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That one super skinny house (eight feet wide)

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Could you live in a tiny home? Or what about a skinny home? I’m talking where walls range anywhere from eight feet to twelve feet wide at their maximum. Well, let’s talk about a super thin unit that sold recently in Sacramento.

Skinny house in Sacramento - Google Street View

Think Like an Appraiser Class: I’m teaching my favorite class on April 28 from 9am-12pm. We’ll talk through choosing comps, making adjustments, and lots of practical scenarios. Hope to see you there.

MARKET STATS: So much to talk about right now. I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

THE SKINNY HOUSE:

The “skinny house” is sort of a neighborhood landmark in South Land Park, and I think it’s a great conversation piece. I’m not aware of any house that is actually skinnier, so I’m open ears if you know about something. Most websites no longer have photos of this house, but Compass still does.

  • Lot size: 2,040 sq ft
  • Square footage of house: 1,019 sq ft
  • Built in 2006
  • Walls range from 8-12 feet (SacBee)
  • Modern design
  • Sold recently for $494,000 with multiple offers

The skinny house - googld street view

You don’t need much: This property is a testament that you don’t need much land to build a home. The boxy modern design works well to maximize the footprint too. This house was built in 2006, so it was ahead of its time before modern units became all the rage. When this home was under construction, The Sacramento Bee actually quoted the developer as saying he put up a sign that said, “It’s a house.” Apparently, lots of curious residents kept stopping to talk to workers. The SacBee wrote about this home again recently (paywall).

HOW DO WE VALUE SOMETHING SO SKINNY?

Good luck finding three model match sales in a one-mile radius. That’s just not going to happen for something unique.

A few questions I would ask: 

  1. Are there any other unique homes that have sold in the neighborhood or other neighborhoods? Maybe those can give clues into value.
  2. Has the subject property sold previously? If so, what did it compare to at the time? These could be clues.
  3. What are similar-sized properties selling for in the neighborhood? The subject might not compete with these units, but we need to at least understand what buyers have been paying for similar sizes.
  4. What is the price position? In other words, where might a property like this fit into the market price spectrum? I know, this sounds really subjective, but we have to ask. Is a property like this poised to compete toward the highest prices or the lowest prices?

Scatter graph showing the skinny house selling twice in the past

A second scatter graph to show 900-1200 sq ft sales along with two previous sales

Sold twice (see black dots): This property has now sold twice on the open market. The first time was during the foreclosure crisis, so we probably don’t want to give too much weight to that sale. With that said, each time this unit sold, it competed toward the lower end of the competitive range.

Don’t get stuck on 90 days of sales: It’s easy to get trapped looking at only a few months of sales, but sometimes we need more context, so it’s a good idea to step back and let the past give us insight. Of course, we have to be really careful about locking a property into whatever price position it had in the past, because it’s possible the market could change its perception today. But for now, with a property like the subject, the two prior sales help give weight to the idea that this unit tends to have a price position toward the lower end of the competitive range. The black dots help substantiate this. 

A murderous example: Two weeks ago, I talked about Scott Peterson’s house. Being that this property has sold four times in the past twenty years, we have some insight. Why not check out the previous sales to understand the market? It’s easy to talk about this home like it’s damaged goods, but I think market stats say otherwise in this case. By the way, this property got into contract in less than a week recently with over ten offers. 

OTHER SKINNY HOMES:

Single family home in Citrus Heights: This property was built a few years ago on Antelope Road, and it has a small footprint for building. Modern architecture isn’t for everyone, but what I like here is it’s not just another dull ranch home. In other words, this pushes the envelope – especially for Citrus Heights. Image: Google Street View.

skinny house in Antelope - Google Street View

Skinny modern halfplex in Midtown: These two attached units are only seventeen feet wide on each side, and there are three stories of living space (and an extra fourth story of bonus area). I wrote a blog post about this halfplex a couple of years ago. It’s amazing to fit a total of over 3,000 sq ft of building area on such a tiny lot. Photo: Brian McMartin.

