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The housing market nobody predicted

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Nobody predicted 2020. Who would’ve thought during a pandemic we’d see such an explosive year in real estate? The expectation was that the market would start to tank, but we saw the exact opposite. It’s not just Sacramento either because many areas of the country experienced this same dynamic. Anyway, enjoy some brand new visuals if you wish. Thanks for being here.

THE SHORT VERSION:

Here is a highlight reel to talk through some of the bigger themes this year. In short, the stats are stunning.

What stands out to you?

THE LONGER VERSION (organized by county):

1) Sacramento Region
2) Sacramento County
3) Placer County
4) El Dorado County
5) Yolo County
6) Bonus visuals

I welcome you to share some of these images on your social or in a newsletter. Please use this stuff. In case it helps, here are 5 ways to share my content (not copy verbatim). Thanks.

1) SACRAMENTO REGION:

 

2) SACRAMENTO COUNTY:

3) PLACER COUNTY:

4) EL DORADO COUNTY:

5) YOLO COUNTY:

6) BONUS VISUALS:

Here are some extra regional graphs to show how various counties are moving together.

 

Other visuals: Not that you needed more, but check out my social media in coming days and weeks for extra visuals. I am posting daily stuff on Facebook, Twitter, and LinkedIn. Oh, and sometimes Instagram.

Thanks for being here.

Questions: What stands out to you most about 2020 real estate? Any stories to share? I’d love to hear your take.

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Why your home isn’t worth 16% more today

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Home prices have been massive lately, but there is an asterisk. It’s easy to look at glowing stats and say, “Dude, prices are up 16%, so my house is worth 16% more.” But lofty county or regional price stats don’t always show up the same in a neighborhood. Let’s talk about this.

TWO REASONS WHY PRICES ARE SO HIGH ON PAPER:

1) The top & bottom: There have been more sales at the top of the market and fewer sales at the bottom. In fact, when comparing the past four months this year with last year, we’ve seen 20% fewer sales under $400,000 and 75% more sales above $750,000. Here is a brand new visual to show the change in various price ranges. If you’re not in Sacramento, is this happening in your area too?

The effect: Having a big change in volume at the lowest prices and a hefty change at the top has simply boosted price metrics. Thus on paper price stats are really high compared to last year, but when pulling comps in a neighborhood we don’t always see anywhere close to this sort of explosive growth. 

Here’s another way to look at the same data:

2) Larger homes: I’ve mentioned this before and I’m not trying to beat the dead horse, but during the pandemic buyers have been purchasing noticeably larger homes over the past four months. Do you see the spike? In short, having larger homes has boosted price stats, so when talking about growth it’s good to remember that part of the reason for higher prices is due to larger homes selling more often. 

The takeaway: There is no mistaking the market has increased in value quite a bit this year. I’m not saying it hasn’t. I’m just saying if we’re not careful it’s easy to get infatuated with lofty regional price stats which can sometimes blur our vision for a neighborhood market. My advice? Know why the numbers are the way they are and focus on comps instead of county or zip code stats. Moreover, don’t expect the market to be the same temperature with every location, price range, or property type.

I hope that was interesting or helpful.

Questions: Have you seen some neighborhoods where prices have risen greatly and others where growth is more subdued? Did I miss anything? Any stories to share?

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The problem of overpricing in real estate

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Overpricing is a problem. You’d think in such a “hot” market that it wouldn’t be an issue, but it is. I’m not trying to dog sellers, but let’s talk about some of the most common pricing mistakes right now. I hope this helps.

1) Getting married to the list price: Sometimes it’s like sellers get married to a lofty list price and become unwilling to budge – even when buyers are refusing to pay that much. It’s as if sellers get paralyzed and cannot move beyond a clearly unrealistic price. My advice? Listen to the market and budge on price as needed.

2) I need this amount to move: I’ve encountered a few sellers recently who priced based on how much money they needed to move. But the market doesn’t care about personal finances or plans. The market only cares about paying a reasonable price for the property.

3) Headlines: At times sellers hear sensational headlines like, “Values are increasing more rapidly than ever,” so they price according to a headline rather than similar sales in the neighborhood market.

4) Out of touch with picky buyers: Buyers these days tend to be more picky than ever about what they purchase, but I’m not sure sellers are really in tune with how finicky buyers are about price, location, and condition. You’d think buyers would be so desperate to get into contract and pay anything because of a housing shortage, but they’re actually quite patient in many cases because they want to wait for the right property and feel like they’re paying a fair price. My advice? Price for real buyers in the neighborhood market rather than that one mythical “unicorn” buyer who is going to pay more for some reason.

