Sacramento Appraisal Blog

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Real Estate Market in Sacramento

Juggling foreclosures & short sales in Sacramento

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We are seeing fewer foreclosures lately in Sacramento, which is a good thing. But at the same time, the foreclosure rate going down seems in part be a result of more effectiveness with short sales. This is important for consideration since short sales are still considered distressed sales and very often sell for less than traditional sales and even foreclosures (depending on condition of course). As you can see in the chart below, the overall percentage of distressed sales has remained fairly similar over the past few years (but definitely down from stats in 2008 when a wave of bank-owned sales hit the market).

Is this interesting to anyone besides me? Or am I just a numbers geek?

Sacramento County distressed sales chart by Sacramento home appraiser blog

For reference, The Sacramento Business Journal reported yesterday on a decreased level of notice of defaults (NODs) during the first quarter in both California and Sacramento County. Theoretically, if there are less defaults this year, we should see the percentage of foreclosures continue to decrease.

The Point: We are seeing glimpses of recovery in the housing market, but the market is still distressed. Let’s take any good news in context.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Twitter, subscribe to posts by email or “like” my page on Facebook

Weighing the distressed market in Sacramento

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It’s really interesting to look at the percentage of foreclosures and short sales among certain price segments in Sacramento County over the past quarter. Generally speaking, the higher the price, the lower the percentage of foreclosure, and the lower the price, the higher the rate of foreclosure. Why do you think there are more distressed sales at lower price levels? Why does the percentage of distressed properties tend to decrease as price levels increase?

distressed sales in sacramento county graphy by Sacramento Home Appraiser

NOTE: I wanted to show distressed percentages up to $1,000,000, but there were only 24 sales in Sacramento County between $650,000 to $1,000,000 over the past quarter, so the data was too sparse to really establish a trend. The data above $500,000 in fact starts to get really limited.

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Twitter, subscribe to posts by email or “like” my page on Facebook

A graph of the unemployment rate from 1990-2012 in Sacramento County

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Anytime I hear hyper-positive news about the national housing market, I wonder if it’s spin I always sift the details through the local economy in Sacramento and the need to see the unemployment rate continue to drop to see improvement in our market. It’s been somewhat encouraging to see the unemployment rate decline from the high of 13.2% in July 2010 to 11.2% in February 2012, but I’ll feel even better once we see unemployment down a few more percentage points. I’ve been posting unemployment trends and graphs for quite some time, but the graph below stands out in my mind since I added an additional eight years (1990-1998) from my previous graphs. It’s amazing to consider what a wild ride it’s been over the course of two decades. The economy and unemployment have been up and down to say the least (sort of like a roller coaster), and hopefully we’ll have a downhill ride in coming years to get that rate down a bit.

Feel free to use this image on your blog, website or in a presentation. I do have a larger size available too, so email me if that’s relevant for you. Please just keep the image intact and feel free to link back.

What stands out to you about the graph? What time period do you remember most?

Unemployment in Sacramento County 1990-2012 - graph by Sacramento Appraiser - 530 pixels

Property Tax Class This Week: By the way, on an unrelated note, on Thursday I am teaching a class at the Sacramento Association of Realtors YPC forum called “How to Appeal Your Property Taxes.” The class is open to SAR members and affiliates, but even if you are not a part of the association, you can come as my guest. Just let me know beforehand if you’re interested (send me an email, call or comment below). I’ll be talking about the nuts and bolts of property tax appeals, FAQs and advice for consumers from my experience consulting with home owners.

YPC Forum: “How to Appeal Your Property Taxes” – April 19, 2012 9am Sacramento Association of Realtors 2003 Howe Avenue, Sacramento, CA 95825

If you have any questions or Sacramento area real estate appraisal or property tax appeal needs, contact me by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.

Is a property worth less if it’s a short sale?

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No. A property is worth what it is worth regardless of being distressed or not. With that being said, when a house is a short sale it may need to be marketed at a more aggressive price level to dump the property before a foreclosure date or offset any negative perception in the market for being a short sale. Notice though we’re talking about an aggressive “price” and not “value”.

Here’s a good question to ask. If a short sale was not a short sale, would it sell for more? The answer is very often “yes” and that leads us to a better picture of what market value is. The truth is that properties are frequently marketed as short sales and end up generating little interest before resulting in foreclosure. But then after these same houses end up as bank-owned they generate very quick offers at or above the original short sale listing price. Of course part of this could be banks not cooperating with the short sale process and buyers tiring of waiting for months for the deal to close, but it’s hard to ignore that short sales often (not always) sell at lower levels.

Case-in-point: I appraised a house recently in the City of Galt where competitive properties in the neighborhood showed a distinct difference between short sales and everything else. Comparable non-distressed properties were selling around $105,000-$115,000, REOs were selling mostly between $85,000-$100,000 and short sales were selling closer to $85,000-$90,000 near the bottom of the competitive range. It’s certainly true that condition and quality of updates played a role in the price differences, but it’s not an accident either that short sales were consistently finding their place near the bottom of the market.

Why is this important to understand?

  1. Appraisers:  From the appraisal standpoint, if short sale comps are used in an appraisal report (without an adjustment upward), then the value in the report may be lower than what it should be. The value could really be a “quick sale” value rather than “market value”. That’s not good on many levels. Please understand though that short sales do not always sell less than fair market value, so an adjustment upward is not always warranted in an appraisal. It all depends on what is happening in the market.
  2. Investors:  I just spoke with a Sacramento investor yesterday who has been growing frustrated to see some of his properties compared to bottom-of-the-market short sales by appraisers. This investor found me online and he called me to see if I had any advice on how to deal with his situation. That’ll be a different blog post, but I did give him some tips, a few which I mention below.
  3. Real Estate Agents:  I recommend real estate agents (and investors) provide a detailed list of all updates to appraisers (with costs if possible). Send this via email or provide in person to the appraiser. You can also discuss any relevant marketing information (ie.. “There were 4 full-price offers in 3 days and I am still getting calls and back-up offers”). Lastly, feel free to share market research and properties that helped you establish your listing price. Don’t tell the appraiser which comps to use and how to do his job, but rather share data that helped you establish your price so the appraiser might understand your point of view. You are allowed to talk with appraisers about property specifics and the real estate market, but don’t coerce and pressure for a certain value.
  4. Sellers:  Know your market if you are selling. You will have to compete with distressed properties around you, which can impact your price, but that doesn’t necessarily mean you have to price your property the same as neighborhood short sales and REOs. A trusted real estate agent or pre-listing appraisal should be able to give you guidance to understand the market. Misunderstanding what the market is doing can cost you dearly.

What do you think? Agree? Disagree? Any stories to share?

If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook or subscribe to posts by email.

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