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Sacramento Real Estate Market

Fanny packs, pendings, and a slower market

November 16, 2017 By Ryan Lundquist 12 Comments

I guess I never thought I’d talk about fanny packs on my blog, but here goes. This is either a new high or low depending on your perspective, but I want to share an important concept to consider – especially during a slower market. Then for anyone interested I have a big market update for Sacramento. Any thoughts?

Fanny pack analogy: Imagine spotting a guy wearing a fanny pack. You might think, “Sweet, I haven’t seen one since the early 90s.” The truth is if we only saw one dude sporting a pouch, we’d probably just think this person is trapped in the 80s and 90s (like Uncle Rico back in ’82). After all, one guy’s fashion statement doesn’t mean it’s a trend for everyone. But if we started seeing more and more people wearing fanny packs everywhere we went, then it’s probably a fashion trend. The same thing happens with pendings. If we only have one pending at a much higher level than anything else in the market area, it’s probably an outlier more than anything. It might be an isolated incident that’s totally disconnected from the market (like one guy wearing a fanny pack) rather than a real indicator of value (a trend). But if we saw a group of pendings shifting higher or lower, then that’s probably a trend.

The big point: Sometimes we get so distracted by the bling of one high listing or pending that we fail to see the bigger picture of value in a neighborhood. It’s like we develop tunnel vision and get locked into one outlier rather than looking at everything else that is similar AND trending lower. Sellers in particular struggle with this during the fall because they sometimes only see the highest prices from the spring rather than current listings and pendings that might be generating slightly lower prices because the market has softened. Or it’s easy to see that one overpriced listing down the street and expect to fetch a similar lofty price rather than recognizing that zero properties are getting into contract that high. Thus let’s be cautious not to stake all the weight of value on one “lone ranger” pending or listing while ignoring all other data. Otherwise it’s sort of like seeing one guy wearing a fanny pack and calling it a trend…

Disclaimer: This post was in no way meant to offend anyone who used to wear, currently wears, or will wear a fanny pack.  🙂

–——-——- Big monthly market update (it’s long on purpose) ———–——-

The market has continued to soften, though it’s not really all that soft. Inventory is up, price reductions have increased, sales volume has been dropping, it took three days longer to sell last month in the region, and price metrics are down about 1% from the height of summer. Overall the market is clearly slowing down for the season, though it’s not painfully dull like it was in 2013 or 2014 during the fall. This is a key to understand because when saying values are “softening” some interpret that to mean the market is really slow or crashing. But that’s not what I’m saying.

Big Point: We have a housing shortage, but that’s not a trump card to stop a slower seasonal trend.

Let’s get technical. Many price stats last month actually showed an increase in value by about 1%. What the? Does this mean the market increased? I thought you just told me the market is slowing? Let’s remember that sales from October really tell us more about properties that got into contract in August and September before they actually closed escrow in October. Thus that 1% uptick really happened in the market a couple of months ago rather than in October. In other words we’ll see the real trend of the market for October when the pendings from October close in November and December. This is so important because let’s not make a big deal about the market technically showing an increase because the uptick didn’t technically happen last month. Know what I’m saying? If we want to see the current market we have to look at the sales, but we cannot forget to give strong weight to the listings and pendings. Are properties taking longer to sell? Are there more listings hitting the market? Are properties starting to generate less offers or offers at lower prices? What are buyers, sellers, and the real estate community saying about the market?

A huge soft stat: Every year the median price and average sales price in Sacramento County tend to soften by about 5%. This doesn’t necessarily mean values decline by 5% in every neighborhood or price range, but it does mean we can expect price softening in most areas during the fall season.

By the way, here’s an article I wrote for Comstock’s magazine this month about some of the different layers of the Sacramento market right now.

I could go on, but let’s get visual.

