FHA

The other day a client asked me to include a statement in my appraisal that horses are allowed on the property. It was a huge lot, so it seemed like that might be okay… But I said NO for a very specific reason. Let’s talk about this and then for those interested let’s take a deep look at the local market.

A conversation with the city:

Me: Are horses allowed in the Tahoe Park neighborhood?

City: No. You need agricultural zoning for that to work. City of Sacramento code says: “It’s unlawful to keep, harbor, or maintain any bovine animal, horse, etc… on any parcel located in the city.” There are some locations that will work in the northern part of the city due to agricultural zoning, but not this location.

Me: What if it’s a really large lot though?

City: No. You need agricultural zoning.

Me: What if it’s an emotional support horse? (I wish I asked)

The point: On paper it might look like a horse property, but what does zoning allow? That’s the question. This is a good reminder to call the city or county to verify what is legally possible. To be fair owners can sometimes obtain a variance, but otherwise horses weren’t going to fly in this tract subdivision.

Class I’m teaching on Jan 16th: I’m doing a big market update at SAR from 9-10:30am. We’ll talk through the market, tips for talking to clients, and ideas for where to focus business. I’d love to see you there. Sign up here.

Any thoughts?

—–——– Big local market update (long on purpose) —–——–

This post is designed to skim or digest slowly.

A QUICK LOOK AT CONTENT

1. Recap of 2019
2. Loans & cash over the past decade
3. The number of sales in 2019 vs 2018
4. Distressed sales in Sacramento County
5. Sales above $1M over the past eight years
6. Sales below $100K over the past eight years
7. Sales volume “recovery”
8. Not a crash, but on the lower side
9. Price growth is slowing down
10. Comparing last year vs this year
11. Price Cycles
12. Housing supply is anemic
13. More visuals for surrounding counties

Scroll down to see what captures your interest. There are a number of new visuals too. I used a different format. What do you think?

DOWNLOAD 145 visuals: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

1) Recap of 2019: The year ended up feeling somewhat normal after a painfully dull last half of 2018 that left us wondering what would happen in 2019. Price gains were modest, there were slightly fewer sales compared to the prior year, and it typically took several days longer to sell in most counties (besides El Dorado taking over ten days longer). Here are some trends to watch in 2020.

2) Loans & cash over the past decade: These visuals are brand new and I hope you like them. Conventional financing has taken off this past decade, right? FHA used to be more common until conventional products began offering lower down payments. There was actually an uptick in FHA though this year, so let’s keep watching that. Cash sales are not a big factor in today’s market despite sellers thinking they are.

3) The number of sales in 2019 vs 2018: There were more sales at higher prices and less at lower prices. This makes sense for a market that showed upward price movement. 

4) Distressed sales in Sacramento County: It’s astounding to think that 84% of sales in Sacramento County were distressed in early 2009, whereas now we have fewer than 1.5% bank-owned sales and 0.5% short sales. People keep asking me if we’re poised to see these numbers start increasing again. Technically there’s really no place to go but up since distressed sales have bottomed out. But I wouldn’t expect these to increase dramatically because there’s no mechanism in place right now that would trigger mass-distressed sales. There is not the ticking time-bomb of adjustable rate mortgages or an economic collapse. But if we had a devastating economic downturn or some other huge issue, that could change things. There are definitely voices that talk about a coming “wave” of distressed properties, but this wave has not materialized despite prophecies for many years. Granted, bank-owned sales are up very slightly this year, but it’s not statistically significant. I’ll keep you posted with any changes.

5) Sales above $1M over the past eight years: This is a fascinating way to look at the market. I know there are many colors, but here is the number of sales above $1M for each respective year. What’s the trend?

6) Sales below $100K over the past eight years: On the other side of the price spectrum, here are sales below $100K. There aren’t too many these days. I know, everyone wants to go back to 2012. But the problem is financing was hardly available back then to so many people who had a foreclosure or short sale on their record. So even though prices were right so to speak, financing wasn’t.

7) Sales volume “recovery”: We’ve begun to see sales volume come out of a funk as it was down for over a year. However, there’s an asterisk to this news because we’ve seen sexier volume over the past few months, but we’re also comparing these recent months to a REALLY dull season last year. So of course the numbers today look better. My advice? Take this news with a grain of salt and save rejoicing for the spring season if we see this trend continue.

8) Not a crash, but on the lower side: As I said above, we’ve been having a definitive sales volume slump since mid-2018, but lately volume has been stronger. The number of sales this year has basically been down about 3% or so from last year in the region, though when looking at the past five years we can see volume is down closer to 5% or so. But here’s the thing. Sales volume this year was still on the lower side of normal (and even higher than 2014 which was a dull year). This is a good reminder to look at stats in a wider context instead of having tunnel vision stuck on one or two years. For reference, when the market crashed in 2005 we saw a 40% drop in sales volume over one year.

9) Price growth is slowing down: Price growth has been slowing, which basically means prices aren’t rising as quickly as they used to. Though technically the monthly and quarterly data below show higher price growth this year. Does that mean the market has been more aggressive? Has it begun to rebound? Not necessarily. I recommend being hesitant about sharing this positive-sounding news because the market was REALLY dull last year. Thus when we compare monthly and quarterly numbers today with dismal stats from 2018 it can really inflate the figures.

10) Comparing last year vs this year: All year long most price metrics have been up about 2-4% each month compared to last year, but these past three months they’ve been higher. This is likely due to stats sagging last year during a dull 2018 fall season. I know, I keep mentioning that. Additionally, mortgage rates went down a few months ago and we’re likely seeing some of the effect of that.

11) Price Cycles: Markets go up and down. That’s just what they do. Here’s a look at the past few price cycles in various counties. This is a fascinating way to see the market. Do you see the price deceleration in this current cycle? Also, in El Dorado County I pulled my stats just two days ago and the median price was down 0.1% instead of at 0% in my recap image above (that’s why the numbers are slightly different).

12) Housing supply is anemic: There isn’t much on the market right now, so buyers are hungry for good product. Remember, the spring market usually comes alive in the sales stats by March, but this means the market really started to move in January and February when these sales from March got into contract. Anyway, inventory looks to be mirroring what we saw a few years prior to last year’s dull season as you can see in the image directly below. There should be more homes hitting the market in coming months if we have a normal seasonal rhythm. Sellers, there’s nothing wrong with listing in January or February either. If you sense demand is there and especially if rates go down, you’ll have a captive audience.

13) More visuals: I know, there are too many visuals already. But here’s more. I never post them all either, so check out the download if you wish.

SACRAMENTO REGION (more graphs here):

SACRAMENTO COUNTY (more graphs here):

PLACER COUNTY (more graphs here):

EL DORADO COUNTY (more graphs here):

DOWNLOAD 145 visuals: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

Thanks for respecting my content: Please don’t copy my post verbatim or alter the images in any way. I will always show respect for your original work and give you full credit, so I ask for that same courtesy. Here are 5 ways to share my content.

Questions: What stands out to you about the market last year? What are you seeing right now? Anything to add?

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