in value was modest at probably 3-4% at best.

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

2) Inventory increased this year (declined in December):

inventory in sacramento county  Since 2011 - by sacramento appraisal blog

Housing inventory was flirting with 2 to 2.5 months for much of the year. This means there were generally 2 to 2.5 months worth of houses for sale at any given moment. The peak was 2.75 months in November, and the low was last month at 1.79 months. Remember, inventory almost always declines during December, so don’t make too much of the low number (it doesn’t mean buyers flooded the market).

months of housing inventory by sacramento appraisal blog

During November and December people tend to be thinking of turkey and gifts instead of real estate, so it’s not a huge surprise to see sparse inventory. Moreover, it’s natural to see a lower inventory right now since many owners do not want to list their properties until February or March when the market begins to heat up. As January unfolds though, listings are slowly starting to come back on the market. As you can see, inventory is not the same at every price level, and it was very low in December other than above the $1M range.

 3) Sales volume was down 7.7% in 2014 compared to last year:

sales volume through nov 2014 in sacramento county

Sales volume was down by 7.7% this year, which translated to 1,310 less sales on MLS this year compared to 2013. As you can see by the graphs above and below, volume this year was much lower than previous years. There were more sales in December than November, but that’s not a surprise since November had a sluggish sales volume (and December often has more sales than November, but technically many of these sales got into contract in November).

sales volume in Sacramento County since 2001

 4) FHA purchase volume increased by 11% this year:

FHA sales since 2009 in Sacramento County by sacramento appraisal blog

FHA has been making a big come-back in the market. Why? There are less cash investors, and FHA has been one of the strongest options for many buyers trying to purchase with little money down. This year FHA sales represented about 24% of all sales, whereas last year FHA was just under 20% of the market. Remember that FHA used to represent over 30% of the market from 2009 to 2012, so there is room for continued FHA growth. This year there are bound to be some more competitive conventional products hit the market, and the 90-day flipping rule will thwart some FHA buyers, but otherwise FHA should still be a relevant force to reckon with in housing in 2015.

5) The Fall showed a normal real estate seasonal cycle:

cooler price in Fall 2 - by sacramento appraisal blog inventory during fall 2 - by sacramento appraisal blog

sales volume in fall through 2014 - by sacramento appraisal blog

It’s easy to get alarmed when prices soften during the Fall, but that’s normal. There are simply fewer sales, and inventory tends to be a bit higher too.

6) There were 38% less cash sales this year:

cash sales and volume in sacramento county - by home appraiser blog

Having 38% less cash sales in 2014 made the market feel a whole lot different than 2013. This dynamic really cooled off values and brought about a more “normal” feel. In 2012 and 2013 there was an extraordinarily high level of cash investors playing the market, but without the investors this year it gave us a picture of what demand really looks like in the Sacramento market. It’s a healthy sign to see more conventional sales this year too compared to 2013.

Cash sales since 2009 in Sacramento County by sacramento appraisal blogFHA and cash sales since 2009 in Sacramento County by sacramento appraisal blogFHA and cash sales in Sacramento County by sacramento appraisal blog

I mentioned above that having less investors has helped FHA buyers get into contract more often, and these graphs really prove the point. The same is true with conventional and VA buyers. This past year owner occupant buyers were actually able to get into contract without having to try to outbid investors with deep pockets.

7) It’s taking 20% longer to sell a house in today’s market: 

CDOM in Sacramento County - by Sacramento Appraisal Blog

It took 50 days on average to sell a home last month in Sacramento County, which is 20% longer than it was taking one year ago (40 days in December 2013). Keep in mind it was taking easily 80-90 days at the end of 2011 and beginning of 2012, which was only three years ago. Ultimately well-priced properties are still selling very quickly and receiving multiple offers in some cases, but properties that are overpriced are sitting on the market. This is the classic example of what Jay Papasan says about “being on the market” vs. “being in the market”.

8) Distressed sales were hardly a force in 2014:

REOs and Short Sales since 2013 in Sacramento County

REOs and Short Sales in Sacramento County

Both short sales and REO sales hovered around only 6% of the market for the past two quarters. There are still distressed sales to buy out there, but they are far and few in between.

9) Interest rates are boosting purchasing power for buyers:

interest rates by sacramento appraisal blog since 2008

All the experts keep saying rates are going to increase, but then the Fed keeps surprising us with lower rates. Obviously this cannot continue forever, but for now lower rates are going to help buyers afford more house for their money (and afford to purchase in a market with higher prices).

10) Trends to Watch: Job Market, Interest Rates, and Inventory

layers of the market sacramento county since 2008 - by sacramento appraisal blog layers of the market sacramento county since 2011 - by sacramento appraisal bloglayers of the market sacramento county since 2001 - by sacramento appraisal blog

Three factors to watch this year include interest rates, the health of the local and national job market, and housing inventory. These are three of the biggest players in the market right now since cash investors and freakishly low housing inventory are no longer driving factors.

a) Interest Rates: Rates moving up and down will impact values to a certain extent as buyers will be able to either pay higher prices or not.

b) Job Market: Our economy has been inching forward, but we need local buyers to have higher incomes. Relief at the gas pump will certainly help free up some funds, but that is an external temporary boost for buyers instead of wage growth.

c) Housing Supply: Inventory has been flirting with 2.5 months, and it was poised to grow this coming year (but we’ll see what lower rates do to inventory as more buyers may enter the market). Remember that the market in Sacramento showed declining values any time in the past 15 years when inventory was higher than 4 months of housing supply. We like to say “5 months is a normal supply of houses”, but that’s not the norm for today’s market. In short, let’s keep our eye on how high inventory goes because the market is very sensitive to increases in inventory.

Questions: How would you describe the market in 2014? Anything else you’d add? If you are not in Sacramento, are there some similarities here that also resemble your market? I’d love to hear your take.

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