housing market trends

Buyers aren’t impressed yet with lower rates

September 11, 2024 By Ryan Lundquist 17 Comments

Mortgage rates have gone down, but buyers aren’t that impressed yet. It seems like the real estate community is really excited about lower rates, but buyers aren’t sharing the enthusiasm so much (yet). Let’s talk about it and maybe kick around some language to describe today’s housing market.

Skim by topic or digest slowly.

UPCOMING SPEAKING GIGS:
10/18/24 Prime Real Estate (private)
10/23/24 SAFE Credit Union (details TBA)
10/29/24 Orangevale MLS Meeting
11/19/24 Downtown Regional MLS Meeting Q&A 9am

WEIRD VIBES IN REAL ESTATE

When talking to the real estate community across the country, the word “weird” is often used to describe the housing market. I keep hearing stuff like, “It was priced to the comps, but nobody is even coming to look at it.” Or the market feels so uneven, and it’s either multiple offers or crickets. The truth is buyers are extra sensitive about price, condition, and location. Additionally, there could be some heightened sensitivity in light of the uncertainty of who is going to pay for the buyer’s agent commission (NAR lawsuit). I was talking with Realtor Desiree Taylor today, and she was telling me quite a few contacts are saying they’re going to wait until rates drop more. Have you been hearing that? In short, there are many layers to the weirdness.

NO BIG CHANGE IN PURCHASE APPLICATIONS (YET)

When looking at national mortgage applications data, there’s been an uptick in refinances, but purchase applications have been pretty flat. This shows we haven’t reached an inflection point yet where the math is working enough for buyers. In other words, buyers need more affordability to be able to play the game, and we’re not there yet. Granted, if rates persist to drop, we’ll definitely get some buyers back, so let’s watch by the week. On that note, we can hear about a change in buyer demand from the real estate community first before it shows up on a graph like this. Ultimately, we need a sharper change to affordability to get a sharper change to the number of buyers. Many experts think 5.5% or slightly lower is a threshold for more buyer activity, and that seems reasonable to me. But it’s not like all buyers will come back at a certain rate, which is why we need to watch by the week. Only time will tell. Do you think we’re on the cusp of more buyer demand? Am I going to be writing a blog post in a few weeks or months about buyers thawing out?

BUYER FOMO IS SO 2021

We’ve had more closed sales this year in Sacramento, but barely more than last year. As long as rates remain steady, the positive news is we’re poised to see more volume in 2024 compared to 2023. Yet, we’re only up 345 sales from last year, so it is super close. Today’s buyers tend to be patient, picky, and they don’t reek of FOMO (Fear of Missing Out) like they did in 2021.

SELLERS, GIVE SOMETHING TO BUYERS IF NEEDED

Are sellers giving more concessions? Yes. That’s what tends to happen during the second half of the year. The white vertical bars represent July to December, and do you see the increase during this time (besides 2020)? Concessions happened in about half of transactions in Sacramento County last month. And yes, it’s on my radar that the yes or no concessions field could get muddy in light of the NAR lawsuit. Let’s watch and digest over time.

WILL UNEMPLOYMENT HURT SOME BUYERS?

The unemployment rate has been rising, and if it keeps going up, we have to ask if it will affect the pool of future buyers. I find some real estate narratives about the future often only focus on the idea of a flood of buyers coming into the market, but let’s recognize some people are struggling. My advice? Don’t ignore unemployment rising, but be careful about sensationalism too.

WHY HAVE PRICES KEPT GOING UP?

Someone saw this image on X, and asked why prices have kept going up. It’s baffling at times to the public why prices haven’t really dropped much. Well, it’s because inventory is still low (despite growth this year). In short, sellers stepping back from the market has created a more competitive vibe. But price metrics have shown a very modest uptick this year too, so let’s keep the narrative in check. It’s not 2021 price growth. Keep in mind homes are slightly smaller this year too (for what it’s worth).

SELLERS AREN’T AS STUCK

Some good news. Sellers aren’t as stuck as they were last year. That’s true nationally as well as locally. It’s been great to see consistently more supply hit the market, but we’re still 34% below the pre-2020 normal for the number of new listings in the region. It’s true that inventory has skyrocketed in some places in Florida and Texas, but Sacramento has sort of a balanced vibe at the moment in the midst of growth this year. Keep in mind this “balance” only exists due to a low number of listings meeting a low number of buyers. It’s not that we actually have a normal number of buyers and sellers (it’s going to take time to get back there).