DOWNLOAD 62 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

SACRAMENTO COUNTY (more graphs & stats here):

SACRAMENTO COUNTY STATS:

  1. The median price is currently $349,450. It’s up slightly from last month but down 1% from summer.
  2. The median price is 9.2% higher than the same time last year.
  3. Sales volume in October was 5.4% lower this year than 2016. There were 1456 single family detached sales last month.
  4. It took an average of 29 days to sell a home last month (one year ago it was taking 4 days longer).
  5. The median days on market last month was 15 days.
  6. It took 1 more day to sell in October compared to September (median days).
  7. FHA sales were 19.9% of all sales last month in the county.
  8. Only 0.7% of sales last month were bank-owned & 0.7% were short sales.
  9. The avg price per sq ft was about $221, which is about 1% lower than last month (9% higher than last year).
  10. The avg sales price increased about 1% last month and is currently $386,000. This is 9.4% higher than last year.
  11. Cash sales were 12.2% of all sales last month.

SACRAMENTO REGION (more graphs & stats here):

SACRAMENTO REGION STATS:

  1. The median price is $392,000. It increased about 2% last month, but it’s down 1% from summer.  
  2. The median price is 9.8% higher than the same time last year.
  3. Sales volume in October was nearly the same as October 2016. There were 2380 single family detached sales last month.
  4. It took an average of 34 days to sell a home last month (one year ago it was taking 3 days longer).
  5. The median days on market last month was 18 days, which means properties are selling really quickly.
  6. The median days on market increased by 3 days last month, which shows a slowing in the market.  
  7. FHA sales were 16.5% of all sales last month.
  8. Only 0.8% of sales last month were bank-owned & 0.8% were short sales.
  9. The avg price per sq ft was about $227, which is down slightly from last month (9% higher than last year).
  10. The avg sales price increased about 1% last month and down about 1.5% from summer (but up 9.4% higher than last year.
  11. Cash sales were 15% of all sales last month.

PLACER COUNTY (more graphs & stats here):

PLACER COUNTY STATS:

  1. The median price is currently $455,000 and increased about 1% last month.
  2. The median price is 3.8% higher than the same time last year.
  3. Sales volume in October was 10% higher than 2016. There were 533 single family detached sales.
  4. It took an average of 37 days to sell a home last month (one year ago it was taking 4 days longer).
  5. The median days on market last month was 22 days, which means properties are selling really quickly.
  6. The median days on market increased by 4 days last month, which shows a slowing in the market. 
  7. FHA sales were 9.5% of all sales.
  8. There were only 4 bank-owned sales last month and only 4 short sales.
  9. The avg price per sq ft was $232, which is slightly higher than last month (9.2% higher than last year).
  10. The avg sales price is currently $511,121. This is 6.4% higher than last year.
  11. Cash sales were 18% of all sales last month.

DOWNLOAD 62 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: On a serious note, did you wear a fanny pack back in the day? Anything else you’re seeing in the market? I’d love to hear your take.

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Filed Under: Market Trends Tagged With: appraiser in Sacramento, average price per sq ft, average sales price, fanny pack, Home Appraiser, House Appraiser, inventory shortage, market trends in Sacramento, Median Price, Placer County, Sacramento County, Sacramento Real Estate Market, Sacramento Region, trend graphs, Yolo County

What’s your housing shtick?

April 12, 2017 By Ryan Lundquist 25 Comments

It’s easy to fall into the trap of saying one thing about the housing market. Just as a comedian has a shtick, or regular performance, we can get into the routine of talking about real estate based on one big idea about what the market is doing or will do. Let’s consider some examples. Which one(s) are you? Any thoughts?

37841087 - overhead of office table with notebook, computer keyboard and mouse, tablet pc and smartphone. copy space

Doom & Gloom:  The market is going to crash like it did 10 years ago.

Corrector:  Values will correct but not implode.  

One-Metric Wonder: The market will turn as soon as this one thing happens.

Normal: The market is normal and not in a “bubble”.

Mr. Buzzword: The market is headed toward a “shift” in the future.

Polly Pollyanna: It’s always a good time to buy and sell. Everything is always good.

Specific Year Guy: This year is going to be the one where values turn.

Mrs. Cyclepants: The market has a 7 year cycle and it’s about up.

Foreclosure Prophet: Another foreclosure wave is coming. Just wait.

Headline Regurgitator: This person says whatever the latest headlines say.

Spinster: Any negative aspect of housing is spun into something positive.

