How did the previous housing crash affect buyers? In other words, how are buyers different today because of what they went through years ago? Without writing a dissertation, let’s consider a few thoughts below. Then for anyone interested, let’s take a deep look at the Sacramento market. Any thoughts?
Three ways the housing crash seems to have impacted buyers:
- Getting into Contract: Despite inventory being low, buyers seem to be picky about price. In other words, if the price isn’t right, they won’t make an offer (in Sacramento at least). Sellers haven’t fully embraced this yet, but it’s very real. You’d think buyers would feel desperate and offer on anything since housing inventory is sparse, but it’s simply not the case. There could be many reasons for this, but one of them is buyers are being cautious about what they offer because they don’t want to feel like they are making the mistake of overpaying like they did a decade ago. Of course prices today are much higher than they were just four years ago and buyers are willing to pay these prices. It’s just buyers are generally more cautious about overpaying. Also, keep in mind buyers are much more informed about prices because of Metrolist, Zillow, Redfin, etc…. This means buyers can often sniff out something that’s overpriced.
- Staying in Contract: Many real estate agents in Sacramento have been reporting contracts falling out of escrow much more often. It’s like buyers are picky about getting into contract in the first place and then they are picky about staying in contract. I’ve heard some say contracts falling apart is a sign the market is beginning to crash, but there have actually been more sales this year than last year in Sacramento. Thus the truth is more contracts are actually closing regardless of however many are falling out.
- Sensitive about Location & Condition: Buyers seem to be exhibiting a sensitivity to adverse locations and properties that are not in pristine condition. In other words, buyers have higher expectations about what they are buying and they aren’t overlooking the true condition of a home or paying top dollar for junk. Lenders and appraisers certainly aren’t overlooking the condition either (or at least they shouldn’t be). Also, consider how HGTV and other networks have exploded in popularity this past decade. I have to think constantly seeing the latest designs on TV (and Pinterest) only helps foster a more finicky buyer when looking for a home.
What do you think? Any further insight? Let’s talk. Please comment below.
—-—–—– And here’s my big monthly market update ———–—–
Two ways to read the BIG POST:
- Scan the talking points and graphs quickly.
- Grab a cup of coffee and spend time digesting what is here.
DOWNLOAD 79 graphs HERE: Please download all graphs in this post (and more) here as a zip file. Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.
Quick Market Summary: The market is softening just like we’d expect to see during the fall. Sometimes we talk about real estate in only hyper-positive terms as if values do nothing but increase, but that’s simply not realistic. Almost every year values soften as a part of the normal real estate cycle, and that seems to be what we’re seeing right now. It’s starting to take longer to sell, prices are down a few percent from the summer, housing inventory is up from a few months back, and sales volume is beginning to slough off. Keep in mind one year ago it was taking an average of 6 days longer to sell, which reminds us the fall market this year has been more aggressive so far. Overall single family housing feels flat and the market is very price sensitive, so sellers ought to be very cautious about pricing according to properties that are actually getting into contract in their neighborhood and price range. On a different note the 2-4 unit market has been somewhat subdued for a number of years as values have recovered much more slowly than the single family market, but it seems to be heating up as news of higher rents is spreading to investors. Let’s keep an eye on that and of course keep hoping the economy and wage growth can drive values more than low interest rates and freakishly low housing inventory. Check out specific stats and graphs below for Sacramento County, the Sacramento Region, & Placer County.
Sacramento County:
- The median price was $317,000 in September. It dipped 2% from the previous month, but is 9% higher than last year.
- The average price per sq ft was $201 last month (down 2% from the previous month, but still 7% higher than last year).
- There were only 25 short sales in the county last month.
- Sales volume was 3% higher this September compared to September 2015.
- It took 4 days longer to sell a house last month compared to the previous month (though one year ago it was taking 6 days longer to sell).
- Sales volume is up 7% this year compared to last year.
- FHA sales volume is down 7% this year compared to 2015 (keep in mind nearly 26% of all sales were FHA this past quarter).
- Cash sales are down 7.6% this year (they were only 13.6% of all sales this past quarter).
- Housing inventory is 5% lower than the same time last year.
- The average sales price at $346,000 softened by 2% last month (but is 10% higher than last year).