LISTINGS HAVE GROWN FASTER THAN SALES

This is one of the best ways to describe the market right now. The number of listings has grown faster than the number of sales. Locally, we’ve had about 2,600 extra new listings this year compared to last year, but only 345 extra sales. Look, the number of listings is still so much lower than normal, but there is no mistaking a wider gap between listings and sales right now, which means the market isn’t as tight.

NORMAL IS BORING

Can I get a drum roll? Okay, maybe not since this is going to sound boring. Market competition levels are somewhat normal right now. Check out the percentage of sales with multiple offers as well as sales selling above and below the list price. Days on market is also very close to normal. Of course, this doesn’t mean the market is normal. It’s a strange dynamic today where there is a sense of balance in some ways because we’ve had low supply and low demand. It’s just the number of listings and the number of sales are incredibly low compared to the norm. So, on paper the market feels somewhat balanced (but a cooler market than last year). But when we step back, there is a real problem with affordability, which is not healthy. We’ve had a volume crash. Not a price crash. That’s a good way to put it.

Okay, that’s what’s on my mind. Time to stop before this thing gets any longer. But some local stats for those interested…

LOCAL MARKET RECAP IMAGES

YEAR OVER YEAR

Some smaller counties don’t have much data, so I lumped them into 60-day chunks. One month just isn’t enough (too erratic). I have all these images on the STATS tab too (and more).

MONTH TO MONTH

I hope this was interesting or helpful.

Questions: What stands out to you about the stats? What are you seeing out there in the market right now? I’d love to hear your take.

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Is it 2007 again in the housing market?

September 12, 2023 By Ryan Lundquist 22 Comments

Is it 2007 again? There’s so much talk online about today’s housing market being like 2007, but what are the stats showing? Today I want to walk through three parts of the market. I suspect many locations are experiencing the same trend as Sacramento too. Skim by topic or digest slowly.

A brown background with some blocks that say, "normal" (crossed out in red). There is a white background rectangle with the title of today's post in black also.

UPCOMING (PUBLIC) SPEAKING GIGS:
9/26/23 Orangevale MLS Meeting
9/28/23 Yuba City Big Market Update (in Yuba City (register here))
10/4/23 KW Sac Metro Big Market Update (register here)
10/6/23 How to Think Like an Appraiser at SAR (register here)
10/27/23 AI Fall Conference (San Francisco)

It’s a strange market today with low volume and low supply. It feels a little amateurish to call it weird, but that’s a pretty good description.

THREE WAYS TO COMPARE 2007 & 2023

1) INVENTORY IS NOT BUILDING LIKE BEFORE

One thing that is REALLY different today is inventory is not building like it did in 2007. Supply has actually been subdued in today’s market as sellers have pulled back from listing their homes, and that’s the opposite of what we saw between 2005 and 2008. In fact, when prices peaked in August 2005, housing supply literally tripled in one year in Sacramento. Prices weren’t all that impacted the first year, but in the background, there was a tidal wave of supply building. Look, I’m not trying to sugarcoat today’s market, but we have a different vibe today where supply is not showing 2007 vibes. Granted, this doesn’t mean the market is healthy today. I’m just saying it’s way different.

Housing supply is actually lower today than one year ago.

New listings are down 34% from last year and 44% from the pre-2020 normal. Basically, we’re missing 7,700 new listings in the entire region compared to last year and 11,900 from the pre-2020 normal. I don’t have stats for 2007, but do you see what was happening in 2008? Yikes.

2) LOW VOLUME TODAY FEELS LIKE 2007:

One part of the housing market that feels really similar to the previous housing crash is the number of sales happening (volume). In 2005 prices peaked, and while prices weren’t down all that much the first year, the real change was seen in volume falling off a cliff. In real estate it’s easy to obsess over prices, but the real trend is often seen with volume.

We’ve basically had the lowest volume we’ve seen through August, so today really does feel like 2007 in terms of volume.

Not to beat the dead horse, but here’s another way to look at volume.

3) COMPETITION DOESN’T SMELL LIKE 2007

The stunning part about today’s market is how competitive it is in the midst of some of the worst volume ever. This is why I often call today a hybrid market. It’s like 2007 volume and 2020 competition gave birth to 2023.

Here’s a different way to compare competition in 2023 and 2007. Any dot above the 0% line went above the original list price, and anything below went below. Striking difference, right?

