Pulling comps in 2024 is tough. Think about it this way. If we have 40% fewer sales happening, that means there are 40% fewer comps. Yikes. Let’s talk about this. I also have some market recap visuals to unpack what’s been happening in 2024 so far.
UPCOMING SPEAKING GIGS:
2/19/24 Matt the Mortgage Guy YouTube Live
3/11/24 Yolo Association of Realtors (YAR only)
3/19/24 WCR Gold Country (details TBA)
3/21/24 2024 Market Update for Brent Gove Team (big event free)
3/26/24 Orangevale MLS meeting 9am
3/27/24 SAFE Credit Union Lunch & Learn (TBA)
4/11/24 Lindsay Carlisle Event (private)
4/25/24 HomeSmart iCare Realty (details TBA)
5/9/24 Empire Home Loans (details TBA)
5/15/24 Investor Meetup (details TBA)
6/11/24 Elk Grove Regional MLS Meeting 8:30am
6/13/24 Sacramento Realtist Association (details TBA)
(and you are the baby daddy)
TWO THINGS I’M DOING FOR COMPS IN 2024
1) GO BACK FURTHER IN TIME:
One of the things I’m doing more often today is looking at older comps in the immediate neighborhood. I find myself scouring 2021 onward especially. The truth is there are portions of 2021 and 2022 where prices are exactly the same as today too, so if I use an older comp, I don’t always need to adjust for the way the market has changed. But backing up, I can look at older stuff for the sake of research, but this doesn’t mean I’ll use a super old comp in a report. In short, it’s not enough today to go back 90-180 days because there just aren’t enough data points in so many cases. We probably need to go back much further, and there is nothing wrong with looking at years of data to help us understand the trend. My suggestion is to do this in bite-size chunks though because it would be overwhelming to pull up three years of sales at one time. This is why I might start with the past 6 months, then the prior 6 months, then time before that, etc…
EXAMPLE 1:
There were only five competitive sales since late 2022 in the Rollingwood neighborhood (black dots). It helps that these sales are recent, but five isn’t much to work with either, right? This is why I wanted to look much further in time. For me, it really helped to dig into 2021 and 2022 to understand how prices have changed over time. And if you don’t make graphs, that’s no big deal. I would recommend using the MLS map search so you can dig through various time periods. Do you see how it looks like prices are lower than the peak of 2022? Could that be helpful to know? Maybe so.
PRO TIP: WATCH THE MEDIAN TREND
The median price for the region doesn’t translate rigidly to neighborhoods, so be careful about saying stuff like, “The median is up 3% this year, so neighborhood prices are up 3%.” Maybe. Maybe not. Look to the comps most of all. In my experience, some people get really upset when I share median trends because the sentiment is the median isn’t a perfect metric (true). But here’s the thing. The median trend locally has tended to be the pattern in so many neighborhoods where we’re still down from the peak in 2022, we’re up from one year ago, and early 2024 is tending to compare to a few different times in the past.
2) EXPAND TO OTHER NEIGHBORHOODS:
Looking up other nearby neighborhoods is something I’ve done much more of lately since sales volume has plummeted. The ideal is to compare areas with similar prices, but even if the price point is a bit different, it can be valuable to see what is happening in a different nearby neighborhood. I may or may not use comps from a different neighborhood. I’m just trying to understand what the market is doing. When using the MLS map search, I typically draw boundaries around a neighborhood, but then I find myself drawing a couple of other boundaries in nearby areas in many cases too. That maybe wasn’t as necessary in previous years, but today I’m doing it all the time because there just isn’t much to work with to understand the trend.
EXAMPLE 1:
With only five duplex sales over the past 18 months, it can be tricky to understand where value is at when there isn’t much of a frame of reference. In this scenario, I included duplex sales in South Land Park on a graph of Pocket area sales. Is that ideal? I don’t think so. But this helped me to see the market a bit more. I also included single family detached units in the background of this graph just to try to see where prices have gone over time. Of course, the trend could be different for single family units, but I was basically looking for whatever context I could find to help understand the market.
