appraisal blog in sacramento

A spike in listings & sitting on the market

June 20, 2022 By Ryan Lundquist 21 Comments

The pile of listings is growing, and it’s taking longer to sell. That’s what so many housing markets across the country are experiencing right now. We’re on the cusp of seeing some real change in the stats over the next few months. Here are some things on my mind. Anything to add?

wooden house with a red arrow up. The captionn is the blog post title.

Why have we seen a spike in listings?

We have almost 3,400 active listings today in the Sacramento region. This is actually still lower than a normal level, but over the past two months there has been a dramatic uptick. What is causing this change? It’s not that sellers have rushed to list, but rather we’re seeing fewer buyers. Since April we’ve easily had over one thousand fewer pendings in the region. Instead of getting into contract, these properties have essentially stayed active. In short, we’ve seen a rise in listings due to a fall in demand.

It’s taking longer to sell (check out the actives):

I think this is a helpful way to show market change. Sales in June have gone quickly, it’s taking longer for pendings to get into contract in recent weeks, and active listings are really starting to sit. And when actives close eventually, that’ll really affect the stats. Do you like this visual?

A data table to show days on market trends for varioius areas of Sacramento. It basically shows sales in June, pendings since June, and current actives. Here's the trend. It's take longer to sell.

NOTE: Sales in June got into contract in May, so they really tell us more about what the market was like in May.

The stats are hot, but that’ll change more in July:

The market has been changing, but we haven’t seen too much change in actual sales stats yet. The truth is it takes time for temperature change to show up in the numbers. This dotted line projects days on market through July based on pendings so far in June. The black line (2022) is going to get a whole lot closer to the red line (pre-pandemic average). We are still not back to a normal days on market, but that can happen quickly. As I’ve said, we’ve waived goodbye to the most aggressive market ever. This is key to recognize since it’s simply going to take longer to sell today.

Duh, it should be taking longer:

Some of what we are seeing is seasonal because it should take longer to sell at this time of year, but we’ve also experienced a market shift since affordability has been given a severe beating in recent months. So, what we are seeing isn’t just seasonal. This is about a bigger change where buyers are struggling to afford and stay in the game.

I’m exhausted and out of quarantine:

I just got out of quarantine. Covid finally got me after all this time. My family actually had to cancel a New York vacation last week because of this, so that was a real bummer. I honestly so needed a vacation, but that’s water under the bridge now. Anyway, I’m grateful for health, and I’m also really tired, so I’ll be inching back to work and trying to pace myself.

Thanks for being here.

—–——– MORE VISUALS FOR THOSE INTERESTED ———––

GLOWING AND SLOWING:

There are two housing markets right now. Glowing sales stats from May. And slowing stats in June. This is important to recognize because we want to understand sales from the past while not ignoring listings and pendings today. The stats from May are still quite elevated in that properties sold a few percent above the list price on average. On one hand this reflects a market that is still statistically above the normal trend, but on the other hand let’s remember sales in May really tell us more about pending contracts in April (that closed in May). My advice? Recognize hot stats from previous months, but don’t ignore slower metrics right now with fewer offers, increasing days on market, dropping sales volume, more price reductions, etc….

SHARING POLICY: I welcome you to share some of these images on your social channels or in a newsletter. In case it helps, here are 6 ways to share my content (not copy verbatim). Thanks.

Some visuals…

YEAR OVER YEAR:

Annual stats are important to digest, but don’t forget to look at month to month stats. But remember, sales in May really tell us what the market used to be like in April when these properties got into contract. Also, not every location and price range have the same trend.

MONTH TO MONTH:

Looking at sequential months is key too so we don’t just get stuck or hyper-focused on last year (the past).

OTHER VISUALS:

Just in case you’re hungry for more…

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Thanks for being here.

Questions: What are you seeing out there in the market? What did I miss? I’d love to hear your take.

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

Freakish home price growth so far in 2022

March 8, 2022 By Ryan Lundquist 21 Comments

Freakish price growth? Yes. That’s exactly what we’ve been seeing. Here we are again with what feels like a carbon copy of last year, which was our most aggressive market ever. In short, 2022 is doing its best to crush 2021. Let’s talk stats and perspective. I’d love to hear your take.

UPCOMING PUBLIC SPEAKING GIGS:

3/15/2022 NARPM Luncheon (details)
3/22/2022 SAFE Credit Union market update (details)
4/28/2022 SAR Think Like an Appraiser (details)

WHAT IS HAPPENING?

