It’s been a heavy week around here and I have a few things on my mind. Let’s talk about the fires, the new norm of fire season, and then I have some fresh stats to share.
Fire rampage: It’s been a brutal week in Sacramento. I think so many locals feel deflated as we watch the Caldor Fire rage. As of yesterday 471 homes are reported to have been destroyed and the fire is heading toward South Lake Tahoe too. It’s a gut punch to see local friends displaced and to hear so many stories of loss. Hang in there everyone and let us pray.
Fire season: We are getting used to regular catastrophic fires in California and it’s numbing to recognize that fire season is now a thing. I was just thinking how unfortunate it is to be in touch with Air Quality Index (AQI) numbers to the point where I have conversations about the daily AQI. In terms of real estate, the smoke is something affecting everyone and it’s now on the radar for people making decisions about where to live. While I don’t think smoke is the primary decision for moving out of the market, it’s at least somewhere on the list now for why people might move.
Appraisals after a disaster: I don’t cover the fire territory for work, so I’m NOT fishing for business. I just want to let you know I’ll be available to help answer questions and be a resource. People are definitely going to be dealing with appraisers through the insurance process as they rebuild. Anyway, here is an interview I did about appraisals after a disaster in case it’s helpful. Also, here is a post called “The real estate left behind after a fire” in case you’re wondering what happens to a market after a disaster. Keep in mind not every area is going to react the same exact way though.
Multiple offers: Okay, some quick stats. August sales stats show fewer multiple offers compared to July. On one hand the market slowed down last month, which isn’t surprising because that’s what tends to happen around this time of year. But on the other hand we’re still basically having one of the most competitive markets ever. I find some people tend to focus only on the fact that the market is still nuts while others focus only on the slowing. My advice? Pay attention to both because the market is experiencing both dynamics at once. In other words, don’t ignore one for the sake of the other. The market is both glowing and slowing.
What the market should have done: Here’s one more image. The blue line shows the market we’ve had over the past year and the gray line shows the market we should’ve theoretically had if the trend was normal. In short, the market in 2020 traveled way outside the lines of a normal trend and we’re still not even back to normal levels yet.
A message to the future owner: In lighter news, my family got new flooring this past weekend and here’s a message I left for the future owner under the new planks we installed. By the way, a previous owner clearly didn’t believe in drop cloths because nearly every room looks like this. It’s insane to me that someone would leave the wood flooring looking like this.
Covering wood: And yes, we covered the hardwood. Some people are offended by that, but I’m really happy with the luxury vinyl planks we chose. It was going to be too much work to sand, repair, and add wood to other areas of the house that did not have it. I prefer the look of a wider plank also. Anyway, not that I needed to say this, but I wanted to explain in anticipation of comments. By the way, it’s cool with me if you would’ve done things differently. You do you.
Be blessed.
Questions: How do you think we can help people going through the fires right now? In terms of multiple offers, what are you seeing out there?
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Ryan, As usual, thank you so much for your continued expertise with stats.We are experiencing both ends of the glowing and slowing. From active pockets with offers over list, to new listings not having one showing in 7 days( other than open house). What factors do you see impacting buyers right now?
Bob Mck
Thanks for the kind words. And I really appreciate hearing what you are seeing. Keep that coming. I don’t know that there is one factor affecting everyone because different buyers are experiencing different dynamics. I’d say it’s business as usual for some buyers and they’re simply trying to get an offer accepted by continuing to play the market. I’ve heard a few stories of some frustrated buyers who have actually come back to the market in hopes of a slightly less competitive vibe. Still some buyers are thinking they have more power than they really do. It’s just not a market where you can offer 10% below the list price though (well, unless it’s severely overpriced). Many buyers have been on the sidelines though doing vacations and getting the kids back to school. Around this time of year we typically see a lower number of sales and a lower number of pendings. One more thing. I find buyers are really sensitive to price. For instance, I appraised something in Folsom the other day around $900K and it seemed like a few recent listings were trying to piggy-back on a couple of really high sales at that level. Yet market demand looks to have peaked for the year as it normally does in mid-summer. In short, sellers would be wise to consider that buyers are in tune with this reality right now and they aren’t in the market to overpay. They will pay more for the right property of course. In short, my advice is to price reasonably and then rejoice if you get bid up. But don’t price for the unicorn. If you price for a miracle, you might be sorely disappointed with zero offers. Price the market instead.
