sacramento real estate blog

How much are buyers paying above the list price?

December 1, 2020 By Ryan Lundquist 14 Comments

It’s exhausting being a buyer because it’s so easy to get outbid. It seems like finding a house is a bit like trying to buy the new PlayStation 5. Let’s talk about that today. How much are buyers actually paying above the list price? And if you’re not local, what are you seeing in your area?

A spring market in the fall: First, here is a big market update I did for SAFE Credit Union (40 minutes). Enjoy below (or here).

QUICK SUMMARY:

There isn’t just one amount buyers pay above the list price
The market isn’t the same in every price range.
We’ve seen huge growth this year between $10-20K
About 80% of sales are somewhere between below list and $20K
Not everything is getting bid up
About 40% of sales sold at list price or below last month
2/3 of the million dollar market sells at list or below
Higher prices tend to pay more above list (when above list happens)
Only 3.5% of sales went $50K+ above the list price last month
Look to the comps. Don’t just blindly offer above the list price.

SKIM OR READ IN DEPTH:

How much are buyers paying above the list price? Here are some brand new visuals to show how much buyers are paying above the list price. These might take a minute to digest. This image basically shows the total percentage of sales in the market. For instance, in the visual below 31.4% of homes last month sold below the list price, 9.9% of sales sold at the list price, etc…

Under $400K:

Between $500-750K:

Million dollar market:

This visual compares last year with this year.

Here’s the same information but with numbers. Do you like this better?

HOW MUCH ARE BUYERS PAYING ABOVE LIST PRICE?

1) Mixed results: There isn’t just one answer that applies to every price range and escrow.

2) The biggest change: In many cases buyers are tending to pay ten to twenty thousand over the original list price to secure a contract. About one in five buyers paid $10-20K over the list price last month. In some cases prices get bid up even more, but close to eight out of ten sales are somewhere between below the list price and twenty thousand above the list price. Keep in mind many buyers are getting a loan for the full contract price, so paying above the list price doesn’t always mean buyers are bringing that much cash to the table.

3) Not everything gets bid up: It might be surprising, but this month we saw about one in three sales sell below the list price. It just goes to show sellers have to price it right – even in this wonky market. We also have to be careful about saying “EVERYTHING IS GETTING BID UP” when that’s not true.

4) Million dollar market: The highest prices basically show if buyers are paying above the list price it tends to be more significant. But two thirds of all million dollar sales last month sold at either the list price or below the list price, so the bulk of homes in this range aren’t getting bid up like the rest of the market. Like I’ve said before, this is the most overpriced segment of the market.

5) Not sensational: Only 3.5% of all sales went fifty thousand over the list price last month, so let’s be careful about shining a spotlight on this tiny sliver and saying, “Everything is getting bid up $50-100K.” Nope.

6) Don’t offer above without looking at comps: Buyers, be prepared to offer above the list price, but don’t blindly offer $10-20K above without really considering the comps and advice from your agent. Remember, the market isn’t the same at every price range either.

7) Appraisers: These days appraisers are getting huge flack for “coming in low.” Look, sometimes appraisers are legitimately missing the mark, but other times properties are getting into contract way beyond what is reasonable, so the appraisal should come in “low”. Sellers, sometimes the highest offer isn’t always the best one if there is going to be an appraisal involved. And to my appraiser colleagues, our role is never to “hit the number”, but let’s be sure to account for the true temperature of the market in our reports.

Anyway, I hope that was helpful.

Questions: What stands out to you most above? What is it like right now in the trenches for buyers? Anything stories to share? Did I miss something?

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Is a blue kitchen all the rage or too much?

October 30, 2018 By Ryan Lundquist 24 Comments

A blue kitchen? I recently saw a loud kitchen and I hoped we could talk about it. Is this the new trend? Do buyers crave color? Here’s some photos, a quick interview with the investor behind this, and some takeaways.

This home is in an older area near Downtown Sacramento.

I’ve been seeing more shelves in kitchens lately too. Have you?

What do you think of that hood and vent?

The bathroom also has blue. Notice the loud tile too?

Q&A with Slavic Avetisov (owner / investor):

Why did you go with blue? The reason I went with blue was because I wanted something really trendy, something out of a magazine. I figured there is no better place to do it than near downtown. I’ve sold two other homes in the area to Bay Area buyers, so I figured if my buyers for this house were from the Bay Area they would like the blue. So I went with my gut and against everyone’s opinion, including my wife (she wasn’t liking the blue idea). But after I did she said it wasn’t bad.

