Price growth has been unreal lately in many parts of the country, but here are some things to keep in mind before pricing for the moon…
Six things to keep in mind:
1) County stats don’t translate perfectly: It’s easy to look at county or zip code stats and think, “Dude, my home is worth 14% more now because the median price is up by 14%.” But the market isn’t that rigid where price growth for a larger area applies equally to every parcel.
2) Picking and choosing: If we’re not careful we can pick and choose stats that benefit us the most. For instance, someone in Placer County this month could be tempted to focus on the region at 14% instead of Placer data at 6.4%. My advice? Look at all the stats instead of fixating on glowing numbers.
3) Larger homes are padding the stats: During these past few months we’ve seen buyers focus on noticeably larger homes, so it’s important to take this into consideration when interpreting huge price growth. At the least larger homes represent some of the heightened price growth lately.
4) Not every property type has the same trend: The truth is not every type of property is going to be showing the same price growth. Thus price trends could be different for vacant land, entry-level homes, the million dollar market, attached homes, 55+ communities, 2-4 units, commercial units, etc…
5) Hot Pockets: The real estate market is like a Hot Pocket taken out of the microwave a tad too early. Some portions are blazing hot while others are only warm or frozen. Like a Hot Pocket, we can say the real estate market is “hot” overall, but it’s definitely not the same temperature in every neighborhood or price range. For instance, the City of Davis seems to have very subdued price growth over the past couple of years, but East Sacramento has been a far different story with large increases. My advice? Price according to similar homes that are getting into contract rather than projecting zip code or county stats on a property.
6) It’s NOT all about prices: The question I get asked the most is, “What are prices doing?” I get it, but if we want to understand a real estate market it’s important to look to other metrics too like inventory, sales volume, days on market, SP/OLP ratio, etc.. Besides, sales are like historical artifacts that tell us what the market used to be like 30 to 60 days ago when these homes got into contract. If anything sales tell us more about the past than the present. If we want to understand the market right now it’s critical to see what’s happening with the listings and pendings (which will be future sales in about 30 to 60 days).
I hope that was helpful or interesting.
NEW VIDEO TUTORIAL: I made a graph last week to show the seasonal market and lots of people responded saying they’d like a tutorial. Here it is.
Thanks so much for reading my post today.
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MARKET SUMMARY: For anyone interested, here are some tidbits for social media, newsletters, or in case you want to win the real estate category on Jeopardy.
– We have 20 days of housing supply in the region
– There were 41% more multiple offers this September compared to last year
– Monthly inventory is lower than it’s been in 15+ years
– There are 53% fewer listings in the region right now (not a typo)
– Sac, Placer, Yolo, and El Dorado counties all have less than one month of housing supply. Each respective county is lower than it’s been in 15+ years.
– We saw the highest number of sales for September in Sacramento County in 11 years (since 2009).
– The million dollar market has grown this year in the region. 3.3% of homes have been above one million in 2020 compared to 2.5% last year.
– It took 9 fewer days to sell this September in the region compared to last year at the same time.
– Demand has increased dramatically lately from local buyers as well as Bay Area buyers. This is part of why we’ve seen heightened pending contracts, higher prices, lower inventory, more multiple offers…
– Normally the market at this time of year would be cooling more substantially by now, but the spring buying season has been sort of extended. Yet before saying it’s simply buyers making up for the sluggish pandemic market in the spring, let’s not ignore the power of low mortgage rates. It’s no coincidence we’re seeing a hyper-competitive market over the past 90 days as mortgage rates have gone below 3%.
– In the background it looks like sales volume and pending contracts are starting to flatten. I talked about this last week. Normally during the fall season we see a dip in all metrics. That really hasn’t been the case so far, but seeing volume flatten could lead to other metrics dipping at some point.
– So far this fall season reminds me of 2012 where the market was incredibly aggressive. Prices kept going up that fall, yet there was a hint of a normal seasonal trend too as there was a dip in sales volume. We’ll see what this fall holds. For now it’s anything but cold.
WAY TOO MANY VISUALS:
You are welcome to use these in newsletters and social media with proper attribution. Scroll quickly or digest slowly.
EL DORADO COUNTY:
I hope that was interesting or helpful. Thanks for being here.
Questions: What are you seeing out there right now? Anything else to add about prices?