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affordability

My real estate mind never shuts off

December 3, 2019 By Ryan Lundquist 23 Comments

My real estate mind never shuts off. Even when I’m on vacation I can’t help but notice interesting things and think through value issues. Anyway, last week I took a family road trip through Southern California and here are some things that caught my eye. Enjoy if you wish.

INSIGHTS WHILE ON VACATION

1) Vibrant colors: Imagine this pink color in a newer tract subdivision of stucco boxes with earth tones. In that scenario the market could have a negative reaction to such a loud color, but in certain areas vibrant colors are accepted. This reminds us the market isn’t the same in every location or price range. By the way, check out this pink house near Austin in case you missed it earlier this year.

2) Prices are relative: These new townhouse units in San Diego start at $1.2 million. That’s wild considering the starter model is less than 1,200 sq ft. In Sacramento we don’t tend to see such small units command this price point. For reference only 2.5% of the entire regional market in Sacramento this year has sold above $1M. It’s a good reminder that prices are relative to their location. But still, I think this underscores the struggle of affordability in California too.

3) Views can be temporary: This unit has a view of the ocean for now because there’s a vacant lot in front of it that allows this view to happen. My advice? Whenever purchasing a property near vacant land, be sure to check out the zoning and/or the probability of a zoning change. This will help you know what can be built because a vacant lot doesn’t always stay that way…

4) Unique architecture: This is a new build with a modern Arabic architectural feel. It’s a gorgeous custom home and there aren’t too many like it from what I can tell. What would you do for comps on this one?

5) The rage of contemporary homes: I see contemporary or “modern” architecture popping up all over the place in many major cities throughout the country. But while contemporary is clearly a growing trend, it’s not everywhere either. For instance, we don’t tend to see homes like this built in rural markets or lower-priced areas, but we do see it near major cities. On a personal taste level, this isn’t for everyone. But then again, it doesn’t matter what you or I think. What does the market think?

6) A location with an asterisk: This is a killer view, but there’s one big issue. Is it possible to demolish the unit in front? If so, how high could a new structure be? This is a critical issue to consider when choosing comps as we have to consider the permanence of a view when assigning value to a property. We see stuff like this happen all the time when an owner backs vacant land until a developer builds a store. I recently appraised a house that had a lake view only because of a vacant lot across the street. But said vacant land was purchased and it’s now likely to see a change in the view.

7) Funky driveway: I’ve not seen a driveway like this before. I’m not sure if it’s just ornamental or if there is a practical use for this design. What do you think?

8) A door that pops: I often get asked for ways to help increase curb appeal. I’m not saying painting your door is going to sway value, but when there is a limited budget I tend to tell people to focus on lots of little things instead of just one big project. In other words, try to increase the “bling” of a house in small ways rather than only remodeling the kitchen. This is why I like painting a door because it’s an inexpensive and practical way to give a house vibe or even charm. As always, know your market. If nobody is doing this, maybe don’t do it.

9) A house of a convicted murderer: I made this image just before vacation and I wanted to sneak it in here. I’ve been watching a series on Hulu called The Murder of Laci Peterson. If you recall, Scott Peterson was convicted of murdering his pregnant wife about 15 years ago. Anyway, this home has sold a few times, so I figured it was worthwhile to visualize on a graph. Does it look like the most recent three sales sold with a diminished value? Or does it seem like the sales fit into the market without any big negative reaction? We talk about homes with stigma all the time, and all I’m saying is it’s important to consider whether a notorious owner in the past or something that happened at a house can make a difference in the value. In this case we don’t actually know for sure where the wife and child were killed. Here are some more thoughts on fame and real estate if you’re interested.  

10) Unique homes & unique comps: If you’re trying to pull comps on a unique home, you’re not likely to find something exactly the same. My advice? Look through years of sales for clues on how the market responds to unique properties. Try to find something that is similar in appeal or uniqueness rather than hastily picking the three most recent similar-sized ranch home sales over the past few months. Those SALES might not be COMPS.

Anyway, that was my vacation. And now my trip is a tax write-off since I blogged about it. Right?  🙂 

I hope you enjoyed my trip as much as I did.

