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low inventory in Sacramento

A bit less cash and a slightly different smell in the Sacramento market

July 2, 2013 By Ryan Lundquist 3 Comments

Cash stats showed a decline last quarter and properties are taking slightly longer to sell. What do you make of that?

I mentioned in early June that cash sales in Sacramento County were down slightly from the previous quarter. Since the data at the time was based on sales in only April and May though, I wanted to see how the last month of the quarter would steer the stats. Let’s take a look below to see what the numbers tell us now that the month of June has closed.

Cash sales in Sacramento Placer Yolo County through 2013 Q2 - by Sacramento Appraisal Blog

As you can see, there were definitely less cash purchases in Sacramento County from April to June 2013 (Q2) since cash sales decreased from 36.3% to 31.8% of the market. Stats in both Placer and Yolo County were also down.

cash sales in Sacramento County through 2013 Q2 - by Sacramento Appraisal Blog

The market under $200,000 still continues to be a cash feast though and has not changed much as 50% of all sales continue to be cash for the third quarter in a row. In light of the median price skyrocketing over the course of the year, the market under $200,000 has become far more competitive for first-time buyers and investors. I don’t see this letting up any time soon so long as rates remain relatively low and inventory continues to hover around one month of housing supply. The vast bulk of cash purchases are still under $200,000 in Sacramento County, though keep in mind about 25% of all sales between $200,000 to $300,000 were cash in Q2. That’s a strong market segment.

cash sales in Sacramento County - price levels - by Sacramento Appraisal Blog

What does this mean for the market? Ultimately less cash has seemed to create SLIGHTLY more opportunity for owner occupants. Take that with a grain of salt of course because the market is still HEAVILY in favor of sellers since there is only a one-month supply of inventory available. I don’t know about you, but I’ve been noticing in my appraisals over the past few weeks that the Days of Market (DOM) for current listings has been slightly higher than the DOM for closed sales over the past quarter. This means properties are taking a bit longer to sell than they were during previous months. I’ve been hearing a similar thread from some Realtor and investor contacts also. Yes, there are still properties being sold in days of being listed and there are multiple offers too. There is just a very subtle dynamic going on right now as explained above, and we’ll see where it leads.

By the way, I appreciate Realtor Doug Reynold’s take on the market in one of his recent YouTube videos as it compliments some of what I’m seeing. Give it a watch or listen above (or here) and let me know what you think.

UPDATED ON 07/05/2013: I wanted to clarify that these stats do not apply to every single neighborhood and every single niche market in Sacramento County. When determining trends for a neighborhood, it is very important to look at hyper-local neighborhood data.

Any thoughts?

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Filed Under: Market Trends, Resources, Videos Tagged With: cash in Sacramento market, decline of cash purchases in Sacramento, Home Appraiser, House Appraiser, housing inventory in Sacramento, investors purchasing houses in Sacramento, low inventory in Sacramento, Realtor Doug Reynolds, Sacramento County real estate trends

Hedge funds dominating the market in Sacramento

November 9, 2012 By Ryan Lundquist 3 Comments

Hedge funds have become a noticeably dominant player in the real estate market lately. While investor funds have always been a factor, it’s been easier to spot in recent months since inventory is so tight. As an example, consider Blackstone, a hedge fund that began aggressively buying properties in the Sacramento market over the past few months. Since August 2012 they’ve purchased 158 sales on MLS as THR California LLC. They may have other DBAs, but I’m only aware of this one. Investors friends tell me their plan is to rent out their portfolio, which makes sense since a great number of their purchases were bought at the top of the market and have already been remodeled.

As you can see below, Blackstone has purchased nearly 3% of all sales recently.

Hedge Fund Cash Blackstone in Sacramento Real Estate Market 2012 - by Sacramento Appraisal Blog

When looking at the entire market in Sacramento County under $200,000, it’s astounding to see how much cash is the market, isn’t it? I shared some cash stats from one week ago, yet cash sales increased by 3% from that time until now.

Cash Sales in Sacramento County Chart by Sacramento Appraisal Blog - 2012

By the way, the Sacramento Business Journal came out with an article today entitled “Some worry that investment funds are distorting housing market“. I have a quote in the article. Unfortunately the article is for their print edition, so only part of it shows up online.

Questions: What are you seeing out there in the market? How do you think so much cash is going to affect the market long-term? I’d love to hear from real estate professionals, investors and prospective home owners.

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

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Filed Under: Market Trends, Resources Tagged With: Blackstone, cash deals in Sacramento, competition in real estate, hedge funds in Sacramento market, Home Appraiser, House Appraiser, investment funds, low inventory in Sacramento, real estate data, real estate market trends, rental funds, Sacramento Business Journal, Sacramento Real Estate Market, THR California LLC

The cash and FHA teeter-totter in Sacramento

November 1, 2012 By Ryan Lundquist 10 Comments

Cash has been a growing force in the Sacramento market, while FHA loans have been losing power. Anyone in the trenches of real estate knows this because of how difficult it is to get into contract right now, but it’s telling to see the data actually back it up. When looking at stats from this past year in particular, we see this trend: More cash deals equals less FHA loans.

