What’s been happening at the top end of the real estate market in Sacramento County? As you can see in the graph below, there were 809 sales above one million dollars in Sacramento County over the past ten years since March 2002. It’s not much of a surprise, but there were far more million dollar sales before the “bubble” burst and there has been a clear trend downward in recent years too. In fact, the number of million dollar sales has been fairly thin over the past few years compared to earlier in the decade.
I condensed the graph above to include only sales under $2,500,000 and it helps show the trend more clearly. What do you see?
This bar graph shows how the 809 sales above were dispersed on the sales spectrum.
What challenges is the top of the market facing right now in the Sacramento area? Why are we seeing fewer sales above the one million dollar level?
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1) Market Interpretation: First of all, the appraiser should not be making a subjective value judgment, but is rather interpreting what the market is saying about what a pool is worth. The appraiser analyzes similar homes with and without pools to see if there is a reaction (price difference) in the market for the pool. For example, if homes with pools in a neighborhood have sold for $290,000 and homes without pools have sold for $280,000, assuming everything else is similar, the pool is worth $10,000.
ARMS LENGTH TRANSACTIONS: The appropriate Federal banking agency shall require that entities used by financial institutions to assess or review underwriting standards and collateral values for real estate loans made by such institutions after the date of the enactment of this Act use comparable sales involving arms length transactions to make such an assessment or review.