Crazy price growth. That’s what the market has seen lately. But let’s take a step back to look at how much growth has occurred since the market bottomed out in 2012. With so much talk about rapid price appreciation lately, I figured this would be interesting. Enjoy if you wish.
DOWNLOAD TEMPLATE FOR YOUR AREA: I created a template to help anyone quickly make charts like this. Download HERE. See video for how to make these too.
QUICK POINTS:
1) Huge growth: In many areas of Sacramento we’ve seen $300,000+/- price growth since January 2012, which was the bottom of the market in our area. Remember, just because the median price rose by $300,000 or so since 2012 doesn’t automatically mean your home is worth that much more.
2) Not adjusted for inflation: These stats are not adjusted for inflation. If you want to adjust them, by all means please do so.
3) Limitations: I didn’t include every area locally because I don’t have time, but most importantly if there aren’t enough sales, it’s just not going to be meaningful to compare only one month of data. This is where I would suggest maybe comparing an entire quarter or year if you’re working in an area with few sales. If you want bonus points too, maybe look at the average price and average price per sq ft to see if you observe anything different.
4) Huge percentages at lower prices: The lower the price in 2012, the higher the percentage change. Do you see that in the charts? For instance Oak Park had over 600% growth, which is just completely unreal. Someone even asked me on Instagram if this stat was accurate. It is. But here’s the thing. Part of the percentage being so high is simply a result of the first number in 2012 being so low (typically foreclosures and fixers selling then). When we look at the dollar change in Oak Park, the number is fairly consistent with the rest of the market in how much prices have risen. I’m not saying this to diminish the pain of gentrification or lower-priced areas increasing exponentially. I only want to say it’s helpful to be aware of both percentage and dollar growth so we are well-balanced in what we understand and say about the market.
I hope that was interesting or helpful.
Are Bay Area buyers dominating? One more thing. Here are some thoughts about Bay Area buyers in the Sacramento market.
Questions: What stands out to you most about the stats above? Any other points to add? I’d love to hear your take.
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Thanks Ryan for the template download!
My pleasure. Everyone will have to figure out how to save the graph to share it, but at least I provide a template. For any onlookers, an easy way to save the image is to just use a snipping tool on your desktop to cut the image you desire and then paste it into Microsoft Paint (or whatever free program you have). Then add titles as needed.
Great to look back at where we have been. Very interesting.
Definitely Gary. I think sellers on the fence about listing might do well to consider their equity and how and where they can deploy that. Hope you’re well.
Honestly at this rate, when govt allow banks to foreclose , this will turn south rapidly.
I see most prices that have increased as much as by 199 % to drop by 50 percent EOY.
Thanks Jins. That would be a huge drop in a short period. I’ll be watching closely. Let’s keep conversation going to see how things unfold…
I would be surprised if values fell by 5% as there’s simply not enough phantom inventory of FCs to warrant a 50% drop. Big difference between now and 2008 is nearly every home has lots of equity so owners won’t easily walk away.
Thanks Jeff. I appreciate your take.
That appreciation is unreal compared to the Birmingham area where I work. It’s interesting to see the contract between our two areas.
It’s shocking stuff Tom. Seems like our market swings hard. We don’t like balance. We’re all about extremes…. 🙂
Interesting stats from 2012. It would be interesting to check these Stats against the “height of the market” in like 2008 or 2009..is that right? There are properties (like in my neighborhood near American River Canyon) where the prices are still down +/-$100,000 from the height of the market. When we accommodate for inflation, etc. , the market in reality is still behind.
Thanks David. I appreciate your comment. For us in Sacramento the top was August 2005 in most areas, though sometimes 2006. The country topped off a couple years later. We were early birds.
We technically don’t have to look to the previous market to know anything about today, but you are correct about adjusting for inflation. That is a piece of the conversation we must have. Yet even with 15+ years of inflation from August 2005, we are not that far behind even from an inflation standpoint. In case you wanted to do the math, our median price in August 2005 was $419,000 compared to $500,000 today.
For any onlookers, here’s my commentary regarding inflation (and I know this upsets people – especially econ friends on Twitter). The truth is most market participants are fixated on the nominal price and they really don’t care about inflation (right or wrong). I find it brings little comfort to most market participants when comparing 2005 to today too with the idea that prices aren’t that high because we are still behind when it comes to inflation. Thus for me I’m highly comfortable focusing on the nominal price because that’s where the market lives. I am very careful about saying that “value” has surpassed 2005 levels though because that’s not an accurate statement due to inflation. This is exactly why I choose my words carefully to focus on “price”. Thus we can say our median is about 19% above 2005. That is a factual statement. In terms of actual value though, it would be a mistake to say value is 19% above 2005. Nope.
My observation is when I share price stats in presentations and people see 2005 vs now, I don’t find anyone adjusts for inflation. Their automatic response is, “We are now at the top” even though I don’t use those words. Technically some areas are still not back to the height of nominal prices in 2005, but many are. Some areas have clearly exceeded too such as Tahoe Park (https://twitter.com/SacAppraiser/status/1362236277651763204).
Anyway, I’m rambling, but I wanted to throw in my two cents for any onlookers who are thinking through these issues. For anyone who does not agree with my take here, that’s okay. I welcome you to pitch in your two cents to help advance the conversation.
Thanks for bringing value to the post David. I appreciate your commentary.
Thank you for the template! Great source and information. I wish I would have read this before I published my newsletter. I will either use next month or publish and addition. Amazing to see how much the numbers have grown.
It brought me great joy to see your chart on Twitter. I love it.