Anyway, I’m sure there are other factors. That’s what came out of my brain for now… Anything to add?
Ryan, Thanks so much for detailed input.
My pleasure. And any onlookers can pitch in too. What are you hearing and seeing with buyers and sellers right now? What are they thinking and believing about the market? I’m always open ears. You can also send me a private message.
Great intell. I love that when I get together with colleagues we all secretly quote your stats as if we have an inside man LOL.
I’ve refinished several floors and it’s always a headache. Easier and more durable to cover, and the trends change faster than the useful life anyway.
Haha. Thanks Adam. I appreciate the kind words.
Yeah, the struggle is real. Trends change so quickly. On that note we went with a brown plank because I personally don’t see gray having staying power. For me a bit more of a traditional look works to hopefully feel somewhat relevant over a longer period of time. We’ll see though. I will say I’m good with not changing flooring for quite some time. I feel like we moved this past weekend.
I read recently that grey is no longer The color, so good decision. So where ARE the bodies hidden? 😉
Haha. I wish I could be there when the new owner pulls up the flooring we installed. Hopefully the permanent marker I used will really be permanent. On a related note we do know that the wood floors have paint on them, so I suspect we’d have to disclose that when selling. Thankfully we don’t have to disclose any bodies though. Well, I sure hope there aren’t any… 🙂
Ryan,
Your insights and advice are so valuable.
I wish I could remember everything to repeat to my clients!
Take care and thank you,
Susan Harrold
Thanks so much Susan. You are too kind.
As well as your customers ??
Good morning Ryan,
I am such a fan of your blog, your professional insights along with your kind, playful & generous spirit.
I refer All of my clients to your blog so they are able to receive your most CURRENT Real Estate market updates along with the stats & details that come from a local appraiser.
Your work & insights have helped me for year’s!
Thank you Ryan
And YES I am sending ~Waves~&~Waves~ of prayers and assistance for the families & Fire Fighters in this challenging & extremely stressful time.
Andrea White
Thanks Andrea. I really appreciate your encouragement. And YES to the prayers!!
I have been told by agents that history of fire in a neighborhood does not affect sales. Now, we get to the problem of availability of hazard insurance………
Thanks Truett. Yeah, we have to watch insurance rates. I wouldn’t be surprised at all to see some insurers pull out of the market. I was talking with a Realtor friend the other day about her cabin in Tahoe and the insurance company dropped them (meaning they got notice that the insurance company would not be renewing their policy when it expires). The California Fair Plan can be SO expensive too. I feel for people in rural areas. During the pandemic the higher rates really didn’t matter to buyers as we saw such huge volume coming into the market, but this is a big deal for existing owners on a limited budget. And it can be a huge deal for the market when / if this heightened pandemic demand subsides.
Past experience with the Paradise Camp Fire showed the insurance companies hire their appraisers from out of state, sometimes way out of state. These appraisers never showed up at our office to ask for help which based on the horror stories I heard they desperately needed. I would expect similar activities with the current fire losses.
One out of state appraiser used duplex comparables from Yuba City, Durham, and Chico for a duplex in Paradise. The property owner was a little upset as she knew better.
Thank you Dave. I appreciate the inside scoop. What a shame. I do know quite a few Sacramento appraisers were doing work in the area too. One guy I know basically shut down his business for a month or two and was totally devoted to Paradise desktop appraisals for clients. I didn’t do any appraisals for fire damage. I wanted to help, but I just don’t know the market there. I get it where appraisers can learn and become geographically competent, but there is a line to not cross too. What a crazy example you shared. That’s probably a pretty good example of the line I just mentioned… Thanks again Dave.
Great information as always Ryan! Thank you!
Thank you so much Michelle.
Thank you Ryan! I love your articles and updates. I tell all of my clients to read and subscribe. I like your message to the future owners. You do you. (:
Thanks so much Charlotte. I really appreciate your support. And glad you liked the message. I thought it would be funny. Good thing my wife agreed too (after I wrote it). 🙂
Ryan, I am so sorry for all of you in California. These fires are just so hard to imagine. Hang in there! Congrats on your new flooring. My wife and I just covered our older hard wood floors with vinyl plank flooring. With pets, I think the vinyl will hold up better to scratches. Stay safe out there!