Are there any other colors we need to look out for? As far as colors, hard to say. Personally if I find another house in the area, I might do green, like army green (black and green). I have to feel the house though. It depends on the feel of the house as well as market demand. I read up on blue before doing it, and all those architectural digest magazines were writing how a blue bathroom would add 5k to sell off your house. But you can’t just paint it blue and call it a day. Everything had to be properly put together.

What sort of feedback did you get about the cabinets? It wasn’t on the market long enough to get feedback (had a quick full price offer). However, I was looking at a house in the neighborhood to flip, and the sales agent was running my ear off about my house until I told her that I did it. She replied by saying she’s been telling everyone about it. As far as comments in regards to not having enough kitchen space, my thoughts were: 1) Bay Area buyers are used to being in a small apartment or a room rental so they won’t have lots of stuff; 2) People that want to live in that area, downtown, midtown etc… aren’t going to be doing much cooking, but more going out. That’s why I proceeded with open shelves on top & no cabinets. The brick and the exhaust hood vent pipe gave it a loft feeling. I think the butcher block complimented the house age and gave the blue a tone down & a good feel rather than granite or quartz.

TAKEAWAYS:

1) The color trend: I’ve seen a shade of blue in three different kitchens recently. Design magazines earlier this year were talking about seeing more color in the kitchen. Were they right?

2) Location: Certain upgrades and types of architecture work well in some areas and not in others. I suppose the shade of blue matters too. Anyway, a trendy area might favor a colorful kitchen, but a 55+ community might completely reject it. At the end of the day location means everything.

3) The market doesn’t care if we like it: The market doesn’t care if we personally like something or not. This is why we need to remain objective when valuing properties. What will the market pay? That’s the only relevant question.

UPDATE: Props to the multiple real estate agents who emailed me photos of a blue kitchen in a model home in the Folsom Ranch neighborhood. The blue trend is alive.

A closing blended example:

This is quite the mishmash, right? Either you love it or hate it. Is it okay to blend architectural styles? Is it beautiful or a travesty? A friend on Twitter said, “Wow, the elusive Rustic Modern Dutch Colonial.” Thank you to a colleague in Boston for letting me use this photo (he didn’t want to be identified).

The point: From a value perspective the only thing that matters here is what buyers are willing to pay.

NEW FALL VIDEO: Last week I made a quick video to talk through the fall season (inventory, sales volume, price, and days on market). Enjoy if you wish.

Questions: What do you think of blue kitchens? Could blue be worth more? What’s the big takeaway here in your mind? I’d love to hear your take.

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How much does a previous purchase matter to appraisers?

August 28, 2018 By Ryan Lundquist 19 Comments

How much does a previous purchase matter? Do appraisers give strong weight to the purchase price? Or do they completely ignore it? This is an important conversation, especially in the midst of so much talk about the market changing.

1) Meaningless: Sometimes a previous purchase is meaningless. That’s not always happy news, but if a property sold for too little or too much, it just might not mean much to us today. As an example, it doesn’t make sense to give any real value weight to a short sale that closed way too low or an inflated purchase that was clearly disconnected from the market and not supported by data.

2) Strong weight: If a property sold recently and it was a reasonable price, appraisers might actually give strong weight to the sale. If you didn’t know, appraisers are actually allowed to use a previous sale of the subject property as a “comp” in an appraisal report too (usually Comp #4). That might seem strange to do, but then again what is more comparable than the subject property itself? Of course let’s be careful about understanding exactly how the market and property have changed since the sale though.

3) Someone overpaid: One thing we have to consider before giving too much weight to a previous sale is whether it was a reasonable representation of value or not at the time. It can be dangerous to blindly accept a sale without understanding the full story of why it sold at the level it did. On that note, my observation is at times cash buyers fall prey to overpaying on the higher end of the market where comps are a little more sparse and it’s not always easy to see value. Here’s an example I just tweeted about this morning:

4) Seeing the context: Sometimes a previous purchase is an incredible way to understand how a property fits into the market. In the graph below I have three previous sales in the Stollwood area of Carmichael, and each time the subject property competed at about the same price position. That’s powerful, right? So in this case I would likely give strong weight to the previous sales because they help me understand value.

FYI: Here is a tutorial if you want to learn how to make a graph like this.

Quick closing thoughts:

1) The temptation: It’s easy to get stuck on a previous purchase price and not see the current market because we think, “It has to be worth at least X amount because it sold for Y amount in the past.” Be careful of that. We have to be objective by giving the most weight to the current market.