Questions: Are you similar to me in not being able to shut off your mind? What pictures stand out most to you? I’d love to hear your take.

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Filed Under: Random Stuff Tagged With: affordability, appraisal view, contemporary construction, door color, driveway, location value, modern homes, photos from vacation, real estate vacation, sacramento home appraisals, sacramento house appraisals, sacramento regional appraisal blog, Scott Peterson house, Scott Peterson Modesto, value of a view

Real estate trends to watch in 2019

January 3, 2019 By Ryan Lundquist 20 Comments

What’s the real estate market going to do in 2019? Let’s talk about some of the bigger emerging trends in Sacramento and beyond. You can quickly scroll or spend a few minutes digesting things. Anything to add?

TRENDS TO WATCH IN 2019:

Affordability: We’ve had seven years of price increases without dramatic wage growth, so it’s no surprise one of the most pressing issues today is affordability. This is true for buying and renting.

Buyers gain power: It’s been a sellers’ market for years, but buyers have been gaining more power as price growth has slowed. Unless we see something happen to reverse the slowing, I expect buyers will continue to gain more power this year. If sales volume persists to slump, then it will turn into a full-fledged buyers’ market.

Uncertainty about future: For the past two quarters we’ve watched sales volume slough in many markets throughout the country. Was this simply a dull year or is it something more? Buyers seemed to take their foot off the gas pedal. Will they step back on? That’s the big question, and we’ll have to watch closely over the next two to three months to know how the market is going to unfold.

This is a poll I ran on Twitter yesterday. I know it’s only one random sampling, but it reminds me of an uncertain vibe I’ve noticed. When I ask people what they think the market is going to do I get quite a few, “I’m really not sure” answers. It seems like many people are floating the idea the market could be flat or experience something very modest – whether up or down.

Mortgage companies merge: In 2018 we saw some mortgage companies merge as a way to hold on in this market, and I expect we’ll see more of that in coming time. The reality is certain companies are struggling because the refinance market died off and sales volume was weaker last year.

Color: The word on the street is we’ll keep seeing color complimenting gray. For reference, the Pantone color of the year is Living Coral. I’m not saying this orange-ish shade is going to be splashed everywhere, but maybe we’ll see it at some point. In 2016 the color of the year was a shade of blue, and we’ve certainly noticed blue in kitchens. I suppose the color of the year could be like the cerulean belt scene in The Devil Wears Prada where we mock the color until years down the road we realize we’re actually wearing it… Not that I wear cerulean belts.

Looking for an exit: Some homeowners are concerned about a “bubble” and they sense the top is near, so they’ll be looking to exit “before it’s too late.” This doesn’t represent everyone, but some have been waiting for the right time to list and they’re feeling more ready. I expect this will be more pronounced for those in a place to downsize or move out of state. The struggle for others is it’s expensive to sell and buy again in the same market, so it becomes easier to stay put. For locals, I’d watch for Bay Area migration to Sacramento as the dream is to exit a higher-priced market and purchase in a lower-priced area. And Texas, we are the “Bay Area” buyers to you.

Overpricing: Sellers struggled with overpricing in 2018 and I expect they’ll continue to struggle – though hopefully not as much. It’s normal to see sellers want to price higher, but the problem lately has been sellers pricing for a more aggressive market from the past instead of today’s slower market. And of course sellers have been aiming for “unicorn” buyers instead of real buyers.

Laws for Cannabis: Recreational cannabis is now legal in 10 states and medicinal use is legal in more than 20 additional states. Whether you like it or not, this is a trend, and we’re bound to see more states jump on board as cannabis is normalized. I don’t say this as an advocate, but as an observer paying attention to potential impacts to the real estate market. Locally I’m expecting at some point to see other cities besides Sacramento change their zoning code to allow commercial cannabis cultivation. Think about it this way too. With so much talk of a coming recession, it’s hard to imagine city councils are not considering this move to secure future tax revenue.

Emergence of concessions: Sellers have been in the driver’s seat for years, so they haven’t been in the habit of giving credits to buyers or offering concessions, but this year could be different as buyers presumably gain more power. Sellers are going to have to get used to the idea that they won’t have multiple offers on every deal and they might have to offer credits, make repairs, etc… to get escrows closed.

