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College Glen

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 reality of Blackstone’s mass purchases

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It’s one thing to hear about investors purchasing so many properties in Sacramento, but let’s see it. Even if you’ve only been following real estate casually, you’ve likely heard the private equity fund Blackstone has picked up well over 1000 properties in the Sacramento area since last August. No, that’s not a typo.

Let’s look at a few areas of Sacramento to visualize some of the neighborhoods where Blackstone has been most active. Each red label below represents a property that is owned by Blackstone. The bulk of these sales were purchased since last August, but there are still quite a few that have been owned for years.

Properties owned by Blackstone in Natomas

Blackstone has been purchasing as “IH2 Property West” and “THR California”. They’ve had a strong presence in Natomas as you can see – especially in older Natomas. It is important to note the information above is based on Tax Records alone and could very easily not include MANY other purchases that did not end up listed in Tax Records.

Properties owned by Blackstone in Rancho Cordova

There have also been quite a few purchases by Blackstone in Rancho Cordova. Most of the sales are in the 95670 zip code, while only a small amount have been located in the 95742 zip code.

Properties owned by Blackstone in Rosement and College Glen

There are also a decent number of Blackstone properties in Rosemont and a few sprinkled through College Glen and La Riviera. Neighborhoods that are ripe for first-time owners have typically been the primary target of this investment fund.

Properties owned by Blackstone in South Sacramento

Last but not least, here are Blackstone-owned properties in South Sacramento. This market has been a very affordable area under $200,000, which has been a sought after target price for the investment fund. By the way, Deutsche Bank just gave Blackstone 1.5 billion in additional credit over the past week (on top of their initial 2.1 billion credit line to purchase properties). We’ll see if any of the money finds it’s way into the local market.

Video interview with Blackstone from Bloomberg (worth a watch):

Questions: How do these images stir you? Or what do they make you think of? If you are renting from THR / IH2, what has it been like to rent from them so far? Any stories to share?

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The market is hot, but is it still distressed?

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People think I’m nuts sometimes when I tell them the real estate market is still distressed. I get one of those, “What’chu talkin’ ’bout, Willis?” looks (you’ll only get that if you watched the TV show Different Strokes). Let me explain.

College Glen Sales - 2000-2013 - 1100-1400 gla - by Sacramento Appraisal Blog

As an example, let’s look at sales over the past 13 years in the College Greens / Glenbrook neighborhood in Sacramento. If you didn’t know, the market in Sacramento basically increased in value for 8 years from 1997 through 2005 as shown above in part. The rise in prices was very tight before 2005, wasn’t it? When the bubble burst though at the peak, prices really began to spread apart (“bifurcation” is the fancy real estate word to explain this segmentation). Even now, despite the market being “on fire”, we still see current sales have a far wider price spectrum than before 2005. What does this tell us?

College Glen REO Short Sale and Normal Sales - by Sacramento Appraisal Blog

When looking more closely at price differences in the neighborhood, it’s easy to see both REOs and Short Sales tend to sell for less than traditional sales. This doesn’t mean normal sales always sell for more of course, but generally speaking that is the case. Since distressed sales are still ample in the neighborhood and county as the market experiences a correction and upward movement, we’re still seeing a wide array of prices. If the market continues to increase over time and distressed sales continue to decrease, I would suspect we’d see the trend line squeeze together more tightly like it used to be ten years ago.

What I’m NOT Saying: College Glen Sales - by Sacramento Appraisal BlogI’m not saying that distressed sales are driving the market like they used to several years ago. That’s not the case anymore…. at all. However, we still see the impact of distressed sales in today’s market, don’t we? While the price gap is closing because distressed sales are tending to sell at more competitive levels to normal sales, there is sometimes still a big difference. Ultimately, in the midst of rising values, we still have 1 out of every 3 sales in Sacramento County as either a foreclosure or short sale. While these sales don’t drive values in today’s market, they are still a factor in local real estate. That is what I am saying.

By the way, click on the thumbnail above to see a larger graph.

Any thoughts?

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