5) Sales instead of comps: The most common pricing mistake I see is pricing according to a sale down the street that really isn’t comparable. So a seller says, “I know that house is totally remodeled with a pool, but someone’s going to pay the same amount for my house.” My advice? Price according to similar homes that are actually getting into contract rather than dissimilar properties. Be careful about hijacking price per sq ft figures too.

6) The fallacy of summer: We hear that summer is the hottest real estate season, but the spring season is actually the hottest in many markets throughout the country. By the time summer rolls around the market is actually beginning to cool because it’s been hot for almost two quarters already. During summer listing volume is just about to peak for the year, and that means it starts to take longer to sell, prices often begin to soften for the season, and buyers gain more power to negotiate. My advice? Be realistic about prices today.

7) Zillow: I can’t tell you how often I’ve heard, “But Zillow says my house is worth X amount.” I know, Zillow says stuff like, “We’re only a starting point and a ballpark figure.” Yet in my experience sellers rely heavily on the Zestimate and very often treat it like a definitive ending point rather than a ballpark. Remember, Zillow doesn’t know anything about condition, upgrades, smell, etc… Sometimes Zillow nails the value, but other times it’s off by a substantial amount – even in a tract neighborhood. My advice? Take “The Big Z” with a grain of salt.

8) Other: What else are you seeing out there?

I hope this was interesting or helpful. In light of the market beginning to cool for the season, I thought scratching out these thoughts might be helpful and even save sellers some money (and heartache).

Questions: Which mistake do you see most often? Any stories or insight to share? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

8 things you can buy if you win Powerball (and the market in Sacramento)

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Have you bought a Powerball ticket? It’s wild to think someone is probably going to win 1.5 billion dollars this week. Of course there’s an extremely slim chance you’d actually win, but if you do, here are some things you can buy when it comes to real estate. After that, let’s take an in-depth look at Sacramento’s housing market.

powerball winner - real estate - sacramento appraisal blog

8 real estate things you can buy if you win Powerball

  1. All current listings in Sacramento: You could literally buy every single active residential listing in Sacramento, Placer, and Yolo County (and still have about $150M left).
  2. NBA Team: You could buy the Sacramento Kings NBA team and have about one billion to spare.
  3. 63 million Shares of Zillow: You could buy 63,911,376 shares of Zillow ($23.47 per share).
  4. Buy an Island: This is an obvious choice for a billionaire. You could easily buy your own island. Heck, you could buy a group of islands. See some islands that are for sale right now.
  5. Own 7 Years of East Sacramento Sales: If you bought every single house that sold on MLS in East Sacramento since October 2008, you would still have 600 million left.
  6. Build a Sports Stadium: Most recent professional sports stadiums have ranged in cost from around $500M to $1.5B. For instance, the 49ers new stadium cost around $1.3B and the Sacramento Kings stadium is coming in around $500M. If you buy, what are you going to name it?
  7. Build a Bigger House than that One Guy in India: You may remember hearing about a 27-story residential home that was built in India in 2014. This home can withstand an 8.0 earthquake and it’s the second most expensive home in the world behind Buckingham Palace. Keep in mind it requires a staff of 600 to care for it. The property was said to have cost $1B total, so you have the coin to pull it off (Wikipedia).
  8. Do Some Good: Imagine the good you could do if you won the lottery. But we know that’s not going to happen. The great thing is we don’t have to wait to win Powerball to be generous since generosity is only relative to how much money we have – whether two dollars or $1.5B.

By the way, the winner won’t actually get 1.5 billion. I realize a huge sum is coming off the top right away for taxes and such.

