Scraping the bottom of the condo market in Sacramento

Welcome to Day 5 of “Condo Week” on the Sacramento Appraisal Blog. Let’s go ahead and wrap this week up by looking at the very bottom of the condo market in the City of Sacramento. The graph below shows all condominium sales under $150,000, which accounts for 86% of all condo sales over the past 12 months. Can you believe that?

I thought it would be interesting to graph all sub-$150K sales by their bedroom count to see if there was any discernible trend. It looks like there are quite a few of each bed count sprinkled across the graph, but there are fewer 1-bedroom units toward the top and less 3-bedroom units at the bottom. Despite two sales under $20,000 over the past year, sales this low have been very infrequent over the past two years. It appears safe to say the bottom of the market has more or less hovered close to $20,000 over the past several years. It might be helpful to filter the graph above by looking at all condo sales in Sacramento over the past 36 months. 

Past 36 months of data for Sacramento condos under $150,000:

• 65% of sales were REO (bank-owned)
• 18% of sales were short sales.
• 83% of sales were REO or short sales.

Past 12 Months of data for Sacramento condos under $150,000:

• 57% of sales were REO (bank-owned)
• 18% of sales were short sales.
• 75% of sales were REO or short sales.
• 214 sales over the past 90 days.
• 121 current active listings
• 84 current active short sale listings
• 91 current active short sale contingents (contract submitted)
• 96 current pendings
• $13,000 was the lowest sale in the past 12 months.
• 1% of sales were under $25,000.
• 36% of sales were between $25,000-$50,000.
• 21% of sales were between $50,000-$75,000.
• 19% of all sales were between $75,000-$100,000.
• 23% of all sales were between $100,000-$150,000.

The condo market has seen such a vast decline in value since the single family detached market has become so much more affordable. There are definitely some big financing challenges too that have made a big impact on condominium values as Senior Loan Officer Darin Marquardt discusses below: 

I notice in this market there are a lot of condo complexes that cannot obtain conventional or government financing; which then tends to lower the value of the condo in that complex. As a lender I always want to know three things when my clients are interested in purchasing a condo. The first thing would be the Owner Occupancy Rate of the entire complex. This is important because most lenders / banks are not will to finance any complex with the Owner Occupancy Rate that is below 50 – 55%. The second item I like to look about is the HOA Fees and their Delinquency Rate. The HOA Fees are part of the borrower’s monthly expense and they need to be calculated into the borrower debt to income ratio for loan approval. Also if the entire complex HOA Fees are delinquent by 5% or more, this could also prevent most lenders / banks from financing in the complex. The third item I look for in a complex is to see if the complex is on the HUD / FHA condo approve site. Since most of my clients are applying for FHA financing, it is a good idea it check and see if the complex is already on the approval list. You can find a list of FHA approved condos online or contact myself at 916-478-7130.

What do you think are some of the positives and negatives of condominium ownership? What stands out to you about the data above?

If you have any real estate appraisal, consulting, or property tax appeal needs in the Greater Sacramento Region, contact me at 916.595.3735, by email, on our appraiser website or via Facebook.