The market went to sleep for the holidays and it’s just starting to wake up. Let’s talk about that along with pulling stats like a boss. Then I have a huge market update and review for those interested.
No sales to support higher values: In a normal January the market is in a weird spot. It’s coming out of hibernation from the holidays, and even though buyers eventually start offering higher prices, the most recent sales might not support higher contracts. In other words, sales from November and December might actually be much lower than what buyers are willing to pay in later January and February because the market has begun to awaken out of a lull. The reality is we might not see any upward value movement in sales stats until March, but the upward trend will begin to happen in January and February before we see it in the stats. Data lags the trend. I remind myself of this every year.
Getting practical: In coming time as the market presumably heats up I recommend looking for a pattern of pending sales (probably higher), watching for properties spending less time on the market, and study what prices normally do this time of year in your area. In many locations prices tend to pick up where they left off in the late summer before they faded during the fall.
Game-changing stats: Paying attention to numbers has literally changed my career, so I wanted to give some tips for how to begin pulling stats for a city, county, neighborhood… Here’s a chart you can use to track price changes and a few other key elements (DOWNLOAD here). I highly recommend carving out a few minutes each month to track some of these basics. Then of course find relevant ways to share the numbers with your clients and contacts.
Here’s a video where I talk through how to use the chart as well as mistakes to avoid. It’s about 10 minutes. Click below (or here) and watch in FULL screen:
–——-——- Big monthly market update (it’s long on purpose) ———–——-
Prices have been softening in Sacramento, but it hasn’t been painfully dull like some fall seasons. Overall prices in the region sloughed last month (not a surprise), it took six days longer to sell, and the year closed out with price metrics being about 8-10% higher than December 2016. The number of listings really took a nosedive last month, but that’s what happens since people don’t list in November and December unless they really have to sell. Listings should increase over the next couple months as the market heats up for the spring. I know hungry buyers feel like inventory won’t be coming, but it’ll happen.
Quick insight: Housing inventory is sparse, but one good thing is inventory seems like it went a little more sideways last year instead of declining sharply. On a positive note, the market ended with the lowest number of foreclosures and short sales in the past decade. This isn’t a shocker, but it’s still a sign of healing after the “bubble” burst more than ten years ago. Prices in 2017 increased about the same as they did the past couple years. Lastly, sales volume has been steady for a few years, and that shows the market has found a rhythm.
Recap of 2017 in Sacramento:
I could write more, but let’s get visual instead.
DOWNLOAD 75 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).
SACRAMENTO COUNTY (more graphs & stats here):
Sacramento County Stats:
- The median price is currently $350,000. It’s about the same as last month & down 0.5% from summer.
- The median price is 11.1% higher than the same time last year.
- Sales volume in December was 5.6% lower this year than 2016. There were 1392 single family detached sales last month.
- It took an average of 36 days to sell a home last month (one year ago it was taking 3 days longer).
- The median days on market last month was 21 days.
- It took 3 more days to sell in Dec. compared to November (median days).
- FHA sales were 20.5% of all sales last month in the county.
- Only 0.7% of sales last month were bank-owned & 0.2% were short sales.
- The avg price per sq ft was about $221, which declined last month (9.6% higher than last year).
- The avg sales price softened about 1.5% last month and is $379,962. This is 10.5% higher than last year.
- Cash sales were 13% of all sales last month.
SACRAMENTO REGION (more graphs & stats here):
Sacramento Region Stats:
- The median price is $385,000. It softened nearly 1% last month.
- The median price is 10% higher than the same time last year.
- Sales volume in December was down 4.7% this year. There were 2202 single family detached sales last month.
- It took an average of 42 days to sell a home last month (one year ago it was taking 2 days longer).
- The median days on market last month was 24 days, which means properties are selling really quickly.
- The median days on market increased by 5 days last month, which shows a slowing in the market.
- FHA sales were 17.5% of all sales last month.
- Only 1.6% of sales last month were bank-owned & 0.9% were short sales.
- The avg price per sq ft was about $225, which decreased 2% last month (8.4% higher than last year).
- The avg sales price decreased 2.5% last month and is 9.1% higher than last year.
