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Arden Park

Appraisal waivers & the foreclosure wave

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I have two things on my mind today. Yesterday I had a conversation about appraisal waivers and “hybrid” appraisals, so I wanted to share my take. Then I have some new graphs to help tell the story of the foreclosure crisis.

APPRAISAL WAIVERS & “HYBRID” APPRAISALS:

Here’s a Q&A with with Scott Short on appraisal waivers and “hybrid” appraisals. I get things changing for appraisers in light of big data, but diminishing the role appraisers play seems like a bad idea for the housing market. Watch here. If you want to just hear the “hybrid” part, it’s at 7:12.

By the way, a local appraiser named Barry Cleverdon had an accident a few weeks ago and is currently in a coma. Here is Barry’s GoFundMe.

THE FORECLOSURE CRISIS:

1) Healing: The foreclosure rate in the United States is way down. I would guess most markets have essentially healed. In Sacramento County ten years ago 84% of sales were distressed and now that number is less than 2% when considering both short sales and bank-owned sales (REOs).

2) Not the same in every neighborhood: When it comes to distressed sales, some areas and price ranges did better than others as you can see below. This reminds us the market doesn’t experience the same exact trend everywhere.

3) The power of equity: Areas with more equity and higher prices tended to fare better with the number of distressed sales. I know that’s what we’d expect to see, but it’s interesting to actually see it. It’s amazing how equity (and probably better jobs) can create opportunity and even help people weather a storm.

4) The promise of a new wave: Many have promised a new wave of foreclosures, but we just haven’t seen it. I hear things like, “Dude, there are so many Notice of Defaults right now.” That may be true, but not all of these NODs end up hitting the market. Or if they do go into foreclosure they may likely be sold on the court steps before MLS.

Two weeks ago I asked friends on LinkedIn which areas they wanted to see, and that’s how this post was born. I didn’t get to everywhere, but I got to most areas.

MAKE GRAPHS LIKE THIS: If you want to know how to make a graph like this, here’s a tutorial for how to put a few different layers of data on one graph.

BLOG BASH: Just a reminder my wife and I are hosting a party at Yolo Brewing on Saturday March 2nd. It’s an excuse to get together and you’re invited. It’s okay if we’ve never met too. I’ll be buying the first 100 beers. Details here.

Questions: What do you think of appraisal waivers and “hybrid” appraisals? What stands out to you most in the images above?

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Seeing the market over two decades

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Buckle up and let’s take a drive through the past 20 years. Where has the market been over these two decades? Since MLS recently made it much easier to extract older data, I had to do this post. I hope you find it useful or interesting – even if you aren’t in the Sacramento market.

SOME THINGS TO KEEP IN MIND:

1) Data: We are only as good as our data and our ability to understand. Some graphs below are very clear in their trends, but others probably aren’t meaningful because of massive data or an enormous price range.

2) Not back: Many lower-priced areas are not back to their price peak in 2005.

3) Back: Some well-established areas have exceeded previous peaks.

4) Different trends: Not all price ranges, locations, and property types have moved the same way, so let’s be cautious about sweeping generalizations about the entire market. After all, the condo market might be far different from the 2-4 unit market or vacant land.

5) Inflation: Prices might be similar today to where they were in 2005, but that doesn’t mean values are the same. I know, that’s so technical, but when we factor in inflation over 13 years, it’s really not the same thing when comparing today’s prices with prices from 13 years ago. Keep in mind the market today has far different dynamics from 2005 also.

6) Bubble: Graphs like this can often lead to conversations about a housing “bubble.” If it’s relevant, please read peak prices and an open letter to buyers worried about another housing bubble.

SIDE NOTE: I’ve been having major website issues over the past 2 months. I’ve switched hosts, and that should solve the problem of down time.

DOWNLOAD ALL GRAPHS: You can download all images as a zip file. I included both a web-friendly size and larger ones. Please use as you see fit (unaltered). If you post somewhere online I always appreciate a link back.

Rosemont:

River Park:

Meadowview:

Vacant Residential Land:

Million Dollar Sales:

Pocket / Greenhaven:

Rancho Cordova:

Sierra Oaks:

Loomis:

East Sacramento:

Duplex Sales:

Gold River:

Land Park:

Elk Grove:

Garden of the Gods:

Sales under $50K in Sacramento County:

Del Paso Manor:

Tahoe Park:

Fair Oaks:

Treelake / Ashley Woods (Granite Bay):

Condo Sales in Sacramento County (and Downtown):

Colonial Heights:

College Glen:

Davis:

West Sacramento:

Bella Vista High School Boundaries:

Arden Park:

Folsom:

Arden Manor:

95815 Zip Code:

4-Unit Sales in Sacramento County:

Roseville:

I hope this was interesting or even fascinating. I’m intrigued and excited about having more data at my disposal (thank you Metrolist). Thanks everyone for your graph suggestions too. I reached out on Facebook, Twitter, and LinkedIn and got to most of what people asked for, though I couldn’t do them all.