EXAMPLE 2:
Here’s a different example where I was working on a larger duplex in the Larchmont Riviera neighborhood, and there just wasn’t much context since there was only one recent sale at the time in the neighborhood. So, I took this graph back multiple years to look at older sales in the immediate area and compare three different neighborhoods. Look, some neighborhood comparisons could be awful, but sometimes when we put neighborhoods together, we end up seeing the market a bit better. I think when I started as an appraiser, I was way too focused on only looking at the immediate neighborhood, but what I’ve found over time is there is tremendous perspective when we back up and look a little wider.
MAKING GRAPHS
The visuals above are scatter graphs, and I have a free tutorial here to learn how to make a template (or watch below). There is a learning curve here, but it is highly doable. It changed my career to start getting more visual in real estate, and I’m always hopeful people will learn.
Anyway, I hope that was helpful.
2024 HOUSING MARKET WILL SUCK LESS (HOPEFULLY)
“Far from normal volume, but hopefully a little more.” That’s the theme for 2024, and it’s what we hope to see with the number of new listings and sales. Or in layman’s terms, the market sucked last year, but hopefully it will suck a little less this year.
GOOD NEWS TO START THE YEAR:
In January, we saw more new listings, more pending contracts, and more sales compared to one year ago. We are still very far from normal levels, but this is the direction we want to go. The x-factor of course is what happens with mortgage rates. If rates rise much more, can that slow down the momentum we’ve had so far? Possibly. Sellers and buyers have thawed out very slightly, but that could change if rates keep going up. Only time will tell.
It’s nice to see most local counties had more volume in January. This isn’t much, but more is the direction we want to go because it’s healthy when more buyers and sellers can participate in the housing market. Bottom line.
STILL FAST, BUT MUCH CLOSER TO NORMAL:
When looking at days on market, it’s definitely not 2021 any longer, but we are still a bit more competitive than usual. We should see days on market tick down in the stats in coming time too as the spring season lifts off the ground. Here’s the thing though. If you’re not priced right, you’re going to sit instead of sell. Buyers are very sensitive to paying the right price.
PRICES DIPPED IN JANUARY AS EXPECTED
Prices dipped between December and January as expected. That normally happens. January is often a low point for the year before prices start to rise again for the spring. Remember, closed sales in January actually got into contract in December mostly, so these sales tell us more about December than anything.
NINE LOCAL COUNTIES:
Here are some visuals. I’m not crazy about the smaller counties here, and I have pause about pushing out this data. Let me know what you think. By the way, I’m posting these on the STATS tab each month.
NOTE: See stats tab for month-to-month visuals
Please take smaller counties with a grain of salt. In other words, prices are not up 15% in El Dorado this year.
Thanks for being here.
Questions: What are you doing for comps right now? Any stories or insight to share? What stood out to you about the stats above?
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in my practice over the past 20 years, ive found that a time adjustment is the #1 easiest and most supported adjustment i can make.
EVER.
i can narrow to my market segment and market area and forget any dates and find ‘perfect’ comps.
Then a simple time data based adjustment and boom. AMC/lenders HATE not having current comps so theres always a few but commentary and comments and disclose and discuss mean im basing value on data…
and time data is the best data to have.
my area of practice is rural and super rural and weird and mountain so time is my friend.
i can do a market search in a 10 mile radius and only get 10 sales of any kind so time is my data.
Thanks Mark. Love it. And I totally agree about a time adjustment. I am really grateful to have much more context in the ‘burbs. It must be challenging in a rural market – especially if volume has dipped in recent years even more. I realize FHA wants appraisers to use comps within one year, but sometimes the best comps are going to be older. It is what it is. I would much rather use older and more relevant comps (while adjusting for market change) rather than something newer and less similar.
Hey Ryan,
Great, practical advice. I’ve graphed one unit homes to understand 2-4 unit trends but never thought to put them on the same graph. That’s brilliant.
Thanks so much. I appreciate it, Joe. Yeah, in this case it looks like a similar trend too. I’ve done this with vacant land on top of residential too. I just try to look for any context possible. Vacant land doesn’t always look so clean though.
Thank you for putting all this together for others. I’m finding that I’m going back to pre-pandemic to 2019 to get a read on what was going on then, even if I don’t use any comps from them still gives me a a baseline of sorts.