Skinny modern halfplex - picture from Brian McMartin

Anyway, that’s what’s on my mind today.

Thanks for being here.

Questions: What do you think of such a skinny house? Would that work for you? Would modern in general work for you?

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Scott Peterson’s house & raging price growth

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I have two things on my mind today. Scott Peterson’s house hit the market. And price growth has been raging so far in 2022. Let’s talk about this.

Think Like an Appraiser Class: I’m teaching my favorite class on April 28 from 9am-12pm. We’ll talk through choosing comps, making adjustments, and lots of practical scenarios. Hope to see you there.

SCOTT PETERSON’S HOUSE IS ON THE MARKET

Last week Scott Peterson‘s old house listed for sale again, and it’s always a wonder how a house with a history might be perceived. If you don’t remember, about twenty years ago Mr. Peterson was charged with killing his wife and unborn child. The disappearance of Laci Peterson was national news.

History of sales: This property was purchased by Scott and Laci in 2000, sold toward the top of the market in 2005, sold as a foreclosure in 2007, and then sold as a short sale in 2013.

Price position: My observation is this house has had a fairly similar price position through the years despite the history. Right now, the property is listed for sale at $459,888, which is an extremely aggressive price point in Modesto. In fact, last month on average, properties between $400,000 and $500,000 sold 4.5% above their original list price. In short, this house isn’t going to be for everyone, but a house with some history or baggage doesn’t always automatically sell for a discount either. I wrote fame and real estate a few years back. Would you buy this house? Why or why not?

I shared some thoughts about this property with CBS 13 a few days ago.

RAPID PRICE GROWTH IN 2022:

Switching gears, we’ve seen explosive price growth so far in 2022. It’s been like a slap in the face to buyers (sorry, an Oscars reference). Seriously though, despite mortgage rate increases, the market has been moving really fast. A better way to put it would be to say BECAUSE of rate increases, buyers have been running to the market. Stay tuned for an exhaustive market update out next week. I’ll definitely talk more then about market temperature (something that is always changing).

Massive growth in our eleventh year: Look at the growth between January and March. This is our eleventh year of price growth, and we’ve seen really strong growth despite prices already being so high. In terms of the dollar amount, this was a record-breaking two-month stretch to see the median price up about $60,000 in the region from January to March. The percentage growth was also stunning. The market was legitimately slowing down through 2019, so had the trend persisted, it’s likely we would have been talking about 5% growth so far this year instead of just over 10%.

Be careful: This does NOT mean every house is worth 10% more since January. It would be a massive mistake to arbitrarily apply this regional metric to your house. My advice? Be infatuated with neighborhood comps instead of county or regional price metrics. In other words, price reasonably according to the comps – NOT price metrics like these. Keep in mind, not all zip codes and counties have risen by the same amount either. For instance, Sacramento County’s median is up 7.1% ($37,000) since January.

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Thanks for being here.

Questions: Would you buy Scott Peterson’s old house? Why or why not? What do you think of the price growth we’ve been seeing lately?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Square footage, recessions, and gas prices

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I have a few things on my mind today. Let’s talk about square footage rules changing, crazy gas prices, and recession buzz.

A tape measure with the title, "measuring square footage is changing for appraisers"

1) NEW SQUARE FOOTAGE STANDARDS FOR APPRAISERS:

If you didn’t know, Fannie Mae is adopting some changes with the way appraisers measure square footage (pdf). In short, as of April 1, 2022, appraisers are going to be required to measure square footage per ANSI standards (American National Standards Institute). The idea is to standardize the way things are measured to help increase uniformity in appraisal reports. In my mind, this isn’t poised to revolutionize the way appraisers report square footage, but there will be some fine-tuning. Keep in mind this does not apply to private appraisals for tax purposes, divorce, etc…

NOTE: So far we don’t know for certain if FHA and VA will adopt ANSI.