Buyers are essentially running to the market to get in before rates spike more. On one hand affordability has declined as rates have risen substantially lately, but so far this has only created a frenzy to buy. At some point theoretically we’d expect to see demand soften due to rate increases, but we haven’t hit any sort of inflection point yet where buyers are backing off the market. That’s something to watch though with the number of purchase mortgage applications, pending contracts, and sales.

FREAKISH PRICE GROWTH:

Below I’d like to show a few examples of what price growth looks like in the Sacramento region right now. I suspect many markets across the country look something like this too.

A QUICK RECAP:

Some quick stats. Feel free to share some of these images on your social channels too. But please see my sharing policy. Thanks.

1) MASSIVE MEDIAN PRICE GROWTH:

This visual shows the median price in February in black, and this year is so far above others. It’s normal to see prices rise in February, but this is massive growth – especially in the eleventh year of this price cycle.

2) RECORD-BREAKING DOLLAR GROWTH:

This year the median price ticked up $31,000 from January to February. This is essentially the largest dollar gain we’ve seen in the Sacramento area between these two months. From a percentage standpoint this was a 5.56% increase. This isn’t the highest percentage ever, but it’s the second-highest percentage gain from 2004 (2015 saw a larger gain).

3) WEEKLY PRICE GROWTH HAS STARTED TO RAGE:

Check out the black line. That’s 2022, and it’s been raging higher. Until the last week of February it looked like the median price for the month was going to be strong, but nothing too crazy. But then stats starting coming in, and we see a much different trend. Remember, closed sales from last week really represent the market from about a month ago when these properties got into contract.

4) BUYERS PAID WAY ABOVE NORMAL:

On average buyers paid nearly $16,000 over the asking price last month. This is far above a normal February where buyers tend to pay closer to $10,000 BELOW the list price. It’s important to note February 2022 was about twice as much as February 2021. Keep in mind this is the average of every single escrow. This number doesn’t perfectly describe every single transaction. In other words, some buyers went way above this number and some went lower. The takeaway here is to know how disconnected this number is from normal rather than offer $15,764 above list price thinking that is the winning number. It might have to be way more. Or in some cases it could be less.

5) FEWER MULTIPLE OFFERS TECHNICALLY

This month there were fewer multiple offers compared to last year at the same time, but we’re actually seeing a more aggressive market today. On one hand this stat suggests the market is slightly cooler in temperature, but it doesn’t feel cooler because the offers that are being made are higher.

6) BUYERS MADE MORE AGGRESSIVE OFFERS:

This month there were fewer multiple offers compared to last year, BUT the market was more aggressive since buyers offered higher amounts above the list price to secure properties. This speaks to buyers having a fear of missing out on low mortgage rates (and anemic supply of course).

7) MORE INVENTORY IS COMING

We are seeing more listings hit the market. Typically, the market really starts to hit more of a stride in March with listings coming, so stay tuned. We won’t have enough listings, but more is better.

YEAR OVER YEAR:

Year over year stats are important to digest, but don’t forget to look at month to month stats to understand what the market is doing right now. Also, not every location and price range are going to have the same stats.

MONTH TO MONTH:

Year over year stats are important to digest, but don’t forget to look at month to month stats to understand what the market is doing right now. Keep in mind Placer County has a limited number of sales too, so I would take Placer with a grain of salt from month to month.

OTHER VISUALS:

As if anyone really wanted more…

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Thanks for being here.

SHARING POLICY: I welcome you to share some of these images on your social channels or in a newsletter. In case it helps, here are 6 ways to share my content (not copy verbatim). Thanks.

Questions: What are you seeing out there in the market?

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

Choosing comps in a lopsided market

February 8, 2022 By Ryan Lundquist 21 Comments

How do we choose comps in such a lopsided market? I had a great question about this recently, so I wanted to share some thoughts. Anything to add? I’d love to hear your take in the comments.

Different colorful shapes wooden blocks on blue background, flat lay. The caption says "choosing comps in a lopsided market."

UPCOMING PUBLIC SPEAKING GIGS:

2/9/2022 Yolo Assn of Realtors market update (details)
2/18/2022 WCR El Dorado market update (details)
2/25/2022 Placer Assn of Realtors market update (details)
3/15/2022 NARPM Luncheon (details)
3/22/2022 SAFE Credit Union market update (details)
4/28/2022 SAR Think Like an Appraiser (details)

QUESTION: With so many listings receiving offers above list, and people having to pay the shortfall between the appraised value and the contract price, how do appraisers look at comps? If a property sold at $580,000, but it actually appraised for $547,000, and the buyer paid the difference, which number do you use? $580,000 or $547,000?

ANSWER: Here are a few things on my mind.