And days on market:

CLOSING THOUGHTS:

First of all, what happened last time isn’t the new template for every future housing correction, so even though I’m ironically writing a post about 2007, let’s remember that 2007 isn’t the new formula for every future downward cycle. With that said, today’s housing market feels like 2007 with volume, but it’s an entirely different beast with low supply, intense competition, and very few foreclosures. Ultimately, it’s not accurate to call this 2007 because it feels so different. Every time someone says it’s 2007, a puppy dies. Okay, that’s probably not true, but we do need to let stats form our narrative.

Though like 2007, we’re in a place where it would be healthy for prices to come down so more buyers and sellers can participate. The reality is sellers sitting back this year has so far catered toward keeping prices higher rather than fostering more much-needed affordability. I know, to some people it sounds like real estate sin for me to say this, but we have an affordability problem, and it’s not a healthy dynamic to see higher prices with lower volume. That’s not good for buyers, sellers, or real estate professionals.

What’s going to happen ahead? It’s impossible to predict the future with certainty since we’ve not had a market like this before. We have ideas for how long sellers might sit out, but the truth is nobody knows for sure. What happens with rates is a huge factor, and rates have persisted to be stubbornly high. No matter what, it’s important to not minimize the struggle of affordability today. In a traditional system low supply can help keep prices higher, but we’re not in a traditional market today, so over time we’re going to find out which is the more meaningful force. Affordability or low supply.

For now, we have a market that feels very stuck with a good chunk of sellers and buyers on the sidelines. It won’t be this way forever, but we seem poised to continue to see low volume and low supply until something changes the trajectory of the trend (rates, economic pain, etc…).

It does feel like 2007 in some ways, but in other ways it’s just so different.

—————— LOCAL HOUSING MARKET RECAP ——————

I have so much to say about today’s housing market, but let’s keep this short and sweet. I’ll push out a ton of stuff these next two weeks on my blog and my socials. Basically, we’re experiencing a pretty normal seasonal slowing so far. It does not feel like the crash-landing market last year in 2022 where most metrics saw incredibly sharp change. Basically, all the metrics are showing pretty normal seasonality so far (and they’re even more competitive than the pre-2020 normal). It looks like prices and volume have peaked for the year, which is normal to see. It’s worth noting we’re starting to see slightly higher prices compared to one year ago. Of course, volume is depressed and inventory is still sparse, so it’s a strange market.

SHARING POLICY:

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ANNUAL STATS

Remember, some annual stats like volume get a little weird because we’re now comparing today with a slumping market last year. But we still need to know these numbers, so I’m going to be pushing them out.

EL DORADO STATS:

Someone in the comments asked about El Dorado stats. Send me an email if you want some stuff. lundquistcompany @ gmail dot com.

MONTH TO MONTH:

JUST A FEW IMAGES:

I hope this was helpful.

Questions: What are you seeing out there in the market? What stands out to you above? I’d love to hear your take.

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

More cash buyers in today’s housing market

September 7, 2023 By Ryan Lundquist 27 Comments

There are more cash buyers right now. Bottom line. Well, technically. Today let’s unpack the housing market’s cash trend, some myths, and things to watch ahead. This post is designed to scroll by topic or digest slowly.

UPCOMING (PUBLIC) SPEAKING GIGS:
9/26/23 Orangevale MLS Meeting
9/28/23 Yuba City Big Market Update (in Yuba City (details TBD))
10/4/23 KW Sac Metro Big Market Update (register here)
10/6/23 SAR Think Like an Appraiser (TBD)
10/27/23 AI Fall Conference (San Francisco)

CASH PURCHASES HAVE BEEN INCREASING

Ever since mortgage rates shot up in early 2022, we’ve been seeing more cash buyers. The uptick has become very noticeable lately in Sacramento, and probably in other markets too. The percentage of cash buyers this quarter so far is 21% of all sales. That’s nothing compared to 32% in 2012 when investment funds were playing the market like Monopoly, but we are still seeing a growing trend at the moment technically (see below).

BUT THERE’S AN ASTERISK (PLEASE READ)

Yes, there is more cash right now as a percentage of all sales, but it’s not that there are so many cash buyers flooding the market. What I mean is when you look at the number of cash buyers over the years, we aren’t seeing a crazy high level today technically. But what we are seeing is the cash buyers that are here today represent a greater percentage of the sales that are happening (see graph above). Does that make sense? It’s as if buyers who aren’t tied to what happens with mortgage rates are finding it easier to play the game today.