Some things to know about ANSI:

  • Appraisers will now be required to round to the nearest tenth of a foot (basically, the nearest inch).
  • Below-grade area doesn’t count in the square footage (but it can count in the value).
  • There will be more of an emphasis on “below grade” instead of “basement.”
  • At least 50% of the ceiling height needs to be seven feet or above to count in the square footage (it can still count in the value as non-square footage if it’s below seven feet).
  • Area below five feet doesn’t count in the square footage (I have a blog post 10 years ago about this).
  • Stairs count for square footage for the level from which they descend.
  • The space below stairs also counts in the square footage. I completely get this if there is a closet with accessible space, but it seems illogical to me to count the space below if there isn’t any access. In my mind this can inflate the square footage by 30 square feet or so.

Keep in mind builders and public records may not use ANSI measuring standards, so it’s possible we can see more minor discrepancies between the square footage in appraisal reports and public records. Of course, Tax Records is not always right. Anyway, I’ll keep talking about this as needed.

2) GAS PRICES AREN’T DRIVING THE HOUSING MARKET:

Gas prices have been unreal lately, and all of us are feeling it (besides Tesla owners flexing right now). Anyway, what do gas prices mean for the housing market? Here’s an absurd graph to compare the median price in Sacramento with gas prices in the state. Honestly, this is a ridiculous visual, but I wanted to share it to say there isn’t likely a correlation between gas prices and home prices. In other words, people don’t say, “Gas prices are low, so I’m going to buy a house,” or “Oh dang, gas prices are rising, so I’m going to wait to buy a home until gas comes down.” I’m not diminishing the pain of the lofty cost of gas, but fuel prices aren’t likely the deciding factor on whether someone buys a home or not. Yet, if gas and other goods and utilities keep rising, that can start to affect buyer behavior.

A line graph showing the median price in Sacramento and gas prices in California over the past two decades

By the way, I went to Death Valley a few weeks ago, and here were gas prices at the time. I would guess they’re maybe a dollar higher now because this was before the war started. Keep in mind this station is in the middle of nowhere. Here are some pics of our trip.

3) HOME PRICES DON’T ALWAYS DIP DURING A RECESSION:

I’ve heard some economists talk about a coming recession. I’m not making predictions, but I wanted to mention some thoughts about home prices. It’s easy to think real estate collapses during or after a recession, but that’s not always the case. The truth is not all recessions are created equally, so there isn’t any one rule for how the housing market will react. In short, if people start to struggle financially and uncertainty increases, that’s where we can tend to see an impact to home prices. Here’s a presentation I put together a few years ago called Deep Recession Thoughts (pdf).

A chart showing the Freddie Mac Price Index since 1975 in Sacramento with recessions in the background.

RECESSION VIDEO: Here is a video of my recession presentation too.


MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Thanks for being here.

Questions: Have you started to drive less lately? Has your behavior been affected in any way by inflation? What do you think about ANSI square footage measurements?

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The anatomy of doom & gloom real estate articles

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The market is going to crash. This time it’s going to be even worse. Have you been seeing more doom and gloom housing headlines? I sure have. This week I’ve had quite a few articles emailed to me. What do you think of this one? What do stats actually show? What do I say to my buyer who feels concerned? Let’s chat about this.

This photo is me holding a sign that says "doom and gloom"

This is me holding a shabby chic doom sign I made this past weekend.

UPCOMING PUBLIC SPEAKING GIGS:

  • 2/25/2022 Placer Assn of Realtors market update (details)
  • 3/15/2022 NARPM Luncheon (details)
  • 3/22/2022 SAFE Credit Union market update (details)
  • 4/28/2022 SAR Think Like an Appraiser (details)

TEENAGE BLOG: My blog turned thirteen years old on Sunday. I’m definitely going to be watching the car keys and liquor cabinet closely… 

NOTE: This post focuses on breaking down what I tend to see in so many doom and gloom real estate articles (and YouTube videos). If you’re looking to read about market ups and downs, check out a piece I wrote a few months ago, “Is the housing market going to crash?”

THE ANATOMY OF DOOM & GLOOM ARTICLES

Sensational title: These posts start with a sensational title such as, “We’re going to see a massive implosion,” or “It’s going to be worse than 2008.” I get it. A great title helps people click.