Thanks Jamie. It’s been tough to watch and it’s difficult to not be able to enjoy outside also. That’s nothing of course compared to people who are losing their homes. I’m just saying there is an effect we are all experiencing and it’s not a good thing. Glad I joined the vinyl plank fan club with you.
Hang in there my man!
I’m all for LVP. Covered over some dated tile in a rental we own and brought the home into the 21st century. I have heard of purchase transactions cancelling due to the unavailability or insanely high cost of fire insurance. Some insurers are not covering entire zip codes, including mine due to proximity to canyon brush.
Right on with the LVP. I’m surprised regarding insurance in your area. Interesting to hear. I can only imagine the conversations happening behind closed doors with insurance companies as it relates to certain areas of California.
Great topics. I live in Portland, OR. Smoke has been so bad at times over the past few years that going outside is like standing on the smoky side of a camp fire and you can’t move out of the way. I could even smell smoke inside our house. For that reason, I spent the last year upgrading my house for clean air. First, I air sealed the house so it has few leaks. Then we installed a Heat Recovery Ventilator (HRV) that exchanges stale air in the house with fresh air outside while saving the heat in or the cool in the house. On that system, we installed a massive carbon filter for smoke and HEPA filter for other contaminates that filters all the incoming air. We also installed a new HEPA filtration system on our forced air system (separate from the HRV system) that would further filter the air that is already in the house when the system fan is running. Finally, we installed air monitors throughout the house so we can closely monitor air quality. Smoke and CO alarms just tell you when there is an emergency to get out, these air monitors we installed tell you when the air is unhealthy and you need to bring in more fresh air. It has been a learning experience and I think will have positive long-term health benefits.
Wow, Gary. I’m really impressed. Next time I go to Portland I’ll see if I can smell the difference between the last time I was at your house and now. 🙂 Seriously, great job. This doesn’t surprise me though with how much you’ve learned about efficiency and such.
Nice work Gary. Building science and incorporating indoor air quality measures make a home so much more comfortable and healthy to live in. Thanks for sharing
Hi Ryan,
I read your blog regularly as I am in the market for my first home and I’m wondering why you aren’t making more of the trend in decreased listing prices in the Sacramento city area? A quick look on Zillow shows that much more inventory has opened up under the 400K range as compared to the past year. The Zillow estimates also now reflect sharp downward curves in price estimates. I am encouraged by the corrective trend and am hoping new units coming online in the new few months provide some downward pressure on prices.
Hi Steve. First, thanks so much for reading. I really appreciate it. And now that you have an approved comment you can pitch in thoughts again without moderation if you wish. No pressure.
Price reductions are part of the normal seasonal dynamic and we should be seeing more reductions right now, so I really haven’t highlighted that. I suppose I could’ve mentioned it at least, but I’ve been more focused on other things. So far I haven’t seen anything alarming though with reductions. That is, I haven’t observed anything way beyond normal. Seeing things like less multiple offers, longer days on market, slightly lower sales price to list price ratio, lower sales volume, more inventory, etc… goes right along with more price reductions. I don’t pay attention to Zillow, so keep me posted if you see anything interesting there. It’s been a few months since I’ve run inventory by price range, so hopefully I can get to that over time to see if there is anything interesting brewing and noteworthy.
Thanks for the prod. I’ll keep my antennas up. Like I said, I’m open ears too if you see anything interesting out there.
Thanks for your reply!
I wasn’t aware that the seasonal price decline began so soon, I would have assumed it would pick up amongst Oct.
Is there a better publicly available listing site than Zillow that you could recommend?
Based off my checks of the housing market in Sacramento during the last year, much of the inventory below 400K in the city area was less than 1500sqft, this is the first time I’m seeing so more listing for properties at or above than for 350-400K. Considering that the eviction mortatoruim will end this month and about 2% of homeowners in CA reported on a survey that they are financially distressed, do you see a significant amount of inventory coming on the market in mid fall to winter? Also, considering how much price appreciation the market has seen in the last few years, do you think that the institutional investors would be looking to unload before any near term economic depression (triggered by inflation or lack of continued stimulus)? Can the earning power of the local market absorb that ? Ie., will we see significant price declines?