1) Weigh the comps:

In any market (not just today) we have to weigh the comps. Or another way to say it is, we have to appraise the comps so to speak. What I mean is if something clearly sells for too much, it’s reasonable to give that property less weight in our analysis. Likewise, if a property sells for too little, we might also give less weight to that sale. Granted, selling for too little isn’t as common lately, but in past markets we regularly considered whether short sales or bank-owned sales sold below market value.

2) One sale doesn’t make or break the market:

It’s important to note one sale doesn’t make or break the market. This means one lofty “lone ranger” sale doesn’t all of the sudden mean the rest of the market will go to that level. This would be like saying that record-breaking $7M sale in Shingle Springs from August will pull the rest of the market up. Nah, I don’t think so. Or Zillow buying a house for $40,000 more than the comps will cause the rest of the market to rise. Nope. If one sale closes at $580,000, but the rest of the market is below $550,000, we won’t arbitrarily accept $580,000 as the new neighborhood price threshold. The same would hold true if a different house sold at $450,000. This one “low ranger” (sorry) won’t automatically drag the rest of the market down.

A picture of a unicorn with a statement saying, "One lofty unicorn sale doesn't all of the sudden mean the rest of the market is now going to be at that higher level."

3) Using the final sales price:

It’s a really good question whether appraisers will use $547,000 or $580,000. Realistically appraisers might not even know about the lower appraised value because it’s not automatically disclosed in MLS or from agents in the transaction. And there isn’t some sort of appraisal database where appraisers know about the appraised value either. Ultimately, even if I knew what it appraised for, I’m not going to use the appraised value because that wasn’t the official sales price. To be fair, is it possible it appraised too low? Yes. At the same time, if the property really was worth $547,000, maybe the buyer legitimately paid too much at $580,000, right? Again, this is where appraisers need to weigh the comps and ask whether they sold at a reasonable level or not. I realize this sounds subjective, but weighing comps has to do with looking at the entire market and weighing sales against other ones, so there is an objective element here. I’ll be checking out recent and much older sales, competitive sales, listings, pendings, withdrawns, lots of geeky metrics, and even similar neighborhoods. I’ll also be making graphs to help visualize where it looks like value is at right now. If something did sell for too much, it’ll probably stand out because it’s disconnected from the rest of the market – including pending contracts. So maybe I won’t use the higher sale as a comp in my appraisal. Or maybe I can use it but give it less weight. No matter what, I won’t automatically use a sale without thinking through why it sold for more than others. But here’s the thing. If pendings contracts are all around $580,000 too, and other neighborhoods have also risen quickly, maybe it’s the market… In that case I need to recognize prices are rising and then adjust my comps up accordingly.

4) Unfairly judging the original list price:

It’s important for appraisers to be cautious about judging the original list price. What I mean is the original list price is a starting point that could be reasonable, too high, or too low. I’m not saying it’s unimportant. I’m just saying it may or may not say something about value. The truth is value is found in the comps – not the original list price OR the contract price. For instance, a friend told me about a property that got into contract about $200,000 above the original list price recently. I know it’s easy to think it could have a problem appraising that much higher than the contract price, but what if the property was priced $200,000 too low? This is where appraisers (including me) need to be careful to be objective and not give the original list price so much weight to essentially say, “I can’t bring the value in that high.” Nope. Value is found in the comps – not the original list price.

5) Instagram and market value:

I’m seeing images floating around Instagram about market value. The images tend to say things like, “The appraised value is one professional’s opinion,” and “Market value is what a buyer will pay a seller.” That sounds maybe sorta kinda hopefully true, but let’s dive deeper. The truth is what one buyer is willing to pay could represent market value (what the bulk of buyers would pay), but sometimes what one buyer pays is more like individual value because it’s totally disconnected from the rest of the pack. So, if a buyer pays above all the comps and pendings, it doesn’t automatically represent market value. It would be like me buying a house for $750,000 in a $350,000 neighborhood. I can pay that, but just because the seller and I agree on the price doesn’t mean it’s market value. Does that make sense? And here’s the kicker. What if a buyer paid 20% lower than the comps? Would we say it’s market value since the buyer and seller agreed on the price? I doubt it.

The bubble question:

I did a YouTube Live last week and here’s what I said when someone asked about a real estate bubble. This was all off the cuff it the answer should start at 58 minutes. Enjoy if you wish.

Thanks for being here.

Questions: What do you think of the points above? What did I miss? Anything to add?

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The housing market nobody predicted

January 12, 2021 By Ryan Lundquist 10 Comments

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.

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

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