Let’s unpack some fresh stats today to help interpret the market and see trends as they are unfolding before us. In the past month I’ve shared about hedge funds, cash and FHA, but let’s throw in conventional sales into the mix today. What is the quarterly percentage of FHA, cash and conventional sales in Sacramento County over the past few years? The chart below shows all sales under $200,000. Why have I been focusing on the market under 200K? This is why: 35% of all sales in Sacramento County this quarter have been cash, but 49% of all sales under $200,000 have been cash deals during the same time period. As you can see, cash has been devouring the market – particularly in Q4 so far. Conventional sales have seen a slight uptick from previous years. FHA deals have been suffering as cash has trumped the market.
By the way, last Sunday The Sacramento Bee wrote a solid piece on investment funds purchasing in Sacramento. I recommend reading it. You’ll see a quote from yours truly in the article too. 🙂
What else do you see? Does anything surprise you?
Unemployment Rates & Hostess: Jobs are an important economic indicator. When interpreting real estate stats, I tend to go back to how many people are working in the Sacramento area. This impacts people’s ability to purchase as well as how much house they can afford too. Click on the thumbnail image on the side to see the trend of unemployment in Sacramento County over the past few years. Do you think we’ll see lower numbers next month in light of Hostess closing its doors in Sacramento? Feel free to use the image on your own blog or website (please use according to my sharing policy).
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Finger Pointing: There are many recent articles lately about how appraisers are to blame for the housing crisis. There is certainly some blame to accept if an appraiser misstated the market, and I am not minimizing that at all, but it’s important to keep in mind that the appraiser is absolutely not always to blame. During the housing boom there was certainly mortgage fraud, but let’s remember that prices really did rise to ridiculous levels, buyers were willing to pay those prices, and lenders had extremely loose standards where almost anyone could purchase a home – whether they could afford it or not. For instance, I had a friend who bought in the Natomas area of Sacramento and didn’t have to show any verification of income to borrow more than $400,000. Maybe the appraisal on his loan in 2004 was bad for some reason, but one thing for sure is that there need not be an automatic finger pointed at the appraiser in an instance like this.
Appraisal Reviews: The article quotes a loan officer saying he used to have so few appraisals reviewed, but nowadays the bulk of his appraisals have to be formally reviewed by the lender at a cost of $125 a pop to the Borrower. I’m not saying there aren’t really bad appraisals out there, but had lending guidelines in 2005 been what they are today, this loan officer may have experienced just as many appraisal reviews then as he does now. Lenders are requiring more of Borrowers these days, and even more work from appraisers too. If you are in the lending industry or in the process of obtaining a loan, I’d be curious to hear your perspective.
Low Fees: The article discusses the “middleman” and how appraisers are hired by neutral third-parties nowadays called Appraisal Management Companies aka “AMCs” (for loan appraisals only – not other types of appraisals). I think the article did a good job describing this process. There are some solid AMCs out there who treat their appraisers well and pay them decently too, but there are also some really bad ones. Here is an email I received a couple weeks ago verbatim from one of the “bad guys”. This was a blast email that went out to numerous appraisers for a property in a semi-rural area with VERY limited market data. I have never worked for this company because of their low fees. Based on their email, do you sense they are interested in obtaining a quality appraisal report?
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