Neighborhoods change. Sometimes they end up growing in a positive direction and other times they go downhill in a big way. Today I want to share a quick example of what I mean.
Million Dollar Sales: Here are two images to show million dollar sales in East Sacramento. Prices were definitely rising during both of these time periods, so they’re helpful for comparison. Prices declined during 2007 through 2011, so I didn’t include those years. What do you notice?
Two Observations:
1) More: Today we have more than three times the number of million dollar sales compared with the past cycle. This makes sense because prices in East Sac have generally surpassed where they were prior to the “bubble” bursting. Thus some of the growth is simply because of where prices are at today.
2) Expansion: The million dollar market used to be concentrated almost exclusively in the Fab 40s and McKinley Park area, but it’s definitely expanded into other places. Over time we’ve seen lots of old homes torn down and rehabbed, and demand for the market has also increased. There is even a newer development called Sutter Park that is already fetching million dollar pending contracts in a location that has previously not seen that price point.
THE BIG TAKEAWAY: As neighborhoods change, so can value. In other words, just because value was one way in the past doesn’t mean it will be the same today. This is why over time we tend to see pockets of value emerge where buyers are willing to pay much than they used to. On the other hand it’s possible to see neighborhood decay where demand wanes and buyers tend to look elsewhere. I’ve written about the four stages of neighborhood life before, so I won’t rehash that much, but it’s so important to stay in tune with how markets are changing. Is the neighborhood growing? Is it stable? Is it in a stage of decay? Are we seeing rebirth? These are all good questions to ask.
Luxury Market Speaking Gig: I’m giving a presentation tomorrow at a luxury market event. I’ll likely share these two images as one of my talking points. Come by the event if you wish (I think you have to register).
What’s the market going to do? I was asked on Norm Shriever’s podcast recently about what the market is going to do in Sacramento over the next few years. In my mind these are some of the bigger points in this conversation.
Questions: What stands out to you about the images above? What sort of change have you seen in markets where buyers are willing to pay more or less? I’d love to hear any stories or examples.
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Great graphic depiction of the growth in value for the East Sac area, Ryan. As you mentioned, I also believe we will see even more high end growth with the new Sutter Park project as the homes begin coming out of the ground.
Thank you so much Chris. I appreciate it. This was fascinating to me and I hope others enjoy it too. You are right about Sutter Park. It’s shocking to me to see how large some of the lots are too. Wow!! I see two pendings right now in Sutter Park at $1.75M and $1.9M. For any onlookers, the homes haven’t been built yet, so these prices include the lot and home.
As always, your insightful information is so helpful. You many times answer questions I didn’t know i had! Thank you.
Thanks Alice. That’s such a nice thing to say. I love this stuff. The market is like an onion. There’s always another layer to understand…
Great visuals in your graphics. It is always helpful to look at how markets change over time. I can think of several different pockets in our markets that would depict similar expansion. Here, our population growth has created a great demand for certain locations and those areas have since expanded.
Thank you Shannon. Yeah, I bet outside wealth has made an enormous impact on your market. It’s amazing how that works. I think just about every Californian knows someone who has moved to Texas also. The irony is our state is still really expensive. We can’t seem to get away from that regardless of who leaves. 🙂
Great point about changing markets, Ryan. While not in the same price range, we are definitely seeing changes in some of our markets around Birmingham. In what was once a very depressed area we are seeing revitalization in parts of the city with increases in home prices and style and type of rehab. I agree that it is very important to stay in tune with the market. It would be easy to look at the market I mentioned and write off some of the prices they are getting if you haven’t been keeping up with what is going on. Thanks for giving us some food for thought and I hope your luxury market speaking gig went well.
Thank you Tom. Great comment. There are many types of change. It’s fascinating to see how areas can change over time. Of course the change is not always positive. It was a fun event and really great opportunity. I think it went well overall. I picked up some solid nuggets from listening to the panel too.