- Cash sales were 14% of all sales last month.
PLACER COUNTY (more graphs & stats here):
Placer County Stats
- The median price is $450,000 and decreased slightly last month.
- The median price is 6.1% higher than the same time last year.
- Sales volume in December was 3.6% lower than 2016. There were 450 single family detached sales.
- It took an average of 48 days to sell a home last month (one year ago it was taking 1 less day to sell).
- The median days on market last month was 28 days, which means properties are selling really quickly.
- The median days on market increased 9 days last month (don’t read too much into that).
- FHA sales were 12.6% of all sales.
- There were only 4 bank-owned sales last month and only 7 short sales.
- The avg price per sq ft was $228, which softened about 3% last month (5.7% higher than last year).
- The avg sales price is currently $510,174. This is 8% higher than last year.
- Cash sales were 14.9% of all sales last month.
DOWNLOAD 75 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).
Questions: What are you seeing out there in the market? Anything I missed? I’d love to hear your take.
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Good points Ryan, this is why the 1004MC is not a meaningful tool. We should be looking back at least 5 quarters because you are not analyzing the same season to season when you only go back 4 quarters like the 1004MC does. I think we should routinely look at a 24 month period to see the trend and help understand seasonal ups and downs that may give false perception of the actual trend if not included in the analysis.
Thank you so much Bryan. I think you are definitely right about the 1004MC and I always appreciate your take.
This reminds us we cannot rely on a stats program or software to tell us what the market is doing. We have to think beyond those things, know how the numbers work, and definitely be in tune with the way the market moves during different seasons. I completely agree about seeing a larger context too. For instance, some of my graphs in this post help show huge value increases over the past six years, but it’s also clear there has been a definitive seasonal increase and slowing in each of these years too.
I’m fascinated by the idea of seeing the market before the stats exist. I think when I became an appraiser years ago I would hear things like, “We need recent closed sales to substantiate a higher value.” I get that and we are not magicians or number hitters. But sometimes more than anything I think we need to possess the skill to see the market trend happening right now before the sales stats show it and then make adjustments accordingly. This is what I love about appraising. 🙂
Great information as always Ryan. I was studying the market data in my area and looking at lock box data and noticed that this year is picking up quicker than it did last year, but then I remembered that last year we had a snow storm that kept everyone home for a couple weeks.
Good catch Gary. That’s interesting to hear. Our weather isn’t too extreme in NorCal by any stretch, so we don’t tend to see the market slow much at all because of it. Keep up the great work in Portland!!
I’ve been telling all my clients the same thing lately about the market hibernation In Sactown… It really slows down in November and December because of the weather and holidays, and slowly ramps back up from January to May, with real sort of exponential growth coming in the March & April months.
Funny being in AZ right now where it’s 10-20 degrees warmer and the snowbirds are all back in town, things are just starting to really heat up! I’ve heard a few people tell me that agents most most of their money in the first 6 months of the year.
It’s estimated that roughly 300,000 people come to AZ after the summer is over, which of course is an unprecedented population boom in such a short time. I wonder what kind of impact it would have on the already tight Sacramento market if 300,000 buyers came to town for Cinco De Mayo!
Well said Wes. It’s not always easy for the real estate community to deal with slower-looking stats but an increasing market. So over the next couple months we’ll live in the tension of that. The same holds true when the opposite happens and the market is declining. Everyone wants to price according to the most recent sales, but it’s probably a better idea to price according to properties that are actually getting into contract at lower levels since the market declined since the sales got into contract a few months back.
That’s fascinating to hear about Arizona. I wonder how many of these people have second homes there and how many would be coming to buy or rent. I wonder what sort of issues happen with vacant homes too in terms of crime, squatting, etc… This sort of reminds me of the City of Davis changing so much when college is in session. The town’s population swells and vacancy rates decline.
Great advice in the video, Ryan. You make a great point about how important it is to look at the numbers and understand them in order to be an expert in the neighborhood you are working in. Using graphs can really help appraisers and agents to visually understand what is going on.
