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

January 13, 2015 By Ryan Lundquist 10 Comments

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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Filed Under: Market Trends Tagged With: 2014 recap of housing, appraisers in Sacramento, distressed sales declining, Fall Market, home appraisals Sacramento, housing inventory, interest rates, investors leaving the market, job market, Market Trends, more FHA loans, real estate market in 2014, REO sales, sacramento housing market, Short Sales, trend graphs

Reader Interactions

Comments

  1. Tom Horn says

    January 13, 2015 at 12:46 PM

    Ryan, your charts and graphs provide such a great resource to local real estate professionals. A couple of similarities exist between your market and mine. The months of inventory for those homes priced around and higher than 1 million still have higher than normal months of inventory, however this is expected until the economy recovers more. Our foreclosures and short sales have also declined, which has helped the median price to increase. Keep up the great work!

    Reply
    • Ryan Lundquist says

      January 13, 2015 at 1:14 PM

      Thank you so much Tom. I love putting these together, and it’s always good to hear positive feedback too. It seems most markets are “out of the woods” so to speak when it comes to foreclosures. It’s nice to be in a different market, though today’s trends are only a snapshot for today. It’s always changing. I look forward to hearing more about your market on your blog as the year unfolds.

      Reply
  2. DeeDee Riley says

    January 13, 2015 at 1:26 PM

    Ryan,
    Great information as always. Love your green infogram at the top!

    Reply
    • Ryan Lundquist says

      January 13, 2015 at 2:07 PM

      Thank you so much DeeDee. I really appreciate it. I’ll have a Placer & Regional graphic come Thursday too. 🙂

      Reply
  3. Gary Kristensen says

    January 13, 2015 at 4:57 PM

    Your level of research is impressive.

    Reply
    • Ryan Lundquist says

      January 13, 2015 at 9:42 PM

      Thanks so much Gary. Kind words.

      Reply
  4. Henry Ung says

    January 14, 2015 at 1:36 PM

    Great post Ryan. Thank you for taking to time to share your information. It is greatly appreciated by myself and my agents!

    Reply
    • Ryan Lundquist says

      January 14, 2015 at 2:00 PM

      You are very welcome. It’s my pleasure. I’m so glad the information is helpful. At some point I’d love to do come to your office for a Q&A or do a 30 or 60-minute presentation to talk about the market or appraisal methodology. Keep me in mind when the time is right.

      Reply
  5. Matt The Mortgage Guy says

    January 14, 2015 at 4:39 PM

    Ryan,
    I always enjoy your posts and research. I’m a numbers nerd so I like all the details you put into the graphs and data.
    Was it just me it did it seem like prices had more of an uptick through July and August. I believe the data and know that numbers don’t lie…
    Maybe I was just in and around quality inventory that was selling at a premium.
    #MattTheMortgageGuy

    Reply
    • Ryan Lundquist says

      January 14, 2015 at 5:05 PM

      Hey Matt. Thanks for the comment and the kudos. I appreciate it very much. The summer felt fairly flat for the most part, which will also be shown in my regional post tomorrow. But then again, not every price range and neighborhood behaves the same. There are always pockets that are hotter and colder for whatever reason (lower or higher inventory at the time, a sought after school district, new construction, a change in zoning, construction of a new sports arena, a charming street, etc..). Glad to hear you’re hanging with the quality inventory. 🙂 Keep up the great work.

      Reply

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