Some of my Favorite Graphs this Month:
SACRAMENTO REGIONAL MARKET:
- The median price was $355,000 in September. It’s down less than 1% from the previous month, but is 9% higher than last year.
- The average price per sq ft was $207 last month. It went down 1.5% from the previous month, but is 7% higher than last year.
- It took 4 days longer to sell compared to the previous month (but 6 less days compared to September 2015).
- Sales volume was 3% higher this September compared to September 2015.
- FHA sales volume is down 7.5% this year compared to last year.
- Cash sales were 16% of all sales last month (FHA sales were 22%).
- Cash sales are down 6% this year compared to last year.
- Housing inventory is 9% lower than the same time last year.
- REOs were 2.5% and short sales were 1.3% of all sales last month.
- The average sales price was $393,000 in September. It softened by 1% last month but is 9% higher than last year.
Some of my Favorite Regional Graphs:
PLACER COUNTY:
- The median price was $432,000 last month, which is up 11% from last year.
- The average price per sq ft was $212 last month. It softened by 1.5% from the past couple months, but is 4.7% higher than last year.
- It took 1 day longer to sell compared to the previous month (but 5 less days compared to September 2015).
- Sales volume was similar this September compared to September 2015.
- FHA sales volume is down 15% this year compared to last year.
- Cash sales were nearly 16% of all sales last month (FHA sales were nearly 16% also).
- Cash sales are down 1.7% this year compared to last year.
- Housing inventory is 16% lower than the same time last year.
- REOs were 1.3% and short sales were 1.1% of all sales last month.
- The average sales price was $483,000 and is 8.5% higher than last year.
Some of my Favorite Placer County Graphs:
DOWNLOAD 79 graphs HERE: Please download all graphs in this post (and more) here as a zip file. Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.
Classes I’m teaching in Lake Tahoe: On October 21st I’ll be teaching two classes in Lake Tahoe for an Appraisal Institute Conference. This is an enormous honor and I look forward to mingling with appraisers and sharing ideas. Click here for details.
Question: Did I miss anything? Any other market insight you’d like to add? What are you seeing out there? I’d love to hear your take.
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Thank you for all the work you put into your market update. Very useful Sacramento real estate market information.
Thank you Gary. It’s always encouraging to hear something like that. I appreciate it.
i am finding that buyers are really picky and if they offer more than list price they are expecting the seller to step up and fix things.
I love the insight. Thanks Nancy. In sports we often have opposing teams study the other side to really know what they are up against, but in real estate it seems like we expect the same thing regardless of the market. Yet the psyche of buyers and sellers changes and market conditions certainly change. Maybe sellers and buyers need to huddle up and understand each other a bit before negotiating a deal. Okay, I don’t know if that metaphor works, but it’s what came to my mind. 🙂
Good luck out there in the trenches.
That is where agents can standout that can & do negotiate with the other side. I am finding that it is tougher to get through a listing agent that won’t talk with the seller as they make all the decisions but once communicated with request for repairs and supporting information on $ amount we are more likely to huddle together. As a listing agent I have seen buyer’s asking for items that don’t exist and the buyer agent is just following the buyer request without putting any effort into solving the problem and dumping it on the listing agent. Yes the huddle is happening and when it does it is a win-win for both sides.
Well said. Communication is so key and we are really only as good as our ability to communicate well. Thanks Nancy.
Ryan, I agree especially on point #3. I find in my area that even though a home may be 20-30 years old buyers still want it to be like new. This makes it very important for sellers to get their home in selling condition or they can expect for their home to sit on the market.
Thank you Tom. Well said on sellers be in tune with the market. Years ago buyers were much more forgiving about condition. These days not only are lenders more strict, but buyers are definitely putting a fine tooth comb over a property. They don’t expect perfection of course. Along these lines it’s interesting to see how granite used to be such a premium feature but it’s now much more common (and much more expected).
I love all these stats. It does seem a buyer is more cautious compared to 10 years ago. I think that is a good thing. If a home needs work , a buyer should not think that they can do the work and put the materials on a credit card. That is how a buyer will get into financial trouble down the road. Keep up the good job with the blog.
Thank you so much Gordon. Yeah, I think it’s actually a good thing too. In some senses flippers probably helped raise the bar for expectations too because so many homes were rehabbed in recent years (which has helped change buyer expectations to a certain extent too). Thanks Gordon.