I don’t know that there is a better site right now than Zillow for seeing listings. Their interface is so much better than Realtor.com and even the local MLS. It’s just true. I’m not a Zillow fan for so many reasons, but I can’t say another site has them beat (for now).
It’s hard to say what will happen with the eviction moratorium. I wonder if it will somehow not end also. The deadline keeps getting punted down the road. I would be surprised if we saw so much inventory that it shifted the market. I could be wrong, but let’s be real that there is space for more units to come to the market to satisfy demand. I read a headline today talking about a huge number of evictions coming soon, but the key is that we compare this to normal data. What is a normal number of evictions to see happen? I don’t have those stats in front of me. I’m just saying it’s not meaningful when I see numbers such as, “We’re going to see 750,000 evictions this fall.” This number only means something when we establish a context. How much would be normal? That’s the key in my mind. In the meantime I suspect some doom and gloom prophets are going to continue to preach a market crash due to massive evictions.
It seems like institutional investors are playing the long game. Invitation Homes is sitting on profound equity, but they’ve never sold. I wrote about them two months ago. I think there is an expectation baked into the minds of many people that they will sell, but they’ve really just thinned the herd through the years by dumping a few non-performing units here and there. They are buying again too as of a few months ago. I would think if they were scared they wouldn’t be buying. But backing up, they are after rental value more than anything, so that’s the real key to focus on. Up until this point it 100% has not been their MO to flip. I suspect lots of YouTube gurus are preaching that message, but it goes against what they’ve historically done. In our area they are the largest institutional owner. There could be others, but their activity is more subdued.
So many questions Steve. I cannot get to everything here. I need to pace myself and hit deadlines.
That’s certainly a lot of food for thought.
I believe that the recently Supreme Court ruling would also be precedent to not extend statewide moratoriums. Congress’ dysfunction also guarantees that much won’t be done and the fed chair publicly talking about tapering of stimulus also makes me think that the government’s stance of more assistance seems to be at its end (unless something catastrophic happens).
I’ll be keeping my eye on the blog as I plan to resume my home search actively around Oct. thanks again for the great and in-depth research/replies.
We’ll see Steve. It was just announced today that New York has extended their eviction protection for renters until January 15th. The trend is to extend. Now let’s see what happens in California.
Vinyl plank flooring is the way to go. I love your P.S. in the message to a future owner. You have a great sense of humor!
Thanks Steve. I appreciate it. I was just glad my wife was on board. I showed her after I wrote it and she chuckled. 🙂
Hi Ryan, great post and YEP I am late to the party. Hmmmm way too much fun at my ranch lately. I went back and looked at the post you linked with Ms. Penny Woods from Aug 2018. I thought I recognized the post, then I scrolled down and found my longwinded comment. Anyone who has issues with sleeping at night go find that comment section. As a Quick Reminder to your RE Agents and Brokers, when I teach classes to local offices and the board I always remind the agents/brokers if they are looking for a way to touch their old and current clients, how about reminding them to get their tablets or phones out, shoot photos all around the outside of the home, then narrate what you have outside in a video, I know sounds weird doing both but it will help in the future if needed. Then do the same thing inside the house and garage. (Yes the garage too) Open all the drawers, closets, cabinets, pantries and shoot photos / video every room in the house. Narrate your tour and make comments about antiques, your great uncle Al’s Elvis painting, Aunt Jenny’s bowl from the farm. Anything that you see that strikes a cord. Then after that is done make sure and upload to the cloud all that you have shot photo and video wise. This goes for tenants, homeowners and landlords for those near the rural areas, in the rural areas and those in tract houses (don’t think because you live in a suburban or urban area that you won’t be effected). I have been involved over 18 years with wildfire case work and I see the same interrogatories from those effected by wildfire, the trauma of the fire and their loss and that they just can’t remember what they had in each room and that adds to the misery of the situation. If you shoot photos and videos it will make your claim to insurance or anyone else a whole bunch easier. And after dealing with this type of loss, you don’t want to add to the pain of the event by not remembering what you lost. Just a few thoughts hopefully that might help your Realtors, agents, brokers and their clients in the future because it appears these wildfires aren’t going away any time soon.
I’m so glad you’re having fun on your ranch. That’s the way to do it, Brad!! I appreciate your advice too. It probably wouldn’t be a bad idea for me to walk through my own house to make a video. I’ll be sure to record all of my tools especially. 🙂