FHA and cash sales in Sacramento real estate market - by Sacramento Appraisal Blog

I’ve still been doing a fair share of FHA appraisals for my lender clients, but I’ve noticed my workload has had far more conventional appraisals lately. This could be just me of course because of the type of business my lender clients are attracting, but I think it’s in part to the shifting market too.

Unemployment Rates in Sacramento County through September 2012 - by Sacramento Appraisal BlogUnemployment Rates: By the way, another trend to pay attention when sifting through real estate data is the unemployment rate. Click on the thumbnail image on the side to see the trend of unemployment in Sacramento County from January 1990 through September 2012. Feel free to use the image on your own blog or website too (please use according to my sharing policy). If you need the image split in two or resized, let me know.

Questions: Where do you see this trend going in 2013? If you are an agent, have you been accepting FHA offers lately? Why? Why not? How has it been for FHA buyers competing with cash and conventional offers lately?

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

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Filed Under: Market Trends, Resources Tagged With: cash in Sacramento market, comparing cash and FHA, FHA loans, FHA loans in Sacramento, Home Appraiser, House Appraiser, Investment in Sacramento, investors in Sacramento, low inventory in Sacramento, real estate data Sacramento, Real Estate Market in Sacramento, sacramento appraisers, unemployment from 1990 to 2012, unempoyment rate Sacramento County

7 reasons why buyers offer more than a house is worth

September 10, 2012 By Ryan Lundquist 8 Comments

Have you noticed how some listings are receiving multiple offers at list price even though they are priced way too high for the neighborhood? I’m talking about the type of listings where agents and others all think, “There’s no way in heck it’s going to appraise that high.” But buyers are still offering at list price and even above. What does this tell us about the market?

Possibilities for why buyers offer full price even when the list price is REALLY high for the neighborhood:

  1. Value: The market has increased in recent months.
  2. Strategy: Since inventory is so tight in the Sacramento area, buyers feel the need to offer at list price or above to get into contract.
  3. Rejection: Buyers have become burned-out from getting their offers rejected, so they’re offering at higher levels to help compete with other buyers.
  4. Cash Competition: There is so much cash in the market, so financed offers need to find a way to be more attractive to sellers (higher offers can help).
  5. Money: It’s really cheap to borrow money right now, so taking out a larger loan is not as big of a deal.
  6. Financing: When buyers finance nearly all of their purchase (FHA), they’re essentially spending someone else’s money. It’s a whole lot easier to offer more when you’re not spending your own money, right?
  7. Good Deals: Many buyers still remember how high prices used to be, so offering more in today’s market still feels like a deal because current values are far lower in the post real estate “bubble” burst.
  8. Other: What do you think?

Housing Inventory in Sacramento County - Graph by Trendgraphix - posted on Sacramento Appraisal Blog

My take as an appraiser: Having multiple offers can be one indicator for how the market sees a property, but it’s not the end-all fool-proof metric for determining value. For example, 10 offers at list price sounds sincerely convincing on paper to establish value, but we also must sift through factors above to try to understand the motivations of buyers – not to mention consider competitive sales and other market metrics. After all, as mentioned above, there are many reasons why a buyer or group of buyers might offer more for a property than it is actually worth.

Listing a property at any price level: I was talking to an investor friend recently about how he could pretty much list his properties at any price level right now (relatively speaking), yet still generate multiple offers due to scarcity of supply. This isn’t true in every case of course, but it’s definitely a realistic dynamic in the Sacramento area real estate market.

All things considered, it’s easy to blame appraisers when appraisals come in “low”, and there are certainly scenarios where appraisers should be blamed. However, in cases like this where offers are unrealistically high for the market, the appraisal probably should come in “low”, right? By the way, check out a previous article if you need help challenging a low appraisal.

Anything you’d add? Any stories to share? Realtors, have you seen listings get into contract far above what you think is realistic? What advice would you give to buyers trying to get an offer accepted these days?

SacBiz Journal Mention: By the way, I was quoted in a Sacramento Business Journal article last week on a related topic of “Homebuyers starting to pay higher prices as investor market dominance wanes.”

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

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Filed Under: Appraisal Stuff, Market Trends, Resources Tagged With: appraiser in Sacramento, challenge low appraisal, high offers, Home Appriaser, House Appraiser, Low Appraisals, low inventory in Sacramento, multiple offers and market value, multiple offers but low appraisal, psychology of buyers making offers, real estate market Sacramento, reasons for low appraisals

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First off, thank you for being here. Now let's get into the fine print. The material and information contained on this website is the copyrighted property of Ryan Lundquist and Lundquist Appraisal Company. Content on this website may not be reproduced or republished without prior written permission from Ryan Lundquist.

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