Now let’s look at the latest Sacramento real estate trends.

the market in 2015 in sacramento

Two ways to read THE BIG MONTHLY POST:

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

DOWNLOAD 78 graphs HERE (zip file): Please download all graphs in this post (and more) here as a zip file (or send me an email). Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Quick Market Summary: If I had to sum up the market last year I would say: Modest value appreciation, but aggressive demand. If I added a few more details I would say the story of the market is summed up as follows: More sales, lower inventory, higher demand, a fairly normal fall (though far less dull than 2014), and modest value increases over the year. Right now housing inventory is only 1.28 months in the region, which is 32% lower than last year at the same time. Overall sales volume in 2015 was 10.8% higher in the regional market, and it’s important to note FHA volume increased by 30% this year. In December it took 4 days longer to sell a home than it did in November, and that reminds us the market experienced a seasonal softening dynamic even in the midst of more competition. Remember though it was taking 90 days to sell a house four years ago, and selling in less than half the time right now helps us see the market can be different each year depending on inventory, interest rates, the economy, etc…  Overall most of the value increases came in the first two quarters of the year, and the market was fairly flat for the past six months in terms of value. Buyers really haven’t had very many options because of how low inventory has been, but at the same time buyers are exhibiting price sensitivity by not pulling the trigger on overpriced listings. One last aspect worth mentioning is rents have been increasing in many areas in Sacramento, and it’s worth watching this trend.

SACRAMENTO COUNTY:

  1. It took 4 more days to sell a house last month than November (but 7 days less than last year at the same time).
  2. Sales volume was 20% higher this December compared to last December.
  3. Sales volume was 10.9% higher in 2015 compared to 2014.
  4. FHA sales represented 27.5% of all sales during the past quarter.
  5. Housing inventory is 41% lower than it was last year at the same time.
  6. The median price increased by 2% last month (see #6).
  7. The average price per sq ft and average sales price stayed about the same from the previous month (so don’t put too much weight on #5).
  8. The average price per sq ft is 10% higher than last year at the same time.
  9. The median price is 11% higher than it was last year at the same time.
  10. REO sales were less than 4% of all sales last quarter (Short Sales were less than 5%).

Some of my Favorite Graphs this Month:

sales in 2015 2

Median price and inventory since 2011 by sacramento appraisal blog

bottom of market

fha and cash in sacramento county by sacramento appraisal blog - part 2

CDOM in Sacramento County - by Sacramento Appraisal Blog

inventory - December 2015 - by home appraiser blog

REOs and Short Sales in Sacramento County since the bottom

price metrics since 2014 in sacramento county - look at all

SACRAMENTO REGIONAL MARKET:

  1. It took 3 more days to sell a house last month than November, but it was taking one week longer to sell at the same time last year.
  2. Sales volume was 14.5% higher this December compared to last December.
  3. Sales volume was 10.8% higher in 2015 compared to 2014.
  4. Housing inventory is 32% lower than the same time last year.
  5. Cash sales were only 15% of all sales in 2015.
  6. The average price per sq ft, median price, and average sales price showed a slight seasonal dip over the past few months.
  7. The avg price per sq ft is 7.5% higher than last year at the same time.
  8. The median price is 5.6% higher than it was last year at the same time.
  9. REO sales were 3.5% of all sales last month.
  10. Short sales were only 3% of all sales last month in the region.

Some of my Favorite Regional Graphs:

sales volume 2015 vs 2014 in sacramento placer yolo el dorado county

prices in sacramento region - FHA and conventional - by appraiser blog

months of housing inventory in region by sacramento appraisal blog

days on market in placer sac el dorado yolo county by sacramento appraisal blog

median price and inventory in sacramento regional market

interest rates inventory median price in sacramento regional market by sacramento appraisal blog

PLACER COUNTY:

  1. It took 6 more days to sell a house last month than November, but it was taking 5 days longer to sell at the same time last year.
  2. Sales volume was 1% higher this December compared to last December.
  3. Sales volume was 13% higher in 2015 compared to 2014.
  4. Housing inventory is 16% lower than the same time last year.
  5. Cash sales were only 15% of all sales in 2015.
  6. The average price per sq ft, median price, and average sales price showed a slight seasonal dip over the past few months.
  7. The avg price per sq ft is 3.6% higher than last year at the same time.
  8. The median price is 2% higher than it was last year at the same time.
  9. REO sales were 1.8% of all sales last month.
  10. Short sales were only 3% of all sales last month in the region.

days on market in placer county by sacramento appraisal blog months of housing inventory in placer county by sacramento appraisal blog number of listings in PLACER county - December 2015 Placer County price and inventory - by sacramento appraisal blog Placer County sales volume - by sacramento appraisal blog

I hope this was helpful and interesting.

DOWNLOAD 78 graphs HERE (zip file): Please download all graphs in this post (and more) here as a zip file (or send me an email). Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.

Questions: How would you spend the money if you won at Powerball? What stands out to you about the latest stats in Sacramento? How would you describe the market? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.