There’s no way it’s going to sell that high. Have you ever thought that in real estate? Well, let’s talk about a property that many said would never sell at $4.1M, but then it did. I definitely have some takeaways about this lofty condo in Downtown Sacramento, and I hope non-locals will relate to the commentary. Then for those interested I have a huge market update below. Any thoughts?
A few things on my mind about this one sale:
1) Outlier: This sale is a total outlier. It is a big deal, but it’s also completely disconnected from the rest of the market. Can you tell based on the graph?
2) Thin history above $4,000,000: There have literally only been four residential sales ever above $4M in Sacramento County. EVER. So yes, it’s huge news to have a condo close this high, but at the same time let’s not think everything is now worth four million. Here are the sales:
a) Governor’s Mansion in Carmichael in 2004 at $4.1M
b) Sierra Oaks home in 2013 at $4.7M
c) Elk Grove estate in 2005 at $4.6M (sold $1.3M in 2011)
d) Downtown Condo at $4.1M
3) Lamborghini & Camry: Some have said things like, “I can’t afford the market any longer.” But this one “lone ranger” sale isn’t the new comp for everything in town. It’s tempting for sellers to price higher now, but it’s not like someone ten miles away is going to pay more at the $300,000 level because of a multi-million dollar condo sale. If my neighbor bought a Lamborghini, that doesn’t all of a sudden mean I have to pay more for a Camry…
4) An emerging market: There is definitely an appetite for high-end condos in Sacramento, so let’s expect to see this niche market find more expression in coming time. Ultimately the sales office at the Kimpton Sawyer Hotel has done well so far to sell units far above what many locals imagined. Of course the eventual test for these properties will be to see what happens when they hit the resale market in coming years without the benefit of marketing from a Beverly Hills sales agency.
I hope that was interesting or helpful. Anything to add?
-—-—- Big monthly market update (absurdly long on purpose) ———–
The market feels very normal for the spring. Well, I guess what I mean is all the stats are normal, but buyers are pulling the trigger very quickly and we’re seeing multiple offers on just about anything that is priced correctly. One of the bigger stories is sales volume so far in the beginning of 2018 is up 5% in the region. In fact, we’ve seen the strongest start to the year since 2013. Buyers have been starving for more inventory, so they’re gobbling up anything in site as long as it’s not overpriced. But part of the growth in volume these past few months could also stem from some buyers trying to get a slice of real estate pie before interest rates rise.
New recap images: Last month I introduced recap images. Here’s round two, though this month my data from last year is less complete since I tore my knee a year ago (I’m all better now). Anyway, what do you think?
Two quick things:
1) Inventory is increasing: We’re starting to see inventory increase a bit. For years it did nothing but decline, but toward the end of last year it seemed to flatten out, and so far this year we’ve seen some slight upticks. Granted, inventory this past month was only up 3% in the region compared to the same time last year, but that’s better than being perpetually down every single month.
2) The wrong comps with new construction: With more new construction lately, it seems like some sellers are using brand new nearby homes as “comps” for their older homes. Let’s remember the new ones often sell with a hefty price premium, so they really don’t make adequate comps. My advice? Don’t get distracted by the brand new stuff. Try to find older sales that are similar rather than assuming buyers are going to pay the same amount as a new home.
I could write more, but let’s get visual instead.
DOWNLOAD 52 graphs HERE: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).
SACRAMENTO COUNTY (more graphs here):
SACRAMENTO REGION (more graphs here):
PLACER COUNTY (more graphs here):
DOWNLOAD 52 graphs HERE: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).
Questions: What do you think of that $4.1M condo sale? What else are you seeing out there in the market? I’d love to hear your take.
If you liked this post, subscribe by email (or RSS). Thanks for being here.
Great Post Ryan! The market is similar here in Cleveland. Properly priced homes are selling in days instead of months in many cases. I just appraised a property in which the buyer stated in the contract that they would pay “x” amount of dollars over the appraised value if the market value is less than the purchase price. It’s an interesting market right now. I appreciate your point also about not comparing new construction homes to homes that are not new construction. Thanks for your post!
Thank you Jamie. We are seeing that too here in Sacramento. That won’t last forever and it’s simply a reflection of a Seller’s market. But it sure isn’t easy on buyers.
I will say in the midst of glowing stats, it’s important to keep an eye on changes too. We are seeing more price reductions and way more listings hitting the market. There is nothing out of the ordinary, but it’ll be no surprise in a couple months when some in the real estate community start talking about the market slowing. If we look carefully, even in the midst of market craziness, we can begin to see the market changing even now. It isn’t going to show up in the stats for a few months, but there are subtle clues if we look closely enough. I’m just talking about a normal seasonal trend – not a “THE MARKET HAS SHIFTED” sort of thing. 🙂
Great information Ryan. I too am surprised sometimes. We just did an appraisal where we knew the subject was going to be an outlier like that, the hard part was to find some evidence that points to where.
Thanks Gary. I guess this reminds us that real estate is not always straightforward. Yet we still have to ask where the support for value comes from. Is it a lone-ranger cash buyer paying above a reasonable value? Or is this reflective of the market? Big questions.
Let me start by saying that this is the reason I don’t have a blog. Even if I took the time to put one together, I could never compete with this. I especially like the Camry analogy. As always, you do an outstanding job at framing the valuation issues around real estate events.
The second thing that comes to mind is the outlier issue. I’m sure we all run across that one sale when looking for comps that makes us wonder “How did that sell so high and how did it appraise?”. Given that the definition of market value refers to the “most probable price” not a possible price, we have to look at the preponderance of sales. This is not to say that outliers might not be informative, but there’s a reason we use a minimum of three comps rather than relying on just one. On it’s own, I’m not sure what assumptions can be made from any one sale.
Thank you Steve. That means a lot to me. I appreciate your kind words. I work very hard at this and it’s great to have someone say something nice every now and then. Though I’m sure you would do great at your own blog. For any onlookers thinking about blogging, I say go for it.
I hear you on comps. And you are right about the importance of looking for more than just one. After all, one really rich buyer might pay whatever a property is listed for. It only took one buyer to pay that price, but does that closed sale really represent the market? That’s a viable question we have to ask.
Ryan did you listen to Zillow’s Earnings Call? They said Millennials want new construction over old and will pay a premium. There also getting into the flipping game, great article as usual!
Thanks Jason. I appreciate the kind words. I did not listen to that. I’ll have to check it out. I’ll keep my eye out for Millennial flippers too.
It’s not surprising to me that Millennials want something new because it seems like they crave the best in terms of housing. There’s nothing wrong with that. I sat on an affordable housing panel last year and many young people said things like, “I want something modern, affordable, energy efficient, and located in Midtown under $200,000.” To add new to the list makes good sense. I loved the ideals of the crowd, though I think some were maybe disconnected with the real market in terms of prices and how much some of those homes would really cost. Moreover, my sense is Midtown is not an entry-level market any longer, and we have to be real about that. I think sometimes too we want the best home for our first purchase, but we have to remember a first home is probably a starter more than anything. Anyway, I’m getting off-topic maybe, but your comment inspired me to type.
I’m just glad we’re starting to see articles talking more positively about this generation. I’m not an old guy, but I believe in this generation and I won’t talk down about them. For the longest time all we’ve read has been, “They are entitled, lazy, they eat avocado toast (I do too), and they don’t want to buy homes.” Well, if they can afford to purchase a home, they’ll likely do that. Nobody wants to live in their parents’ basement long-term either or have their rents jacked up by landlords time and time again. Even my kids in middle school are already talking about moving out. 🙂