Questions: What are your thoughts about the market after seeing the graphs above? I’d love to hear your take.

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How much does a busy street impact the appraised value?

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How does a location on a busy street impact value? It’s sometimes easy to think a busy street might have only a minimal effect on value of $5,000 to $10,000, but it can actually be quite significant. Let’s take a look at the Arden Manor neighborhood in Sacramento for reference. What do sales on Watt Avenue, a busy 4-lane street, sell for compared to the rest of the neighborhood?

Watt Avenue street view

Arden Manor Neighborhood and Watt Sales - 530 - by Sacramento Appraisal Blog

What do you see when looking at sales over the past ten years?

Arden Manor Sales Since 2008 - 530 - by Sacramento Appraisal Blog

The best way to determine an exact value adjustment for sales on Watt Avenue is to compare similar sales on Watt Avenue to similar sales in other parts of the neighborhood. For instance, if a 1081 sq ft model sold on Watt Avenue, how much did a competitive model sell for on a more standard street without an adverse location? When we find a few data points like that, we can begin to get a sense of a percentage adjustment. However, let’s make some general observations so this doesn’t end up being an exhaustive blog post.

Observations about Value on Watt Avenue:

  1. Sales on Watt Avenue tend to sell at the bottom of the market unless they are updated.
  2. Even when properties on Watt Avenue are upgraded, they don’t sell at the top of the market. You might see the one sale in 2005 though that closed at $385,000. I’m not sure how that happened, but I will say this same property actually just sold the day after I made this graph for $155,000 (not at the top of the market).
  3. If an appraiser or agent adjusted $5,000 for the location difference, do you think that would be enough? Would you only pay $5,000 for the difference? That’s probably not very close, right? For instance, currently there is a renovated listing on Watt Avenue at $169,000, while other competitive sales on standards streets have closed on the lower end at $180,000, but mostly between $200,000 to $212,000. This means a quick conservative adjustment would be closer to $10,000 (6%), but otherwise there are quite a few sales that sold for $30,000+ more (15-20% easily). A reasonable adjustment could only be narrowed down with research, but at face glance $5,000 doesn’t look like it cuts the mustard so to speak.

The houses literally across the street: Arden Park

Arden Park and Arden Manor Sales on Watt Avenue - 530 - by Sacramento Appraisal Blog

The interesting thing about Watt Avenue is that the Arden Manor neighborhood on one side of the street has profoundly different values compared to Arden Park that is literally on the other side of the street. For the most part it looks like there is a difference of close to $100-150K, right? Some properties have sold at similar levels of course, and we have to consider the impact of low-ball bank-owned sales and/or aggressively priced short sales in 2010-2012, but otherwise the value difference is striking.

Things to Remember About Location Adjustments: 

  1. The best way to find out how much a busy street (or any adverse location) is worth is to start comparing sales on a busy street with other similar sales on standard streets.
  2. There is no adjustment that will work for every neighborhood because real estate adjustments are about location, location, and location.
  3. Location adjustments tend to get larger when a market is soft since buyers have their pick of properties, but when inventory is tight, adjustments might be smaller.
  4. If there are no recent sales on a busy street for comparison, go back in time to find older sales. What were those sales selling for at the time compared to other properties on streets with less traffic flow? Get a good sample too because having only one pair of sales isn’t enough to establish a solid adjustment.

Questions: How have you seen location impact value? Any further insight, questions, or stories to share?

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The scoop on the value of neighborhood trees

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I read a short article last week entitled “City Trees and Property Values” (pdf) by Dr. Kathleen L. Wolf after hearing a representative from the SacTree Foundation speak at a Realtor event. Dr. Wolf’s research shows that trees generally increase property value. Her study indicated a 2% price increase for a property with a mature tree (greater than 9 inches thick), 3-5% increase for trees in the front yard, and 10-15% increase for mature trees in high-income neighborhoods.

While initially some of her stats seem startling, I do think she is right that trees add to the overall value of a property. This doesn’t mean a house is automatically worth 2 or 9% more due to having the tree set-up she mentioned, but trees generally do yield a value contribution. In an objective sense, trees add worth due to boosting energy efficiency due to shade, while there is also a subjective element where they tend to increase curb appeal among buyers. It’s hard to ignore that some of the most highly priced and sought-after streets in the Sacramento area are lined with enormous trees. Think the Fabulous 40s, Curtis Park, Land Park or Arden Park to name just a few. Granted, these streets typically have very large and well-maintained houses too, but there is no mistaking that a canopy of mature trees stretching along a particular street tends to give a very positive impression to buyers in the market for that street in comparison to others. Agree? Disagree?  

Here is a video of Jacobe Caditz with the Sacramento Tree Foundation speaking about the benefit of trees last week at the Sacramento Association of Realtors.

What do you think? How have you seen trees or a lack of trees impact real estate value? I’d love to hear your thoughts.

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook or subscribe to posts by email.

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