IT’S A CASH SANDWICH

We are seeing more cash at the bottom and more at the top. It’s like a cash sandwich. This is a normal dynamic with more investors purchasing stuff at the lower end and higher-dollar buyers flexing cash at the top. I shared this chart yesterday, and people were blown away at the percentage of cash above $1M, though there is always more cash at higher levels (this percentage is still a little higher than usual though).

Here’s another way to look at the same data. I think this is a cool way to see the trend, but I’m not sold on this image either. Thoughts?

DON’T BLAME INVESTMENT FUNDS

It’s easy to blame the cash trend on investment funds. I can’t tell you how many times I hear people say things like, “Dude, Blackrock and Blackstone are buying everything and destroying the housing market.” Look, I’m not an investment fund fanboy. I’m just saying the stats don’t line up with that narrative. The truth is investment funds are NOT playing a noticeable role in Sacramento region housing market right now. As far as I can tell, Invitation Homes hasn’t purchased anything in Sacramento since last summer.

DON’T BLAME IT ON THE BAY AREA

It’s also easy to blame the local trend on Bay Area buyers, but some recent stats from John Burns Real Estate Consulting suggest Bay Area outbound migration has gone cold, and Sacramento is NOT a hot inbound migration either at the moment. This sort of lines up with the word on the street from what I’m hearing from the real estate community too. Keep in mind this doesn’t mean there are zero Bay Area buyers. It’s just the fire hose of pandemic migration has seemed to turn into a slower drip.

AIM FOR THE MARKET – NOT THE UNICORN

It’s easy to aim for a Bay Area unicorn buyer who is going to drop fat stacks of cash and overpay. My advice? Aim for the market.

IT’S NOT THE iBUYER MODEL

The market shifted last year, and the iBuyer model has suffered. Opendoor currently owns 42 properties in the Sacramento region, and while they look to be trying to turn things around, just over one year ago they owned over 300 units at any given time, so they have really cut back. I would mention other iBuyers, but Zillow, Redfin, and Offerpad all stepped back from the market (failed), so the iBuyer model locally is basically Opendoor.

CASH DOESN’T ALWAYS MEAN INVESTOR

It’s easy to think cash represents only investors, but there are many buyers who purchase owner-occupied units with cash, so cash stats aren’t the end-all solution to determining the number of investors. With that said, in my experience the number of investors is often pretty close to the percentage of cash buyers locally. Here’s a cool tool by Redfin to gauge the percentage of investors in many markets across the country. Their stats show a 17% investor share in Sacramento. Over the years I’ve noticed John Burns Real Estate Consulting tends to show a little bit higher. In short, if someone said we have about 20% investors locally, I wouldn’t bat an eye. That seems legit.

WHERE IS CASH COMING FROM?

Someone asked me where the cash is coming from, but that’s not a question I can answer. The joke on Twitter is that it’s money laundering, but I’ll let you decide on that. Haha. If someone has a way to research this, I’m open ears. By the way, speaking of cleaning money, did you watch Ozark? Loved it.

THERE IS HOPE FOR BUYERS

While cash has been increasing, let’s remember 79% of the market is NOT cash. I think sometimes the narrative is that nobody can compete with cash, but that’s not actually what the stats show. For instance, $400,000 to $500,000 is an incredibly competitive price point in Sacramento County, but only 12.9% of sales were cash in this segment last month. Isn’t that a powerful stat? All I’m saying is we have to let the stats form our narrative instead of imposing a narrative on the market. It’s easy to get clicks and attention when we say “Blackrock is cutting out first-time buyers,” but that’s fake news in the local market.

DOES CASH ALWAYS PAY LESS?

I know this visual is a hot mess, but work with me. Anything above the 0% line went above the original list price last month, and anything below went below. In short, it’s not just one thing with cash buyers. 51% of cash transactions over the past couple of months went below the original asking price, 36.6% went above, and 12.4% sold at exactly the original price. These percentages are a little softer than the rest of the market in terms of going above, so it tells me cash buyers do tend to go a little lower than the entire market. Or maybe they’re getting better deals after properties have been lingering. There are many ways we can look at this. Ultimately, it’s not just one thing. Every escrow has a different story.

CASH BUYERS BID UP IN THE FIRST WEEK

It’s during the first week where cash buyers noticeably go above the original list price. And the longer a property is on the market, the lower it tends to sell when dealing with a cash buyer. But honestly, this trend looks just like the rest of the market, so there isn’t anything different here. What this shows us is cash buyers have to compete with everyone else to get it done. In other words, cash isn’t so strong that it’s somehow exempt from the market trend.

