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The multi-layered real estate cake analogy

Juggling jobs and property value in Sacramento

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The unemployment rate for the past two months was finally published, so I hope to get you up to speed today. If you didn’t know, the government shutdown set EDD back, so that is what caused the delay. Here are a few graphs to not only see the job market in action, but also property values. Let’s take a look at some trends for Sacramento County, California and the United States. What stands out to you?

jobs and median sales price by sacramento appraisal blog 2

Here is a glimpse of jobs and values in Sacramento County over the past couple of years. The unemployment rate in Sacramento County is 8.4% (October 2013) and the median sales price is $255,000 (October 2013). This is the seasonally unadjusted unemployment rate, whereas the seasonally adjusted rate is 8.7%. By the way, if you’re riding the Bitcoin wagon right now, it looks like the median price in Sacramento County is 308 Bitcoins.

jobs and median sales price by sacramento appraisal blog

There is a tie between jobs and real estate, but the real estate market does not always fluctuate right away because of jobs. For instance, property values here in Sacramento hit bottom in early 2012, but the unemployment rate hit its peak about 18 months earlier in July 2010. This tells us it took a year and a half for the real estate market to stop declining despite unemployment beginning to trend downward. Moreover, even though joblessness has been very high, the real estate market has seen an exponential surge in values over the past 12-18 months. The driving force was mainly historically low interest rates, cash investors and low inventory – not vast improvements in the local job market. This goes to show there are many different “layers of the cake” when it comes to things that make real estate values move.

unemployment rate US CA Sacramento by sacramento appraisal blog

unemployment rate US 1948 to 2013 by sacramento appraisal blog

The unemployment rate in California is currently 8.3% (or 8.7% for the seasonally adjusted rate) and it’s 7.3% in the United States. The graph immediately above shows 65 years of unemployment in the United States, and it’s a good reminder how trends move up and down like a roller coaster.

Questions: What is the relationship between the unemployment rate and property value? Any thoughts, insight or stories to share? I’d love to hear your take.

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Things that make value move in Sacramento

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I’ve been talking quite a bit lately about “layers of value” or things that impact the real estate market. Values increase or decrease based on many factors. Let’s look at the image below to see some of the bigger influences for the Sacramento market. I shared a similar photo recently, but expanded it to include monthly mortgage interest rates and unemployment. What do you think?

Sacramento real estate market trends - interest rates median price and inventory - by sacramento real estate appraiser blog

Sacramento real estate market trends - interest rates median price and inventory - by sacramento real estate appraiser blog - largeSeeing the Trends: We all know an increase in interest rates and inventory tends to cool down values. That’s Real Estate 101. Yet at the same time, it’s still good to see visuals like this to reinforce what we know and also anticipate what the future of the market will look like as current trends unfold. As you can see in the image above too, there is definitely a stabilization of values that occurs toward the end of each year as the colder months ensue. Click the thumbnail to view a larger image to see this more clearly. By the way, feel free to use this graphic (unaltered) on your blog, social media or in a presentation. The only thing I ask is you link back if online.

Question: Any thoughts, questions or insight to share? Comment below.

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