The Feeler: I feel like the market is strong and will be in the future.

Crystal Ball: This is exactly what the market is going to do.

Broken Crystal Ball: Nobody knows the future including me.

If we’re honest we might identify with several shticks above. That’s okay. I’m not saying there’s something wrong with that, but let’s be challenged to consider what we say and not get locked into conveying only one thing about the complex housing market. Moreover, let’s be cautious about imposing clichés and ideas on the market because it’s easy to miss trends that way. At the same time let’s not be naive by refusing to consider the future. My advice? Pay attention to the numbers and know them well enough to quote, know what is normal and not for the time of year, remember that values might be moving differently in various price ranges and neighborhoods, and find ways to talk about current values in specific terms while keeping an eye on the future (instead of focusing entirely on the future).

My knee & market update post: Some of you may know I hurt my knee in a snow tubing accident 10 days ago. I have an MRI next week, but for now the doctor thinks I may have torn my meniscus. Anyway, I normally do my big market update between the 10th and 15th of the month, but I can’t swing it this week since I took last week off and I’m basically playing catch-up with all my reports this week. I’m just grateful to be at my desk again. Anyway, I will be 100% up and running (not literally) next week, and I’ll get to my big update then. Thanks for your understanding.

Questions: Which shtick stands out to you most? Any others to add? Did I miss something? I’d love to hear your take.

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Filed Under: Market Trends, Resources Tagged With: 2017 housing market, appraisals, appraisers, clichese, crystal ball, Group of Appraisers, housing market, market predictions, real estate bubble, real estate shtick, Sacramento Appraisal Blog, Sacramento appraisals, Sacramento Real Estate Market, shtick, values, values going down, values going up

Are we really back to “bubble” prices?

November 8, 2016 By Ryan Lundquist 24 Comments

We’re back at the peak of the market. Well, that’s what some of the national indexes are saying. So imagine yourself in line at Starbucks and someone remarks, “I heard on CNN we are back to bubble prices.” What would you say? Let’s look at some of the “national” trends below and then kick around a few thoughts. I’d love to hear your take in the comments.

bubble-prices-image-purchased-from-123rf-sacramento-appraisal-blog

Case-Shiller National Index: This index shows the “national” market is about where it was during the peak of the index in 2006 (source).

case-shiller-national-index-by-sacramento-appraisal-blog

Freddie Mac National Price Index: This index shows the “national” market is about where it was during the peak of the index in 2007 (source). 

freddie-mac-price-index-united-states-sacramento-appraisal-blog

Freddie Mac California Price Index: The “national” index in gray shows we are back to the peak of the market, but the state index in black shows California is still about 5% below the peak (source).  

freddie-mac-price-index-california-sacramento-appraisal-blog

Freddie Mac Sacramento Price Index: The national index in gray shows we are back to the peak, but the local Sacramento index in black shows we are still a ways off (source).

freddie-mac-price-index-sacramento-sacramento-appraisal-blog

Some quick thoughts:

1) I want to buy in the national market: There is no such thing as a national market, which makes “national” indexes only so valuable (or sometimes totally useless). As Jonathan Miller says, real estate is local and we have thousands of local markets instead of one national market. Therefore we ought to be naturally cautious about national metrics (see Barry Ritholtz rip NAR’s affordability index). In short, I watch “national” indexes, but I look to the local market for the real trend.

2) Different Peak: The “national” market peaked around 2007 depending on which index you’re looking at, but Sacramento peaked in 2005. Media outlets often talk about the housing “bubble” bursting in 2007 when in fact that wasn’t true for many markets (including Sac).

3) Current Values: Many Sacramento neighborhoods are still a good 10-15%+ below the peak of the market, though some classic areas are getting very close (while other depressed areas have much further to go). I included some neighborhood graphs below for reference.

4) Condos & Land: Let’s remember not all property types trend the same way. For instance, the condo market has struggled since the housing “bubble” burst. Owner occupancy rates being too low have stalled many complexes from obtaining financing, which has stalled value increases too. Vacant land is also far below where it was at the peak because there is less new construction today and we don’t have land speculators like we did 10+ years ago. 