A MISTAKE BY CASH BUYERS

One mistake I see cash buyers make is to think they have so much power since they’re bringing greenbacks to the table. Look, sometimes cash is super convenient or necessary due to condition, but financed deals end up being all cash to the seller after escrow closes. And the vast bulk of the market is financed locally (79% lately). In short, if you’re coming with cash, you still have to compete and make a strong offer in the midst of a market with limited supply.

MORE AFFORDABILITY WILL CHANGE THESE STATS

Affordability improving will lead to be more financed buyers, and that can quickly change the total percentage of cash buyers in the market. For now, we’re in a place where there is a smaller pool of buyers, and a growing percentage of them happen to be cash at the moment. We’re missing nearly 40% of buyers from the pre-pandemic average, which is sobering.

I hope that was helpful. Thanks for being here.

Questions: What are you seeing with cash in real estate right now? Anything to add? I’d love to hear your take.

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

Higher rates, insurance, & the stock market vs real estate

August 23, 2023 By Ryan Lundquist 19 Comments

Rates have gone up, but have they sucked all the demand out of the market? Nope. Let’s talk about that today by looking at a few stats. Also, someone asked if the stock market is connected to the housing market, so l made a cool graph. I have a few thoughts on insurance in California too. I know, these are all dissertation topics, but scroll quickly or digest slowly.

close up of weathered and textured boards on an old wooden farm door. There is also a white rectangle with black font that says, "Have higher rates sucked all the demand out of the market?"

UPCOMING (PUBLIC) SPEAKING GIGS:
8/29/23 Elk Grove Regional MLS Meeting
9/06/23 KW Roseville Big Market Update (link coming soon)
9/26/23 Orangevale MLS Meeting
9/28/23 Yuba City Big Market Update (in Yuba City (details TBD))
10/4/23 KW Sac Metro Big Market Update (register here)
10/6/23 SAR Think Like an Appraiser (TBD)
10/27/23 AI Fall Conference (San Francisco)

RATES HAVE BEEN GOING UP LATELY

Mortgage rates have gone up lately, but the market doesn’t feel altered like it did last year when rates doubled. I’m not sugarcoating. I’m just saying rates above 7% haven’t been the deathblow to demand over the past couple of months so far, but we could certainly see a huge change ahead if rates continue to tick up. I will say I’m hearing from loan officers that they’ve seen fewer purchase applications lately, so clearly 7% rates are having some effect that maybe hasn’t been entirely seen in the stats yet.

YES, TWO NEW MEMES

DOES THE STOCK MARKET DRIVE REAL ESTATE?

“Bro, the stock market has improved, and that drives real estate.” I’ve heard this a few times lately. Look, it’s possible the housing market in some areas of the country could be more driven by the stock market, but most buyers don’t derive their income from the stock market, so there isn’t a one-to-one correlation to real estate. Granted, this past upward price cycle since 2012 has looked pretty similar for both stocks and real estate, but when we back up a few decades, the trend clearly isn’t the same. The Sacramento market didn’t drop during the dot com bust around the year 2000, and Sacramento peaked years before the stock market did during the Great Financial Crisis (2007). Oh, and Sacramento dropped in the 90s while the stock market increased. And the local market saw explosive price growth beyond what stocks did from 2000 to 2005.

It’s possible a higher-end buyer could feel more confident about real estate if the stock market is doing well, but the stock market isn’t the ultimate driver for the bulk of the trend. Let’s remember what happens with the economy can affect housing and stocks, so there’s going to be some correlation.

EXPECT A SMALLER POOL OF BUYERS

If rates continue to rise, we should expect lower buyer demand. Duh, thanks Captain Obvious. Sellers, price it right, negotiate as needed, and realize buyers are sensitive about paying the right price. If you are a seller, my strong advice is to go to a mortgage calculator to see how much it costs to buy your house before you decide to flex too much on buyers. All that said, if rates rise more, it’s possible we could see sellers step back more too. Time will tell.

IF YOU WORK IN REAL ESTATE…

I recommend planning for low supply and low demand ahead. If something alters the trend, great. I like the idea of being realistic about the market that actually exists, and being surprised if something else occurs. In other words, plan for the worst, but bonus if something else happens.

