Sacramento Appraisal Blog | Real Estate Appraiser

Real estate appraisals for divorce, estate settlement, loans, property tax appeal, pre-listing and more. We cover Sacramento, Placer and Yolo County. We're professional, courteous and timely.

uncertainty

Coronavirus & the housing market

By 26 Comments

The world probably doesn’t need another coronavirus real estate post, but here we are. Over the past week I’ve had countless conversations on the topic so I wanted to share some thoughts. How might the coronavirus affect the housing market? Here are some things to keep in mind.

Things to consider about the coronavirus & real estate:

1) Uncertainty: Markets don’t tend to like uncertainty. It’s been true in the stock market over the past week and it’s true in real estate also.

2) Severity matters: If this virus doesn’t spread much there might not be much effect on the housing market. But if it begins to spread in mass it’s easy to imagine sellers postponing listing their homes and buyers choosing to sit on the sidelines. Ultimately as we consider the immediate future there’s a huge difference between having a handful of coronavirus cases versus a devastating outbreak like the movie Contagion (probably not a helpful film to watch right now). Keep in mind if we’re dealing with something that ends up being very temporary it’s not likely to have a lasting effect.

3) Consumer behavior: One of the most relevant things to consider is whether the coronavirus starts to affect consumer behavior and confidence. No matter what you think about this whole thing, if people begin to postpone or halt financial decisions, that’s when it can begin to matter more for the economy and housing market. Let’s remember many buyers are already struggling with a feeling of hesitancy about the market, so for some the coronavirus could end up magnifying that feeling. Are consumers going to dine out fewer times? Will they stop buying stuff? Will they sit on the sidelines of the real estate market to wait and see what happens? We’re at the beginning stages of this and we’ll have answers to these questions over time. Obviously if there was a massive outbreak though it wouldn’t be a surprise to see the housing market stall or decline. In case you wanted to follow consumer confidence closely, here is a source tracking it daily (found via Len Kiefer):

4) Swine Flu & Ebola: Someone asked if I had any market stats from previous decades when we dealt with SARS, Ebola, or Swine Flu. No, I don’t. The struggle with these examples is we didn’t have a local epidemic, so there wasn’t any real impact on the market. 

5) The economy: One of the more gloomy elements to watch is the Chinese economy as well as our own. Some writers are talking about the potential for a worldwide recession in light of how tied the world is to China. That’s a sensational idea bound to get lots of attention. Is it real? We’ll see what happens.

6) Rates doing the limbo: In the midst of this we’re seeing mortgage rates drop and some are saying they’ll continue to dip. I’ve even heard claims they could drop below 3%. That would be insane!! So if anything it’s possible we could still have a very competitive real estate market in the immediate future. As a side note, it’s actually been an aggressive start to the year in terms of price growth in Sacramento and I’ll have more thoughts on that next week. For now buyers and sellers seem more focused on low rates than the coronavirus, but let’s keep watching because that could change.

7) Sifting data: Hopefully this will all blow over and we won’t have any worst-case-scenarios play out. If you want to watch real estate data though, be sure to pay attention to the number of listings and sales volume – not just prices. Remember, prices are the last place we see change show up even though it’s usually the first place we look. In other words, we see a market shifting first in consumer sentiment, what is happening with listings, whether homes are selling, and then eventually down the road with price changes. So like I always say, the trend happens before we see it in the prices.

8) Peace: On a personal note, I hope you find peace in coming time no matter what happens in the future. If you’re feeling stressed by all these conversations, maybe get intentional about filtering information and finding ways to add peace into your life.

Anyway, I hope that was helpful. Thanks for being here.

Questions: What are you talking about in coronavirus conversations lately? What are buyers and sellers saying? Anything to add? What did I miss?

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

Real estate trends to watch in 2019

By 20 Comments

What’s the real estate market going to do in 2019? Let’s talk about some of the bigger emerging trends in Sacramento and beyond. You can quickly scroll or spend a few minutes digesting things. Anything to add?

TRENDS TO WATCH IN 2019:

Affordability: We’ve had seven years of price increases without dramatic wage growth, so it’s no surprise one of the most pressing issues today is affordability. This is true for buying and renting.

Buyers gain power: It’s been a sellers’ market for years, but buyers have been gaining more power as price growth has slowed. Unless we see something happen to reverse the slowing, I expect buyers will continue to gain more power this year. If sales volume persists to slump, then it will turn into a full-fledged buyers’ market.

Uncertainty about future: For the past two quarters we’ve watched sales volume slough in many markets throughout the country. Was this simply a dull year or is it something more? Buyers seemed to take their foot off the gas pedal. Will they step back on? That’s the big question, and we’ll have to watch closely over the next two to three months to know how the market is going to unfold.