Specific Neighborhoods (Are we there yet?):

college-glen-7

east-sac

4-plex-carro

del-paso-manor

curtis-park

I hope this was helpful.

Questions: Are there any national metrics you pay attention to? Any you’d recommend avoiding? Did I miss something? I’d love to hear your take.

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Filed Under: Market Trends, Resources Tagged With: California real estate, Case Shiller, Freddie Mac Price Index, Home Appraiser, House Appraiser, national real estate, real estate bubble, Sacramento Real Estate Appraiser, Sacramento Real Estate Market, United States real estate

The market is definitely maybe going to do that one thing in the future

August 29, 2016 By Ryan Lundquist 17 Comments

The market is doing great. It’s about to crash. Values are fine but they’re slowing. Actually, the “bubble” popped two months ago. Right now there are some strong opinions about real estate trends. It feels a bit manic to be honest as some say the market is tame while others say it’s beginning a downward slide. In light of this, I hoped to kick around some ideas together. What do you think?

36852833 - businessman holding a glass ball,foretelling the future.

A few things to consider when the market begins to slow:

  1. Don’t let headlines become your talking points: It seems like sensational headlines and stories can become our talking points if we’re not careful. It’s easy to let this happen in our personal lives, so two weeks ago we were offended by Ryan Lochte, this week it’s Colin Kaepernick, and next week it’s going to be some other person or situation. I’m not saying these things don’t matter, but only that it’s easy to get swept up in the latest headlines. The same thing happens with real estate articles and opinions. It’s easy to hear something and swiftly conclude “the market is doing this or that,” without really fact checking our local market. My advice would be to let local data inform our market statements.
  2. Be careful about predicting value: It’s really not the job of real estate professionals to predict what values will do in the future. If I asked you to predict exactly what Apple stock will be worth in one year, could you be precise? Or tell me how consumers will feel about Netflix in 5 years from now. Or let’s keep it simple. Who is going to be President in two months? You get the point. Everyone is asking where the real estate market is heading, but the most honest thing we can say is, “I don’t know what the market is going to do. My crystal ball is broken. But I can tell you in depth what the market is doing right now and what it seems poised to do in the immediate future.”
  3. Know the seasonal trend: Almost every single year in the later summer the real estate market slows down and the real estate community tends to freak out. What is happening? Has the “bubble” popped? Is the market starting to turn? It’s as if we are disconnected from seasonal trends and thus treat any slowing like it’s something totally unexpected. Like I said two weeks ago, weighing a slowing market is like stepping on a scale at the right time of day. Frankly, we have to be able to answer questions like this: What does the market normally do at this time of year or during this month? Does it take longer to sell? What happens with sales volume? Does monthly inventory usually go up or down? Do prices usually soften or increase? Answers to these questions can show us how the seasonal market usually behaves and then help us interpret whether a current slowing is something normal or not. Here’s a good rule of thumb: Unless we see something that indicates this is more than a seasonal slowing, it’s probably an okay idea to consider this a seasonal slowing.
  4. Preaching the market is going to change: For those preaching a coming change in the market, here are a few questions: What is going to cause the market to change? When is it going to happen? And by how much will values decline? In reality it’s a given that at some point in the future the market is going to change. Why? Because that’s what markets do. They go up and they go down. While I’m not a huge fan of predicting real estate, I guess if someone has a platform of change, I’d rather hear some specifics because otherwise preaching change seems like prophesying something inevitable. Know what I’m saying?

I hope this was helpful and relevant.

Video Market Screencast: In the following video I talk about seeing the seasonal market and what the market was like in 2005 when values began to decline. I hope this will be helpful and maybe even a game-changer for some. Watch below (or here). Yeah, it’s not short, but maybe watch it in the background while working.

Questions: What is point #5? Did I miss anything? Which point resonated with you the most? Do you think what’s happening now is a seasonal trend or is it something else? I’d love to hear your take.

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Filed Under: Market Trends Tagged With: changing market, doom & gloom, real estate market 2016, real estate predictions, real estate trends, Sacramento Real Estate Market, seasonal market

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