Smart homes: As Wi-Fi doorbells, security cameras, smart thermostats, and voice-activated light bulbs become common, we’re only going to see more “smart” features in homes.

Energy efficient construction: Green is all the rage and we’re seeing laws change to usher in more energy-efficient technology. For instance, in 2020 in California solar panels are going to be required on roofs for new construction.

Flipping seminars: There will be no shortage of celebrity flipping seminars this year to teach the “secrets” of getting rich in real estate.

Pickier buyers: Buyers are patient about finding the right house, they’re more informed than ever about price trends, and they have higher expectations about condition and location. In a market where buyers seem poised to gain power, it only makes sense to see them grow more finicky as they have a greater selection of homes to choose from.

Crowded for real estate pros: We’ve seen explosive growth in the number of real estate professionals. This makes for a crowded and competitive market – especially in light of slumping volume. I’d expect 2019 to begin to weed some people out of the market if there isn’t enough pie to feed everyone.

Getting rid of appraisers: Over the past couple years we’ve seen an increase in appraisal waivers and there is currently a move to not require appraisals under a certain threshold. There is a clear agenda to start using “evaluations” instead of traditional appraisals. This is a big deal and removing one of the systems of checks and balances (the appraisal) as the market slows might not be the best idea ever… Read more here.

Creative financing: Last but not least, underwriting has been strict for years, but lenders are feeling the sting of the refinance market drying and sluggish sales volume. Do you think there might be more pressure to loosen lending standards to help fuel more business? Right now lenders hold tremendous power and what they do in coming time can shape the next few years. If they help buyers artificially afford higher prices through creative financing, that can only inspire price growth or stall the slowing trend. Sounds healthy, right?

I hope that was helpful or interesting.

Questions: What else do you think will be important in 2019? Did I miss something? I’d love to hear your take.

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Filed Under: Market Trends Tagged With: 2019 real estate predictions, affordability, buyers gaining power, buyers market, cannabis, concessions, creative financing, energy efficiency, exit market, getting rid of appraisers, lenders, mortage companies merge, picky buyers, Real estate agents, real estate bubble, real estate market in 2019, Sacramento Home Appraiser, sellers market, slowing real estate market, smart homes, uncertainty

10 quick things to know about Sacramento’s housing market

June 10, 2014 By Ryan Lundquist Leave a Comment

Competitive. Normal-ish. Price sensitive. These are all words that describe Sacramento’s housing market right now. Let’s take a look at some of the latest trends so we can better understand and explain how the market is unfolding.

Two ways to read this post:

  1. Scan the highlighted text and graphs quickly.
  2. Grab a cup of coffee and spend a few minutes digesting what is here.

If you want an email with all graphs in this post for free, fill out the form below:

free graphs by sacramento appraisal blog

1) Prices have seen a normal-ish seasonal uptick:

price metrics in sacramento county

The market is showing a fairly normal and steady seasonal uptick in price. Whether you look at median price, average sales price, or average price per sq ft, there has been an increase in recent months. The market has seen about a 4% increase in prices over the past four months, yet at the same time many are describing the market as fairly flat since some neighborhoods are not seeing much of an uptick at all. Remember that just because county-wide stats show a 4% recent increase does not necessarily translate into 4% value increase for each property.

2) Houses are taking about one week longer to sell:

CDOM in Sacramento County - by Sacramento Appraisal Blog From April to May, sales took about one week longer to sell in Sacramento County. In contrast, Placer County and the Region showed very little change in cumulative days on market. Generally speaking, the more expensive the property, the longer it is taking to sell. Overall, the market is price sensitive, which means if properties are not priced correctly, they are sitting. Expect this trend to continue so long as inventory increases in coming months.

3) Inventory increased only slightly from April to May:

median price and inventory since 2008 - by sacramento appraisal blog

Housing inventory increased from 1.80 months to 2.0 months in Sacramento County from April to May 2014. Inventory is still very low, which is making competition aggressive in certain price ranges.

