Last year was dominated by cash sales. Or I should say DOMINATED since investors really drove the market. This was true in Sacramento and it was true for many markets across the United States. But this year has been different. In fact, cash has been about half of what it was last year, and it has simply softened the market. Let’s take a look at some images and six quick talking points to share with clients and contacts. Any thoughts?
Key Takeaways for Sacramento County: 2013 vs 2014*
- Total sales volume is down 14% from 2013
- Cash sales are 21% of the market, but they used to be 35% of all sales
- There have been 48% fewer cash sales in 2014
- As prices in real estate have increased, so have cash price levels
- About half of cash sales are still under $200,000
- Less cash has created more space for financed offers to get accepted. There have been more conventional /FHA purchases in 2014 compared to last year. There were 4087 in 2013 and there have been 4194 in 2014.
* Data is based on January to May (single family detached sales in MLS).
I hope this was helpful. By the way, this is completely off topic, but here is my latest wood project. If you didn’t know, I love to tinker with wood – especially scrap wood. I built this outdoor cooler a few days ago out of scrap in my garage.
Questions: How have you been seeing cash investors impact the real estate market (even if you are not local)? What is driving your market right now?
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Nice fine carpentry! Very clean lines on the cooler. Looks like cedar ( or juniper ) which should be able to handle the moisture and thermal stress. I love it when a carpentry project is also an experiment.
We are still looking at properties in Lakeport and near-by. This is one strange market, with mobile homes right next to Mcmansions. Also, since the economy is still tough in Lake county, quite a few homes are flips. As a buyer, I see places that have an asking price way over the value of the Home Depot style improvements.
For example, my real estate agent suggested I consider one house I looked at that sold in 2012 for 42K, an 875 square foot, 2bed one bath on a large lot, built probably in the 40s. I see new counter tops, appliances, tile in the bathroom, paint and light fixtures. Now, in 2014, the buyer has it listed for 189K. Do I see 142K in improvements? The old baseboard heater and window air conditioner remain. Maybe there is a new roof, although it is not mentioned in the listing. Still, it seems overpriced. I write to my agent that it is a nice house but might be a sensible consideration at a lower price. She writes back that we should just keep looking at the listings.
I should add that we are prequalified and mentioned three listings on her site listed at about 139K. The above listing that she mentioned is
a 50k jump over what we were looking for. Two of the ones we were looking at had accepted offers ( though that wasn’t on the site) and the third, our agent told us, was next door to a lot where there was going to be a 24 hour gas station. Why wasn’t that on the listing?
My wife and I are perplexed.
Ryan Lundquist says
Thanks Ricardo. The wood on the outside is redwood (from some redwood fence boards I had laying around).
I am not familiar with that market. Keep in mind the property at $42K very well could have sold at a distressed level and then been fixed up. Lots of owners / investors got the best of both worlds in that they purchased at a discount in 2012 and now they’ve been sitting on a couple of years of appreciation. I guess the market will dictate whether it is overpriced or not based on whether it gets any offers. Are there any recent sales at a similar level? That is also key.
Yikes about the gas station. It is definitely good you are working with an agent who is in touch with the local market. I am not sure if that would have to be disclosed on the listing, though it seems prudent for it to be disclosed somewhere in the paperwork. Sometimes non-sexy real estate details make it into a Transfer Disclosure Statement or addendum in the contract rather than in the actual listing.
Thanks for the comment, Ryan. Yes, I am lucky my agent warned me about the gas station. It’s a jungle, and you need a guide. The house I talked about is kind of what they call a shotgun house in the South — one long rectangle. Compared to other houses that have sold, I think it’s high. But in general, you seem to get a lot more home in Lake County than Sacramento — mainly because there are jobs here.
One impact that intrigues me is the spot price for oil — pretty high right now and set to go much higher if there is a mess in the Middle East. I think this will have a large impact on rural areas where there is no mass transit to distant workplaces.
Ah, so the cooler is redwood. As I said, a very clean design. Is this a Scandanavian thing? ( ha ha). Don’t know what sort of finish you have or will apply, but allow me to suggest linseed oil and turpentine or shellac — both let the wood breath.
Ryan Lundquist says
Rectangular houses are my favorite to measure. 🙂 Thanks for the tip on finish. I definitely need to figure that out. I hope you find something soon (and get a great deal).