Also, I’m seeing in some of my market areas like Malibou, a bump in late 2020 into 21 as folks were seeking safer shelter, including in Rentals, and willing to pay more. As we got into the 2022 in 2023 market, things Appear to have started to get into normalcy, with just less product overall. I hope this perspective is helpful to others in some small way.
Love it. Thank you, James. I really appreciate hearing your perspective. Agreed on getting closer to normalcy too in many of the stats (still more competitive in mostly every stat locally, but nowhere close to 2021 intensity).
Thanks Loved the Excel template tutorial. Very helpful.
Right on. Thank you Sue.
Great discussion. When I’m deciding to go back further in time or further away for a comparable sale, it’s important for me to always keep in mind exactly what I’m looking for. For example, in my more recent and more proximate sales, I had something that set and upper limit of value and something similar, maybe now I’m just looking for something to set a lower limit of value by being overall inferior.
Excellent point. Thank you Gary. And if we pass by lower-priced comps in the immediate neighborhood in favor of higher stuff elsewhere, that’s just cherry-picking. We better check our motives and really be sure how the areas compete.
When the market data is thin, I will find comps that help bracket features such as nearby, similar quality/condition, and recent. Since I know my markets well, it’s not too hard to figure from there.
Right on John. That’s good stuff.
Great article! Thanks for the great tips!
Thank you very much, Scott.
Gosh Ryan, outstanding blog post this week. There is so much valuable information. Thank you
Awesome. Thank you Steve. Appreciate it.
Great post, Ryan. Your post this week is good to share with agents. They sometimes get hung up on only using sales in the immediate subdivision that have occurred very recently. While this would be nice, it is not always possible, so letting them know that it is okay to go further back in time or even look at other competitive market areas is acceptable. Love the charts!
Thank you very much, Tom. And to be fair, I think it’s sometimes easy for appraisers to get stuck on sales in the immediate neighborhood too. It’s not that I didn’t look to other neighborhoods before, but I just find myself doing that more often today to help me see the trend. Valuation is tricky – especially in today’s market. And Tom, congrats on 14 years of your blog!!!!!
That and comps that would include an adu. How do you determine the added value of an attached adu? I will be faced with this in the near future.
Hi Deborah. Yeah, it can be tricky. Is the attached ADU accessible through the rest of the house? I’m just trying to picture the layout of the house. Here are two articles about ADUs in case it’s helpful. Let’s keep the conversation going as needed. You can certainly email me offline too.
Something I wrote in 2016:
https://sacramentoappraisalblog.com/2016/10/05/how-to-figure-out-what-an-accessory-dwelling-is-worth/
A newer post. It rehashes some of the 2016 stuff with some newer stuff too:
https://sacramentoappraisalblog.com/2020/06/10/the-skinny-on-accessory-dwelling-units/
Hi Ryan – Great Post
Here are thoughts from the lender side of the house……
Lenders and investors all prefer data from the immediate market area with time adjustments (supported of course). As a risk reviewer we have found that most often an appraiser travels to a more distant market to ‘find the number.’ So, understanding the shortage of comparables, the caution would be that if the sales that support your value are from a different market area there needs to be a well thought out explanation with reasoning and statistics, demonstrating support for the more distant market area as a comparable to the subject’s market area.
Don’t be surprised if you hear back from the client, we rarely receive adequate explanations, logic, and reasoning. When a beautiful example ends up on my desk, you can be sure you will hear from me with a huge Thank You!
Thank you Lori. What you say sounds perfectly reasonable. Traveling further to “hit the number” so to speak is not reasonable or ethical. Like you said, there better be a good explanation if the appraiser uses something from out of the area. But the struggle is real here. It’s tough out there in the trenches. I’m personally a huge fan of just using much older sales in the immediate area and adjusting for the way the market has changed (no problem using 2021 and 2022 if needed also). But I’m not opposed to using nearby areas too if needed. Yet, one thing I won’t do is look to other areas simply because there aren’t more recent comps nearby. That’s silly. There is no 90-day rule of using comps for appraisers. Appraisers simply need to us the best that is out there. What I find to be incredibly valuable for understanding the market today is to look way beyond the immediate neighborhood. We have to see the trend, and it may take poking around in other communities to understand that. Granted, I don’t necessarily have to use comps from those other places, but I can use those locations for research.