BIG POINT: As some wonder if the market will make a big turn at some point, this conversation could be very relevant if that did happen.

2) Ch-ch-ch-change: The market could have changed since the subject sold previously. Values could have increased or softened. The subject could have been in better or worse condition too.

3) Different trends: Sometimes I hear things like, “It sold in 2016 and the market has increased 15% since then, so it must be worth 15% more now.” The problem is market trends aren’t the same at every price level. Maybe the lowest prices in town have seen increases like that, but price changes could be more subtle at higher levels. So let’s be cautious not to project a more aggressive trend from a lower range on a higher one.

4) Distressed: I find looking to older sales from the foreclosure days isn’t all that helpful because the market was not normal then and properties were selling all over the place. I usually recommend researching previous sales, but when they’re from the distressed days we often have to take them with a grain of salt. The same thing is true for stuff that sold in 2005 at inflated prices.

5) Boldness: Appraisers and agents sometimes have to tell clients why value is actually lower than a prior purchase. That’s not always easy to hear, but we have to be bold and let the numbers speak rather than putting weight on a previous sale that might not reflect the market today.

I hope this was interesting or helpful.

Questions: Which point stands out to you the most? Any stories to share or other points? I’d love to hear your take

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Unpacking the real estate market in Sacramento

May 15, 2012 By Ryan Lundquist Leave a Comment

I don’t read calculus books for kicks, but I do like numbers. It’s really interesting to watch the trends in our real estate market in Sacramento to consider where we’ve been, what is happening now and where we might go. Take a minute to check out these graphs below and let me know what you think. What do you see?

Months of Housing Supply in Sacramento Placer Yolo El Dorado County as of April 2012

Not many houses for sale: We’ve seen a huge drop in housing supply in the Sacramento area. Check out the graph above of Sacramento, Placer, Yolo and El Dorado Counties. Source: Trendgraphix, Inc.

Sacramento County and Placer County median price graph by Joel Wright

Sacramento vs. Placer County: It’s interesting to see Placer County and Sacramento County median sales prices juxtaposed. I’m particularly interested to see how the trend evolves in the next six months. There is a slight uptick evidenced as of late and the Sacramento Association of Realtors blog reported an increase in median sales price level in April also. Only time will tell to see how that further unfolds. This graph comes from Joel Wright of Wright Real Estate (used with permission).

Unemployment Rate January 1990 to March 2012 Sacramento County - by Sacraemento Home Appraiser

The Unemployment Saga: How is unemployment doing in the Sacramento area? Here is a historical glimpse of unemployment in Sacramento County from January 1990 through March 2012. I keep a running graph each month like this. If you need a larger size for a presentation or your blog, let me know (just keep my blog URL in the graph and see my sharing policy). Data source: EDD.

Unemployment Rate Sacramento County January 2009 to March 2012 by Sacramento Appraisal Blog

Current Unemployment Trends: As of March 2012 the unemployment rate per EDD in Sacramento County is 11.4%, which is similar to the rate during June 2009. It’s been so nice to see a decline from the high of 13.2% in July 2010, but there has been a slight uptick lately as you can see above. Unemployment rates tend to fluctuate, so it’s understandable to see the rate experience a little increase during recent months, but we just need it to decline to see housing improve. Bottom line.

Sacramento County and California Graph Median Price by Wright Real Estate - Joel Wright

California vs. Sacramento: How does the Sacramento area stack up against price trends in the rest of California? This graph shows the median price in California compared to the Sacramento area. The graph comes from Joel Wright of Wright Real Estate (used with permission).

distressed sales vs conventional sales in Sacramento - graph by Calculated Risk

Distressed vs. Traditional Sales: The Calculated Risk blog has some pretty amazing content. Be careful when you visit though because you might get stuck there for a while. The graph above is used with permission and is taken from a post that deals with distressed vs. traditional sales in Sacramento. The blog post states, “In April 2012, 60.7% of all resales (single family homes and condos) were distressed sales. This was up from 59.6% last month, and down from 66.8% in April 2011. This is lower than the last few years, but 60% distressed is still extremely high!” This is right in line with what I’ve been saying all along too as I’m cautious about focusing on smaller bits of good news in light of the overall context of the local economy and housing market. Granted, there are some positive signs with low inventory, small price increases and distressed sales going down, but we have a long way to go. Read more with two recent posts “Juggling short sales and foreclosures in Sacramento” and “Weighing the distressed market in Sacramento.” Click HERE for a larger image of graph above.

What stands out to you? I’d love to hear your comments below.

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