This is a poll I ran on Twitter yesterday. I know it’s only one random sampling, but it reminds me of an uncertain vibe I’ve noticed. When I ask people what they think the market is going to do I get quite a few, “I’m really not sure” answers. It seems like many people are floating the idea the market could be flat or experience something very modest – whether up or down.

Mortgage companies merge: In 2018 we saw some mortgage companies merge as a way to hold on in this market, and I expect we’ll see more of that in coming time. The reality is certain companies are struggling because the refinance market died off and sales volume was weaker last year.

Color: The word on the street is we’ll keep seeing color complimenting gray. For reference, the Pantone color of the year is Living Coral. I’m not saying this orange-ish shade is going to be splashed everywhere, but maybe we’ll see it at some point. In 2016 the color of the year was a shade of blue, and we’ve certainly noticed blue in kitchens. I suppose the color of the year could be like the cerulean belt scene in The Devil Wears Prada where we mock the color until years down the road we realize we’re actually wearing it… Not that I wear cerulean belts.

Looking for an exit: Some homeowners are concerned about a “bubble” and they sense the top is near, so they’ll be looking to exit “before it’s too late.” This doesn’t represent everyone, but some have been waiting for the right time to list and they’re feeling more ready. I expect this will be more pronounced for those in a place to downsize or move out of state. The struggle for others is it’s expensive to sell and buy again in the same market, so it becomes easier to stay put. For locals, I’d watch for Bay Area migration to Sacramento as the dream is to exit a higher-priced market and purchase in a lower-priced area. And Texas, we are the “Bay Area” buyers to you.

Overpricing: Sellers struggled with overpricing in 2018 and I expect they’ll continue to struggle – though hopefully not as much. It’s normal to see sellers want to price higher, but the problem lately has been sellers pricing for a more aggressive market from the past instead of today’s slower market. And of course sellers have been aiming for “unicorn” buyers instead of real buyers.

Laws for Cannabis: Recreational cannabis is now legal in 10 states and medicinal use is legal in more than 20 additional states. Whether you like it or not, this is a trend, and we’re bound to see more states jump on board as cannabis is normalized. I don’t say this as an advocate, but as an observer paying attention to potential impacts to the real estate market. Locally I’m expecting at some point to see other cities besides Sacramento change their zoning code to allow commercial cannabis cultivation. Think about it this way too. With so much talk of a coming recession, it’s hard to imagine city councils are not considering this move to secure future tax revenue.

Emergence of concessions: Sellers have been in the driver’s seat for years, so they haven’t been in the habit of giving credits to buyers or offering concessions, but this year could be different as buyers presumably gain more power. Sellers are going to have to get used to the idea that they won’t have multiple offers on every deal and they might have to offer credits, make repairs, etc… to get escrows closed.

Smart homes: As Wi-Fi doorbells, security cameras, smart thermostats, and voice-activated light bulbs become common, we’re only going to see more “smart” features in homes.

Energy efficient construction: Green is all the rage and we’re seeing laws change to usher in more energy-efficient technology. For instance, in 2020 in California solar panels are going to be required on roofs for new construction.

Flipping seminars: There will be no shortage of celebrity flipping seminars this year to teach the “secrets” of getting rich in real estate.

Pickier buyers: Buyers are patient about finding the right house, they’re more informed than ever about price trends, and they have higher expectations about condition and location. In a market where buyers seem poised to gain power, it only makes sense to see them grow more finicky as they have a greater selection of homes to choose from.

Crowded for real estate pros: We’ve seen explosive growth in the number of real estate professionals. This makes for a crowded and competitive market – especially in light of slumping volume. I’d expect 2019 to begin to weed some people out of the market if there isn’t enough pie to feed everyone.

Getting rid of appraisers: Over the past couple years we’ve seen an increase in appraisal waivers and there is currently a move to not require appraisals under a certain threshold. There is a clear agenda to start using “evaluations” instead of traditional appraisals. This is a big deal and removing one of the systems of checks and balances (the appraisal) as the market slows might not be the best idea ever… Read more here.

Creative financing: Last but not least, underwriting has been strict for years, but lenders are feeling the sting of the refinance market drying and sluggish sales volume. Do you think there might be more pressure to loosen lending standards to help fuel more business? Right now lenders hold tremendous power and what they do in coming time can shape the next few years. If they help buyers artificially afford higher prices through creative financing, that can only inspire price growth or stall the slowing trend. Sounds healthy, right?

I hope that was helpful or interesting.

Questions: What else do you think will be important in 2019? Did I miss something? I’d love to hear your take.

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