Thank you so much Tom. It really does pay to understand the numbers. The video was definitely off the cuff, but it was interesting to see two price metrics indicate a 7% increase over the year, but then one indicate a 16% increase. What the? Well, it turned out smaller homes sold this year, so the avg price per sq ft was inflated. The market clearly didn’t increase by 16%. I agree on graphs too.
Great article! I am primarily a listing broker. Every year we see big jumps in prices in January. Our inventory of homes in good condition slows at the end of the year so there is pent up demand. Prices in January will be higher than homes sold last summer/fall. Often there are multiple offers and homes sell for significantly over list price. The prices seem high in January but by May they seem low or average.
This is in a neighborhood where I sold 33 listings last year. What type of information can I give to appraisers for these homes going under contract in January for above asking price to justify the sales price?
Thank you!
Thanks Eric. Congrats on your success too. That’s great. I think you are right about pent up demand for good housing stock – especially during the beginning of the year.
I have a few thoughts (well, maybe more than a few):
1) COMMUNICATION: I highly recommend agents to communicate well with appraisers and be proactive about telling the story of the marketing of the property. Thus telling appraisers about the number of offers, feedback from prospective buyers and agents about the subject property, the specific price level of other offers, etc… can be helpful data to consider. Some agents take a very hands-off approach when it comes to communicating with appraisers, but I think it’s best to have a hands-on approach without pressuring to “hit the number” so to speak. This is an info sheet I created to help agents do this. Please feel free to use it and adapt it as you see fit. My sense is sometimes agents don’t want to share information with appraisers during the beginning of the transaction, but as soon as a deal goes south or value comes in lower than the contract price they’ll change their tune and share anything. Why not be proactive instead of reactive? https://sacramentoappraisalblog.com/2014/10/09/a-cheat-sheet-for-agents-of-information-to-provide-to-the-appraiser/
2) MULTIPLE OFFERS: Multiple offers can matter because it can show the context of value. However, in some price ranges buyers offer at higher levels simply because they can qualify for the loans. Thus sometimes multiple offers are more of a reflection of financing (or even buyer fatigue from getting beat out) more than anything. In other cases properties really do get bid up to “no man’s land” so to speak. In those cases an appraisal rightly should come in lower. I have agents all the time tell me in private that they knew the property was in contract too high, so it really wasn’t a surprise to see the value come in lower. Sometimes for the sake of a smoother deal it helps when agents quarterback the transaction and help the seller select the strongest offer, but maybe a realistic price too if the buyer doesn’t have funds to pay the difference between the appraised value and the contract price. Anyway, multiple offers aren’t always the end-all support for value being at a higher level, but at the same time in my appraisals I regularly take into consideration the number of offers on the subject property in my final reconciliation of value. If 5 people were willing to pay the list price and I’m coming in lower, I better have a really good reason. In my mind multiple offers forces me to look deeper into value and it can help supplement my opinion of value too.
3) PENDINGS: If you have insider information about the pendings, please share. Appraisers will be primarily basing value on the comps rather than how many offers the subject got, so recent sales AND pendings matter much more than multiple offers on the subject property. Since the proof of value is found in the market, your insider information can shed light on value and might help create a deeper context of value for the appraiser. In an ideal world appraisers will call the listing agents for critical neighborhood pending sales, and agents will let the appraiser know what the pending home is in contract for. I understand why sharing this information cannot always happen from the agent side, but it can be very critical to know that number for the appraiser. If we see multiple properties in the neighborhood selling quickly, getting bid up, having multiple offers, and commanding prices above where other homes sold recently, then that can influence the adjustment an appraiser gives to the recent lower sales. The truth is pending sales and listings can help us see the temperature of the current market. In other words the pendings can answer the question, “How has the market changed since the most recent sales?” In an increasing market we see higher pendings and in a declining market we probably see lower pendings. In January at times I might give a huge adjustment up from recent sales in November and December if there is support for that adjustment. Support for that can definitely be found in higher pendings.
In January and February what is going to make or break value is probably whether an appraiser gives or does not give a market conditions adjustment. If the market has changed, but no adjustment is given, then the appraiser really might be undervaluing the property unless the increase in value was handled in a different way in the report besides giving an adjustment. Obviously nobody should pressure appraisers to give a certain adjustment and agents cannot control this aspect. Though agents can be proactive and do their best to tell the story of the marketing of the subject property as well as share insider information about other pendings. At the least that might help.
