Sacramento Appraisal Blog

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Watching listings, the word on the street, & being negative

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This shabby chic piece hangs in my office and I love the phrase. The market is always moving. It’s just true. This means there is always something new to say and understand about housing trends.
 
 
Anyway, here are four things on my mind:
 
1) Watching listings: I am getting many questions about what prices are doing, but we just don’t have many sales yet. Like I said last week, only 2.9% of all sales in March actually got into contract after March 12th, which is the day our pandemic seemed to kick into high gear with events cancelling and such. While we don’t have many sales yet, we do have listings which will give us clues where the market is heading. Are you seeing price reductions? Are properties sitting instead of selling? Are new listings tending to get into contract at lower levels than recent sales or current pendings? Are buyers absorbing inventory or not?
 
2) Don’t be so negative: I’ve been told a few times lately to lay off talking so negatively about the market, but what I’m doing is sharing facts. In truth I’m not being positive or negative. My goal is to be neutral and sling perspective without sensationalism. In other words, let’s talk about the market that actually exists while not getting swept away in every scary headline that may or may not happen. The reality is facts are neutral and less-than-positive sounding stats are not a threat either because they help us make decisions.
 
3) Mindset vs market conditions: In real estate it’s tempting to only speak positively about the housing market. It’s like a Harry Potter world, but instead of not being able to say the name of you know who, we cannot talk about the market changing (sorry if you didn’t get the reference). The bottom line is there’s a huge difference between having a positive mindset in life and being real about market conditions. Those are two distinct things.
 
4) Word on the street: Right now we are beginning to get some solid pandemic real estate data which I share below, but we’re still waiting to see exactly what happens to the direction of prices over time. This is why the word on the street is so powerful. What are buyers, sellers, and real estate professionals saying, doing, and believing about the market? The truth is the stories of today become the stats of tomorrow. On that note, here is a Twitter poll I have going. There is nothing scientific here, but it’s fascinating to have these conversations. One day left if you want to jump in.
 
 
Okay, moving on.
 

A FEW RESOURCES:

Zoom call this morning: If you’re around, I’m doing a public Zoom session on Thursday April 8 at 11am. A local real estate office asked me to do this and they opened it up to anyone. Hopefully there is not a cap to the number of people. Anyway, you can see the Facebook event for details or click here to sign in on Zoom. I’ll give a brief market update and then we’ll do Q&A.

UPDATE: Here’s a recording of the Zoom meeting.

New market video: Here is a new market video from a few days ago. This is 20 minutes. I’ve been having a blast and I’ll keep doing these as long as people keep watching. Check it out below or here.

Mike DelPrete: If you’ve watched any of my videos lately I’ve mentioned Mike DelPrete’s graphs and analysis. This guy is bringing important perspective. Here’s a 29-minute webinar from last week.
 

Fresh pandemic real estate visuals: Here are some visuals to show how the pandemic is affecting the local market. Right now we don’t have much data on prices, but that will come in time.

I hope this was interesting or helpful. Thanks for being here.

Questions: Why do you think it’s so tempting to talk about real estate in glowing terms? What do you think of my thoughts on market conditions vs mindset?

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Hot real estate stats during the pandemic?

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I can see the headlines now. “Prices rose despite the coronavirus,” or “The housing market shows strength in March despite the pandemic.” But let’s step back and think critically about glowing stats from March and what they really tell us. I hope this will be helpful. Any thoughts?

Five things to consider about stats during the pandemic:

1) Prices rose last month (technically): If we’re not careful the hot headline can be the median price rose 3.5% last month in the Sacramento region despite the pandemic. In other words, the median price increased from $425,000 in February to $440,000 in March. On paper it looks like the market is fine and moving along without any effect. BUT we have to remember prices in March actually reflect pending contracts from mostly January and February. So sales in March actually tell us way more about previous months rather than March itself. If you don’t believe me, only 2.9% of all sales in March got into contract on or after March 12th (the day we found out Tom Hanks had coronavirus) and only fifteen properties have gotten into contract and closed since the lockdown went into place. So we have very little pandemic data to consider within March sales.

2) Pulling stats too soon: This sounds geeky, but it’s key to understand. Pulling sales stats on the first of the month is way too early because not all sales have been entered into MLS yet. In my experience on the first of the month we’re still missing about ten percent of the sales from March because not all sales have been entered into the system yet. So if we wait about a week instead to pull stats we end up getting a much more accurate picture. I quoted the median price above at $440,000, but that is preliminary and it could easily change based on ten percent of the market not being accounted for yet.

3) What to watch right now: If you want to see the current market, watch what is happening in the listings and pendings rather than recent sales in March. Are listings moving or sitting? Are we seeing more price reductions? Are properties spending less or more time on the market? What is the sentiment among buyers and sellers? Who is gaining or losing power? Has there been a change to the number of listings and pendings? Do sellers have to give more credits to buyers? Are contracts getting bid up? Are contracts falling apart more often? We need to ask these questions in every neighborhood and price range. My advice? Look to neighborhood stats and let the numbers inform your narrative about what is happening in the market.

