The other day a home owner was upset because he thought his appraisal came in too low. Yes, he was hung up on price per sq ft, which was a big issue, but most of all he believed the home should have been worth way more since there were almost no other homes listed for sale on the market. His thought was, “There’s no inventory, so I’m going to command top dollar.” After all, isn’t real estate about supply and demand? Well, yes. But there’s so much more.
The Market’s Mood: The truth is there are many factors that make value move in a market, and supply and demand is only one cog in the system (or “layer of the cake” as I like to say). Granted, it’s one of the more important metrics, but at the end of the day we can’t forget to ask how buyers and sellers are feeling about the market. Or in other words, what is the mood? For example, in early 2013 housing inventory in Sacramento was incredibly low, and buyers were pretty much willing to offer at list price or above on anything that hit MLS. In fact, if something didn’t have multiple offers, I wondered what was wrong with the property. At the time there was a real desperate mood, yet despite inventory still being low today, buyers are exhibiting more discretion by not pulling the trigger unless the price is right. Like the owner above thinks, this seems irrational because there aren’t many homes for sale. But the mood has changed. Likewise, if a house backs a busy street or has some adverse issue, buyers are tending to wait rather than offer. Again, this seems illogical because on paper it looks like buyers should be making offers all day long because of how low inventory is. Lastly, it’s worth mentioning the owner above did not realize his home valued toward the higher end of the neighborhood range was simply not experiencing the same demand as the lower end of the price spectrum in the neighborhood. Thus the mood at the top was different than the bottom.
Action Step: At the end of the day, let’s not forget to talk with clients about the mood of the market. We can do this by sharing the latest numbers, thinking about what is driving some of the numbers (the mood), reading articles from several local and national publications, and having conversations as often as possible with others in the real estate trenches (not just with people in your office or field). Also, since market moods are constantly changing, we have the opportunity to continually say something different about the local market.
Any thoughts? I’d love to hear your take below.
—————– For those interested, here is my big market update —————–
Two ways to read the BIG POST:
- Scan the talking points and graphs quickly.
- Grab a cup of coffee and spend a few minutes digesting what is here.
DOWNLOAD 73 graphs HERE:
Please download all graphs in this post (and more) here as a zip file (or send me an email). Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.
Quick Sacramento Market Summary: The market in January was fairly normal. It took 3 days longer to sell a house than the previous month. That’s normal. The median price and other price metrics generally declined from December. Yep, that’s normal too for the time of year. Sales volume declined by 39% from December to January, but that’s common since sales volume ALWAYS declines from December to January (yes, I said always). Actually, the real trend is January 2016 had a 2.5% higher sales volume than January 2015. Housing inventory increased, which is also normal. Okay, I apologize because I’m repeating one word too often here. But do you catch my drift? However, I will say the bottom of the market and “entry-level” neighborhoods have felt a little more aggressive in terms of values, number of offers, and demand. In short, some neighborhoods have seemed to have more of a feel of a budding spring real estate market, while others have been cruising along waiting for the spring season to further ripen. As I said last month, if I had to sum up the market in 2015 I would say: Modest value appreciation, but aggressive demand. Yes, demand is very aggressive out there, but sellers really need to price realistically unless they want to sit on the market. One last thing, there is a big difference in the mood among buyers when mortgage interest rates are closer to 3.5% compared to even 4.0%, so watch rates and the market closely.
- It took 3 more days to sell a house last month than December.
- It took 14 less days to sell this January compared to last January.
- Sales volume was 2.5% higher in January 2016 compared to last January.
- FHA sales were 26.8% of all sales last month.
- FHA sales under $200,000 were 29% of all sales last month.
- Housing inventory is 30% lower than it was last year at the same time.
- The median price declined by 5.3% last month.
- The median price is 9.4% higher than the same time last year.
- The avg price per sq ft declined by about 1% last month.
- The avg price per sq ft is almost 11% higher than the same time last year.
Some of my Favorite Graphs this Month:
SACRAMENTO REGIONAL MARKET:
- It took 2 more days to sell a house last month than December.
- It took 15 less days to sell this January compared to last January.
- Sales volume was 7.9% higher in January 2016 compared to last January.
- FHA sales were 23.6% of all sales last month.
- Short sales were 3% and REOs were 3.5% of sales last month.
- Housing inventory is 28% lower than it was last year at the same time.
- The median price declined by 1.3% last month.
- The median price is 10.8% higher than the same time last year.
- The avg price per sq ft increased 2% last month.
- The avg price per sq ft is 11.6% higher than the same time last year.
Some of my Favorite Regional Graphs:
- It took 4 less days to sell a house last month than December.
- It took 16 less days to sell this January compared to last January.
- Sales volume was 13.8% higher in January 2016 compared to last January.
- FHA sales were 16.7% of all sales last month.
- Cash sales were 19% of all sales last month.
- Housing inventory is 28% lower than it was last year at the same time.
- Sales volume is over 13% higher these past 12 months compared to the previous one year.
- The median price, average price per sq ft, and average sales price increased last month, but Placer County data seems to fluctuate quite a bit since there are fewer sales, so I don’t recommend putting too much emphasis on these increases unless they become prolonged over time.
Some of my Favorite Placer County Graphs:
I hope this was helpful and interesting.
DOWNLOAD 73 graphs HERE (zip file): Please download all graphs in this post (and more) here as a zip file (or send me an email). Use them for study, for your newsletter, or some on your blog. See my sharing policy for 5 ways to share (please don’t copy verbatim). Thanks.
Questions: How would you recommend for someone to find the mood of the market? Are there certain metrics you think best show the mood? Also, what stands out to you about the latest stats in Sacramento? I’d love to hear your take and what you are seeing in the trenches.
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