4) LONE RANGER: Let’s remember one sale does not make a break a market. The same is true for pendings. We don’t want to base value on one lone-ranger pending sale. Thus if everything else is lower, there might not be any support to appraise a property at that higher level. On that note, we don’t have a “name your price” market where sellers can command whatever price they want. Buyers are generally more price sensitive. It’s not the most aggressive time in the market like we had in early 2013. And just because inventory is low does not mean buyers will bite at a listing that is priced 10% higher than anything else. But if buyers do offer, the appraiser is going to have to support the value he/she says exists. If all sales , listings, pendings, and competitive neighborhoods and markets suggest value is 10% lower, then that’s what it is. I find in today’s market it’s easy to try to chase that Bay Area unicorn buyer who is going to magically pay more than anyone else. But let’s remember appraisers are not giving unicorn value but market value.
With that being said, in a neighborhood with very few recent sales or listings, it might be important to get a better idea of what the overall market is doing by looking at competitive neighborhoods. We can always look to similar areas to get a sense of how much the market has increased or changed over time. Thus sometimes we might see what looks like a “lone ranger” pending in a neighborhood, but if we begin to look to competitive areas we see that other competitive properties are trending at that level too.
I know that was long. I hope that helps. Anything else? Let’s keep the conversation going.
Hey Ryan,
Great statistics as usual. If more realtors that write articles really concerned themselves with writing great and informative content like you, more readers would be interested in their writings. A quick question – The monthly costs of renting a home versus buying a home in Sacramento in 2018 – how do they compare?
Thanks Tracy. Renting vs. buying is tricky. It depends on the price point. I don’t think any general statement will fit every neighborhood and price range. Some properties will pencil out just fine because it’s cheaper to buy than rent, but that’s not the case in every situation. I do know for certain that as of last month rents increased 8.8% year over year per Yardi Matrix data. Moreover, the net annual increase of rent in Sacramento from 2016 to 2017 was $1,260 (per Yardi Matrix). That’s an amazing stat because the average rent in Sacramento right now is $1,294. Thus to pay an additional $1,260 last year essentially means many renters basically paid an entire extra month of rent over the course of the year in Sacramento.
Hey Ryan,
Good stuff as always. Wondering if you have data on Yolo County, specifically Davis. That market is unhinged from reality but continues along is merry path. Thanks for the information and keep up the great work!
Hi Stuart. Thanks so much. Sorry for the slight delay here as I’ve been leveled these past couple of days with a cold. Anyway, I don’t run Yolo as a county because data is more limited (not as many sales) and there is a huge difference between Davis and the rest of Yolo too. I really think Davis would need to be run on its own entirely and not lumped in with anywhere else because of how distinct the market is. It’s interesting to hear you say the market is “unhinged from reality”. What do you mean? Thanks so much.
Ryan — love the thoughtfulness you put into your blog. It’s a consistent great read!
What’s the current market temp (late January) in Sacramento relative to this time last year? Is it cooler, the same, or hotter. I wasn’t around last year, so I don’t have a barometer.
Thanks!
Hi Brian. Thank you for the kind words. Right now the market seems about what we’d expect for this time of year. Some listings are starting to pop up and they’re going quickly as long as they’re priced right. By now buyers are hungry for good housing inventory. What I mean is some of the listings in November and December were really on the market because the sellers had to sell. Buyers are therefore ready for some quality listings in good condition. Many agents tend to say the market really changes after the Super Bowl is over, though it seems like sometimes it wakes up slightly early before the game. I think the big point is that the market seems to shift gears a little toward late January / early February in terms of picking up speed for the spring. Right now the latest sales stats from December for both listings and sales are fairly similar to where they were last year at the same time, and that suggests a fairly normal market for the time of year. I would suspect sales stats for January will sag, but that’s because the sales technically represent the slower market from Nov / Dec more than the market starting to heat up in January. Anyway, let’s keep watching. I hope that helps.