4) Not every price range is showing the same trend:

months of housing inventory by sacramento appraisal blog

number of listings in sacramento - by home appraiser blog

Different price ranges experience different trends. This is clearly seen since inventory isn’t the same at every price level.The market is very competitive under $300,000 right now, but anything above $750,000 is far less competitive. There was little change from last month for properties under $500,000, though above $750K saw some increases. Take the 24 months of inventory above $1,000,000 with a grain of salt since there were only 3 sales in this price range last month, but there are 20 or so pendings right now. Ultimately this million-dollar stat is skewed, but it’s still safe to accurately say there is one year or more worth of houses for sale above $1,000,000 in Sacramento County.

5) Volume is down by 15% from last year, but similar to last month:

sales volume in Sacramento County

Sales volume is down compared to last year, but sales in May were about the same compared to April. In the next few days as more sales are entered into MLS, I suspect sales volume for May will increase beyond volume in April. After a very sluggish start to the year in terms of sales, it’s nice to have two consecutive months of more than 1400 sales. Of course volume is still significantly lower than previous years, and that is something to continue to watch over time.

6) Cash sales have been declining for one year now:

Cash sales since 2009 in Sacramento County by sacramento appraisal blog

Cash sales used to represent closer to 35% of all sales in the county just one year ago, but now they’re only 19.5% of all sales (for April & May 2014). Cash investors were a very significant driver for the market, but now the market is no longer being driven by cash.

7) FHA & conventional sales are both showing increases:

FHA and cash sales in Sacramento County by sacramento appraisal blog FHA and cash sales since 2009 in Sacramento County by sacramento appraisal blogWhen cash investors took their foot off the gas pedal one year ago, it got much easier for FHA and conventional buyers to get into contract. The market is still very competitive since inventory is low, but owner occupant buyers have much more of a fighting chance these days.

8) Distressed sales continue to be sparse:

REOs and Short Sales in Sacramento County REOs and Short Sales Percentage and Volume in Sacramento County

Both short sales and REOs have decreased dramatically in recent years and are definitely not driving the market. Banks are tending to spend more time and money fixing up their REOs, while short sales are often still priced aggressively low. REOs have shown a slight uptick recently (especially considering the most recent “quarter” is only comprised of two months of sales. This isn’t anything to write home over per se, but something to watch over time to see how it evolves.

9) Interest rates decreased slightly last month:

interest rates by sacramento appraisal blog

Interest rates showed a slight decrease over the past month, and that is something that will help prices be slightly more affordable. In light of massive price increases over the past couple of years, affordability is becoming a challenge for many buyers.

10) “Layers” to watch over the next two quarters:

layers of the market since 2008 sacramento county - by sacramento appraisal blog

layers of the market since 2001 sacramento county - by sacramento appraisal blog Median price & unemployment in Sacramento County

The real estate market has many “layers” that impact value. Last year the market was heavily influenced by interest rates, cash investors and incredibly low inventory, but things have shifted in 2014. Right now some of the main drivers to watch over these next two quarters are the job market, interest rates, inventory and affordability. Local real estate can no longer be so heavily driven by outside cash investors, which means it will be more sensitive to the health and strength of the local economy. Prices increased over the past two years, but not because people are making more money. How does that strike you?

Summary: Our market has slowed down quite a bit from last year. The market is still competitive, but it is very price sensitive. Real estate is still “hot”, but it is definitely cooler than last year in that days on market has increased, inventory doubled, interest rates are higher than they were, and cash investors are much less of a factor. By the way, I’ll share more Placer County and regional trends in a few days.

Sharing Trends with your Clients? If you want to share graphs online or in your newsletter, please see my sharing policy. Thank you for sharing.

Questions: How else would you describe the market? I’d love to hear your take.

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Filed Under: Market Trends, Videos Tagged With: affordability, appraiser in Sacramento, appraisers sacramento, cash investors, CDOM, conventional buyers, distressed sales, FHA buyers, higher prices, housing inventory, increasing prices, interest rates, investment funds, Market Trends, REO sales, rising prices, Sacramento County Real Estate, sales volume, Short Sales, trend graphs

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