NO MAJOR INCREASE OF LISTINGS DESPITE 7% RATES

Rates have been at or above 7% for a couple of months now, but we haven’t seen a major increase in the number of listings during this time in the Sacramento region (though El Dorado has seen more of an uptick compared to surrounding counties). Don’t get me wrong. We’ve definitely seen an increase in active listings compared to the spring, but that’s also normal for the time of year. This is something to keep watching by the week because it could change quickly if rates shoot up, but so far there hasn’t been an explosive uptick like last year, so the market doesn’t feel shell-shocked like it did in 2022. I will say weekly pending contracts have felt flat for the past couple of months, so that’s where 7% rates look to be having an effect (still not a dramatic change though). Check out some weekly metrics from Redfin data if you want.

STRONG MULTIPLE OFFERS STILL

Over the past ten days of pending contracts, 50% of pendings have had multiple offers in the region. This number is definitely lessening from the height of the spring season, but it’s also still elevated compared to a pre-2020 market. Of course, there aren’t many sales or listings today, but among the supply that’s out there, it’s competitive. That’s what the stats show.

IT’S STILL A TIGHT MARKET

Overall, it’s still a tight market. In a normal year we would see way more actives than pendings since it’s normal for buyers to have more selection. It’s not a shocker either to see lower prices with more pendings compared to actives. It’s more competitive at lower prices (normal trend). Again, I’m not sugarcoating here. I’m just saying we aren’t seeing a dramatic sharp change like we saw last year. Are buyers feeling the lack of affordability? Definitely. I’m hearing loan officers tell me they’re seeing fewer purchase mortgage applications, and I’ve heard of other buyers backing off the market. Yet, we just haven’t seen any massive shift in listings and pendings as of yet.

Here’s a look with sales over the past thirty days in yellow compared to actives and pendings. If we start to see volume (yellow) drop over time, we should see a change in the black bars going up (actives). Time will tell.

MONTHLY SUPPLY BY PRICE RANGE

Here’s a look at monthly supply by price range. This considers the number of active listings and sales over the past thirty days. Overall, these numbers are low because we basically have a market where low supply and low demand have met. By the way, it’s normal to see more supply at higher prices.

FIRE INSURANCE ISSUES IN CALIFORNIA

I’ve been asked quite a bit about insurance lately. Look, we’ve been seeing some local areas struggle with costly fire insurance for years, so this isn’t something new. For instance, I recently talked to a buyer shopping in Auburn with an expected monthly $750 monthly fire insurance rate. I’ve heard about payments over twice this amount also in El Dorado County and other areas. It just depends on the size and location of the property. But the bigger narrative lately is insurers are stepping out of California altogether, so the conversation isn’t just about fire insurance any longer. A local resident in a suburban area emailed me this morning to tell me that her insurance dropped her, and now she’s getting quotes at twice the amount of what she was paying. I’ve heard a few stories like this, so my market antennas are up. Ultimately, if this dynamic becomes more common, it can make housing more expensive even in non-fire areas. If buyers have to rely on ultra-expensive state insurance too instead of private insurance, that’s going to be problematic. For now, I don’t think we’ve reached a point like this for homeowner’s insurance, but we are starting to hear more stories, so let’s pay attention.

WHAT DO APPRAISERS DO FOR COMPS IN FIRE AREAS?

Someone asked me if appraisers are doing anything differently in appraisals in areas where fire insurance is lofty right now. Ultimately, the comps are very likely subject to the same issue, so it’s a trend that feels baked into the market. In other words, if all the comps are experiencing the same issue, appraisers don’t have to think too much about insurance. However, if some local areas don’t have higher fire insurance, this is where appraisers (and real estate agents) need to be really careful about comp selection. After all, if one house has an extra $750 per month for fire insurance, but the comps don’t have this issue, that’s absolutely something we need to consider. It really goes back to valuation basics where we need to select comps that are subject to the same bigger forces at hand if possible.

MORE RESEARCH AT SOME POINT

I’ll push out some research at some point to talk more about what’s happening with volume in fire insurance areas. One of the struggles is it’s not easy to isolate areas that are subject to higher insurance because not every portion of a ZIP code or city is always subject to higher rates. I will say, in general, during the pandemic buyers rushed outlying areas, and higher fire insurance wasn’t a big deal at the time. This was true in El Dorado County, but it’s not as easy to track in Placer County. Could this trend change ahead? Of course. When consumers struggle with affordability, that can change how people think about prices and even something like appealing property taxes (which is something people don’t think much about until a market is down). Anyway, let’s keep watching. And if you have a way to easily track fire insurance trends, I’m open ears.

I hope this was helpful. Thanks for being here.

Questions: What are you seeing out there in the market? What stands out to you above? I’d love to hear your take.

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

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