4) Be objective about data: I find it’s so critical to be objective about prices. What I’m saying is if we’re not careful we can judge a market’s price direction based on what we think should be happening, recent sensational headlines, or even regional trends for pending contracts rather than looking to actual stats in a neighborhood or price range. Appraisers even need to do this. It can be tempting to say prices are declining, but we need to be sure that is the case based on what we are observing in the neighborhood market. Remember, it’s possible to be see pendings and listings start to slough, but that doesn’t always mean we’re seeing price declines at the moment. Could that be coming soon? Yes. But we need to let the data tell the story. Let’s remember the market is changing quickly, so what we’re saying today might be different tomorrow.

5) Upping your numbers game: If you work in real estate I can’t emphasize enough how important it is to be fluent in market trends and to be able to talk through current dynamics so you can offer informed real estate advice. If it’s helpful, I am posting a few YouTube videos each week right now as well as lots of content on Facebook and Twitter. Or let’s set up a Zoom meeting with your office so we can talk shop (local offices are free). My goal is to offer perspective and objectively share the story of the market without sensationalism.

A few closing things:

New market update video: Here is a new market update video from two days ago. This is 15 minutes. Watch below or here. I have some new stuff to share, so be on the lookout hopefully today.


 

Fresh daily visuals: During this pandemic I’ve upped my stats game and I’m finding new ways to visualize how the market is moving. I’m not focusing on prices for now because we don’t have enough data yet.

Side note for appraisers: There are disclaimers being put into appraisal reports that talk about not being able to quantify the long-term or short-term effect of coronavirus, but if we pay close attention we likely have enough data right now to at least talk about some of the short-term dynamics. It’s easy to put boilerplate pandemic comments in an addendum for liability and that’s a really good idea, but what’s even better is our market analysis. Colleagues, would it help to have some tutorials for these types of graphs so you can make them in your market? If there is enough interest I’d be glad to put something together. Let me know.

I hope this was interesting or helpful. Thanks for being here.

Questions: What stood out to you about this post? What are you seeing out there in the market right now?

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Working with appraisers during a pandemic

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Are appraisers still working? This is probably the question I’ve had most over the past week, so I wanted to unpack some thoughts.

1) Yes & No: Most appraisers are working and it seems like the bulk of appraisers working for lenders are still walking through the interior. There are definitely some appraisers who are not inspecting the interior though (myself included). Some sources say appraisers are deemed an “essential” service during the pandemic, though not everyone agrees. 

2) Exterior focus announced: Fannie Mae and various banks have announced a temporary emphasis on exterior-only and desktop appraisals. When hearing this it’s easy to think every future appraisal is going to be a “drive-by”, but that’s not the case. In fact, traditional appraisals are still going to be in play for various types of loans and my guess is they’ll be the product of choice as long as they’re available. There is lots of conversation too about appraisers technically focusing on the outside but also getting information about the inside of the home through photos and video. Here is a table Fannie Mae published on Monday show what is possible, but we’ll have to wait and see how it all unfolds in the local market. 

Keep in mind the lender sets the tone here and it’s not up to the appraiser to decide whether to do an exterior-only appraisal or not. However, an appraiser needs to believe a credible value can happen with a more limited scope of work, so appraisers won’t blindly say YES to an exterior-only appraisal if there’s not enough information. Lastly, just because a lender or AMC asks an appraiser to do something doesn’t mean the appraiser has to say yes.

3) Time: It’s going to take some time to see how this all shakes out. We’ll know much more in coming weeks. For instance, we haven’t heard from FHA yet.

4) Practical tips for real estate agents: It might help to take extra photos or video of a home before you list just in case it comes in handy for the appraiser. You might also consider being ready to talk with the appraiser about things such as layout, interior charm, age of improvements, quality of finish work, or anything you might understand more fully by actually walking through a home. If an appraiser is doing a desktop appraisal, I’m not certain the appraiser will call you or not, so you may want to include extra details in your MLS descriptions. This of course isn’t anything new because sharing property details is useful in any market. Please consider using my Appraiser Info Sheet to help tell the story of the property.

5) Private appraisals: If you are looking for a private appraisal, I can’t recommend enough being willing to color outside the lines. Would it be ideal to have the appraiser observe the interior in person? Yes. But during this pandemic it’s important to work with what we have and keep everyone safe. I have private clients who are working with me to use FaceTime to walk through a property (or the Google Duo app for an Android). I also have clients who have sent me 50+ photos of the interior and a very detailed written or verbal description of the property. Of course some appraisals for complex properties or geared toward court might need to wait.