Minimal statistical substance: In many doom articles we tend to see big ideas without statistical substance. These articles often say, “Prices are high, so we’re going to see the same thing happen again.” In my mind that’s not enough substance, especially since there is no such thing as a rigid formula where the housing market has to do exactly what it did the last time. Moreover, many websites have been sharing this message for years, so at some point we have to question credibility. But back to stats, many doom articles seem to hype up the future without entertaining the present. I guess the message of, “The market will change in the future,” feels a bit vague and boring to me. For reference, here’s a post I wrote a few years ago to discuss price cycles in real estate. Remember, not every price cycle rises and falls exactly the same. In other words, what happened last time isn’t automatically the new template for the future.
 
Perspective that goes against stats: Sometimes people say things like, “We’re going to see massive mortgage delinquencies and a new foreclosure crisis.” But when we look at actual stats, mortgage delinquencies are really low and foreclosures hardly exist. During the beginning of the pandemic, the mortgage delinquency rate shot up, but it has since declined. This doesn’t mean we cannot have a problem in the future, but current stats don’t support a doom narrative.
Here’s a look at forbearance rates also. They’ve been declining, and 1.30% of all loans are in forbearance (compared to 8.53% in early 2020). At the start of the pandemic there was so much concern (rightly so), but a housing collapse based on this hasn’t panned out.
 
A visual to show the decline of forebearance rates through the past couple of years. This is a line graph.
Fringe source: A few people sent me an article this week, and I wrote back stating, “This is a fringe political website that I’ve never heard of. I wouldn’t give any credibility to this slanted source.”
 
An obsession with doom: If someone is going to write with a doom lens, I’m skeptical because I know I’m not getting objectivity. To be fair, I feel the same way about a positive-only lens that ignores anything negative.
 
Experts likely not quoted: In many doom articles it’s just one person pontificating without expert perspective (or stats). It reads more like a housing diatribe instead of housing research.
 
That timeless feeling: The big thing is these articles feel timeless because they are so general in what they’re predicting. These pieces basically could have been written three years ago, and maybe they’ll even get repackaged next year. In my mind this “timeless” feel is the tell we’re reading sensationalism more than stats. Of course, one day the authors will be right since markets don’t always go up. But like the saying goes, a broken clock is right twice a day.
 

Other: What did I miss?

CONCLUSION:

I’m not saying all housing articles predicting demise are bad, but the doom niche tends to be formulaic with much of what I mentioned above. The truth is we should be talking about the current housing market as well as the future. Let’s keep doing that. But be careful not to get swept away by weekly articles that don’t add substance to the conversation. Know what I’m saying?

TWO RECOMMENDATIONS:

1) Know the numbers: Pay attention to actual stats and let the numbers form your perspective and narrative. Ultimately, without a good sense of seasonal trends and current stats, it’s easy to get tossed around by each new sensational headline. Moreover, a quick way to lose credibility in real estate is to habitually share articles that lack merit. I know, that sounds so judgy, but it’s the truth. If you feel like you’re not in tune with stats in your market, maybe start pulling them yourself, find a few people who are doing a good job (and devour their stuff), or even check out what a source like Redfin puts out there.

2) Read mostly everything: I recommend reading from a variety of sources and following lots of different people who talk about housing. Having a well-rounded perspective is important as a system of checks and balances too. On a related note, if someone has a positive-only or negative-only housing outlook, don’t waste your time. All that said, I appreciate hearing what Ivy Zelman has to say lately because she’s been more contrarian than most other housing analysts (which piques my curiosity). Some of my favorite housing voices include Calculated Risk, Altos Research, Odeta Kushi, Jonathan Miller, Len Kiefer, Daryl Fairweather, Steven Thomas (SoCal), Patrick Carlisle (Bay Area), etc…

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Thanks for being here.

Questions: What are you seeing out there in the market? What doom and gloom articles have you read lately? What housing sources are you listening to right now?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

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