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buyers market

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

12 market trends and tips for real estate professionals to watch in 2015

January 5, 2015 By Ryan Lundquist 15 Comments

It’s a new year, which means it’s crucial to take a look at the housing market. If you work in real estate, ask yourself these two questions: What is the market doing? And who are your clients going to be this year? The truth is if we do the same thing each year without really considering how the market is evolving, it’s easy to miss out on being relevant to clients.

The 2015 housing market

Here are some trends and tips on my radar as 2015 begins, and I wanted to share them because I thought some of them might be good conversation fodder for business plans or with clients. These trends are relevant for Sacramento, but I have a feeling they might be showing up in many markets across the country. Enjoy.

12 trends and tips for real estate professionals in 2015

  1. Buyers’ Market: The market is definitely morphing into a full-fledged buyers’ market. In light of more houses for sale, buyers simply have more options. This means properties will generally take longer to sell, and buyers will have more room to negotiate.
  2. Pricing Correctly: As the market changes and inventory increases, it will be paramount this year to price properties correctly. When a market grows soft, buyers tend to become more picky about pricing and making offers, which means overpriced listings will sit on the market instead of sell.
  3. image purchased from 123rf and used with permission by sacramento appraisal blog - distressed sales fishingThe Small Distressed Sales Pond: Foreclosures and short sales used to drive the market, but that’s not the case any longer these days. Being a distressed property specialist is still a relevant avenue of business, but it’s also a crowded pond to fish in. Remember that owners who went through a foreclosure or short sale several years ago may actually now be able to re-enter the market (these buyers are called “Boomerang Buyers”).
  4. Equity Sellers: Some home owners do not realize how much the market surged in recent years. They may actually be surprised to know they have equity again after the recent increases from 2012 to 2014. This can open up options for moving up or downsizing.
  5. Dispelling the Want to Buy at the Perfect Time: With the advent of vast online real estate data, many buyers are watching the market carefully and wanting to time the market perfectly to be sure they are buying at a time when values are increasing. The reality is it’s not easy to pull this off. In fact, many home owners who purchased at the bottom of the market in early 2012 didn’t actually realize they were doing so. They were simply lucky and bought at a time they could afford. When I ask, “Do you realize you purchased at the bottom?”, their response is often, “Really? I had no idea at the time.” In short, in a market that is no longer rapidly appreciating in value, buyers need to focus on being sure they are comfortable with the price and monthly mortgage payments rather than looking for that perfect market moment to get rich in real estate.
  6. Image purchased at 123rf dot com and used with permission - 14688774_s - smallerDivorce: As the economy improves, divorce has been more common (the LA Times says so too). I easily did three times as many divorce appraisals last year compared with previous years. Divorce is a very difficult time in a client’s life, so it’s important to be able to serve clients in their time of need, and to be aware that divorce stats may be increasing as the economy heals.
  7. FHA Buyers Increasing: Despite some in the real estate community saying FHA would not increase due to permanent mortgage insurance being required, it has definitely increased over the past 18 months in the Sacramento region. FHA has been a relevant product for many buyers since there is little money down required. Of course we can expect to see some more creative financing options emerge as the market softens, but in the mean time, if you are not in tune with FHA appraisal standards, it’s time to brush up so your buyers and sellers know what to expect. I have seen several properties recently trying to use traditional FHA financing that were blatantly not acceptable for FHA (maybe a 203K loan though). This is where knowing the standards becomes important.
  8. Rentals Hitting the Market: Some investors who purchased in 2012 and 2013 are beginning to sell their properties. I have yet to see Blackstone do this, but I have seen some smaller funds with 30-40 properties begin to unload. I talked with an investor recently who has a few dozen properties, and he wondered how strong the market is to sell. What would you say?
  9. Not as Easy to Flip: Everyone and their Mom wants to be a house flipper, but buying distressed inventory on MLS these days isn’t as easy as it used to be because there just aren’t as many low-priced foreclosures. Since there is less room to buy at a discount on MLS, it’s important for would-be flippers to explore alternative ways of picking up properties, and to be extra sure they are purchasing with enough room to rehab and sell. Being realistic about the ARV (After Repair Value) is key – especially in a price-sensitive market.
  10. Exit Before It’s Too Late: Some property owners are concerned about the future direction of the market, so they will be interested in selling this year “before it’s too late” (in case the market begins to decline in value).
  11. The Granite Wave: Having granite counters used to be such a custom feature a decade ago, but it’s become a bit stale in the current market. Don’t get me wrong, buyers still like granite, but at the same time there is a growing sense of the market becoming saturated with granite. What advice would you give clients about making a kitchen shine in today’s market?
  12. Standing Out: As housing inventory presumably increases this year, it will be important for properties to stand out from others to compete for a limited pool of buyers. When inventory increases, buyers tend to become more finicky about location, condition, and upgrades (which underscores the need to price properties correctly).

NOTE: These trends may not be present in every neighborhood or price range in Sacramento, or in every area of the United States.

I hope this was helpful in some way, and I hope you have a profoundly successful year in real estate. I look forward to watching the market carefully this year, and to all the discussions we’ll have together. May you have a very prosperous 2015.

Questions: Anything else you’d add? If you are not in Sacramento, are there some parallels here that also resemble your market? I’d love to hear your take.

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Filed Under: Market Trends, Resources Tagged With: 2015 real estate market in Sacramento, appraisers sacramento, buyers market, distressed sales, divorce appraisals, divorce real estate appraiser, FHA loans increasing, flippers, Home Appraiser, House Appraiser, investors, real estate market trends, Sacramento real estate trends, Sactown appraiser

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