6) Questions for appraisers: I’m not trying to ruffle feathers, but I think we’re at a place where it’s critical for appraisers to strongly consider whether they should be going into occupied homes. I have the utmost respect for peers, and that’s why I want to bring this up. So I ask, where is the line for us? At what point would you personally begin to pull back? How bad would it have to get? When is it deemed too risky for you and others? If you aren’t visiting your friends and family right now out of precaution, is it okay to go into homes of other people’s friends and family? I realize these questions are direct and there is also a cost to saying NO, but we have a serious situation going on right now. I have definitely lost business lately in light of saying NO to private clients, but that’s okay for this season. I don’t mention this to be combative and I hope to not be fielding angry emails all day. I love my peers and I’m concerned that we’re being asked to go inside homes right now. My strong opinion is we need to stop inspecting the interior of occupied homes. But put more lightly I’d say I think we’re at a place where appraisers need to show resistance to lenders for the sake of public health. Lastly, I realize not all areas of the country are the same in terms of COVID-19 cases (just in case you were ready to destroy me).

A few closing things.

Zoom session: If you want some background noise while quarantining, here’s a Zoom session I did yesterday hosted by KW Elk Grove. We talked about market stats, trends, and then fielded questions. It seemed like most questions were about how to see the current market and choosing comps. This is 100% off the cuff. Enjoy if you wish. Watch below or here.

New market update video: Here is a new market update video from two days ago. This is 20 minutes. Watch below or here.

Fresh daily visuals: During this pandemic I’ve upped my stats game and I’m finding new ways to visualize how the market is moving. Here are four images I’m updating every single day. If you have ideas for images too, I’m open ears. Remember, it’s tempting to focus on prices, but we see change happen first in the listings and pendings.

I hope this was interesting or helpful. Thanks for being here.

Questions: If you work in real estate, what types of appraisals are you seeing happen? If you are an appraiser, what’s your take on interior inspections?

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Buying an island, uncertainty, & pendings

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If you’ve ever wanted to buy an island to feel like a king or queen, here’s your chance. This just might be perfect for social distancing too, right?

I wanted to start out on a light note today because news has been so heavy lately. Anyway, this 18-acre parcel is located in Stockton, CA and it’s listed for sale at $40,000. I’m guessing it’s going to get bid up, but we’ll see. The listing says the zoning is AG40 and you can use it for boating, camping, fishing, etc… Photos shared with permission by Realtor Monte Morris. WATCH video here.

I jokingly verbally offered $500 for this island, but I was laughed off. Haha.

Quick advice about land: If you ever do buy a big (or small) chunk of land, be sure you call the city or county to verify what zoning allows for the particular parcel. What can you do with it? Or in real estate terms, what is the highest and best use? I would definitely not rely on the zoning listed in Tax Records either as that might not be correct. I would 100% find out details such as allowable uses, whether it is buildable, how often it is underwater, etc…

Okay, now to market stuff.

Uncertainty in 2020: I put out a new video called Uncertainty in Real Estate to talk through recent trends and all the uncertainty we’re feeling right now. I unpack where we’ve been in 2020 and some of the things to consider right now during the COVID-19 pandemic. It’s about 30 minutes, so maybe listen in the background while working (or self-quarantining). Start the video at 12:00 if you want to get to more focused pandemic thoughts.

A new pending visual: Here is a new graph I’m going to be updating as often as I can. Do you like it? This visual only goes through the 12th of March so it doesn’t capture this past weekend yet. My sense is we need to wait about a week or maybe more until all data are present before trying to see the trend. Otherwise if we post too soon it can actually be misleading.

The market is still alive: Over the past weekend we saw strong pendings in the Sacramento Region. Pendings were just about the same as the previous weekend, but down slightly. I heard lots of stories about multiple offers too and technically 55% of all pendings had more than one offer according to MLS stats. As of today MLS shows 192 pending sales in the region compared to 210 the previous weekend. When I made this graph yesterday MLS showed 178 pendings, but I didn’t feel like updating this chart again. Yeah, call me lazy. For now pending sales have been higher in 2020 compared to last year, but the x-factor is what happens from this point forward.

UPDATED:

SPIKE IN CANCELLED LISTINGS: I just ran cancellations and it looks like there has been a spike in recent days. This is something to watch. Keep in mind some sellers will absolutely be taking their homes off the market. Some won’t. I wouldn’t make this the primary data point for what the market is doing, but it is a telling factor. Stay tuned. I’ll have more visuals soon. Per MLS “Cancellation of a listing means that the listing agreement is cancelled”. 3:00pm 3/18/2020

SPIKE IN HOLD STATUS: There has been a huge spike in properties on “hold” in MLS. This status basically means homes are removed from the market and they can be placed back Per MLS “Hold means that the listing contract is still valid, but the seller has requested that the marketing be temporarily suspended.” 3:45pm 3/18/2020

I hope that was interesting or helpful.

Questions: Would you buy this island? What are you seeing out there in the market right now?

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