Sacramento Appraisal Blog | Real Estate Appraiser

Real estate appraisals for divorce, estate settlement, loans, property tax appeal, pre-listing and more. We cover Sacramento, Placer and Yolo County. We're professional, courteous and timely.

sacramento regional appraisal blog

My new sewer line adds huge value, right?

By 31 Comments

A new sewer line. That’s what 2020 gave my family as a parting gift before the year closed. Yep, just before Christmas we had to replace our entire line at a whopping $13,688. I know that sounds crazy expensive, but we had four separate bids and went with the most reasonable one. In part it was so pricey because we had one hundred feet of line under eighty feet of concrete. 

The good news is my house is worth $13,688 more now, right?

THE SHORT ANSWER: No.

THE LONGER ANSWER: Buyers expect things like sewer lines to be in working order, so they aren’t prone to pay a premium for a new one. Would some buyers pay a little something extra? Maybe. But I’m not holding my breath for much of a value add because buyers get more excited and swayed by the bling in a house rather than boring adult stuff like sewer pipes. After all, we don’t hear buyers say stuff like, “I want an open concept kitchen, hardwood flooring throughout, but I’m walking if the sewer line isn’t new.”

IF IT’S BROKEN: But if a sewer line is broken, that’s where it becomes more of a value issue since a traditional loan shouldn’t be able to fund without a functioning sewer line. Moreover, in most markets buyers would likely deduct for the expense and inconvenience of having to replace a line. 

CLOSING ADVICE: Sellers, don’t expect buyers to pay dollar for dollar for every repair you do. Seriously, buyers expect certain things to be present and working. This is why they’re not going to look at my house and say, “Whoa, there’s a new sewer line? Let’s offer $13,688 more.” This is just how it works. And frankly if we were the buyers there’s no way we’d be paying cost either, right?

Anyway, here’s to indoor plumbing in 2021.

Thanks for being here.

Market update at SAR: I’m doing a big market update at SAR on January 21st from 10-11:00am. Sign up here.

Questions: Have you done any similar repairs recently? Have you ever seen a sewer line increase value? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Goodbye California. Is everyone leaving?

By 50 Comments

Everyone is leaving California. Well, it feels like it. But what do the stats actually say? Let’s talk about it. This is so important for real estate professionals in particular to understand because it helps us talk about the market and plan for the future. Any stories to share? Please comment below. 

1) Where are California residents moving?

Last year 653,551 residents left the state according to the American Community Survey. Here are the top destinations of where California residents are moving. Keep in mind 2020 data is not out yet. I included the top states below. If I had all fifty states on one graph it would be too big. Does anything surprise you?

2) Who is coming to California?

There is so much news about people leaving California, but we have quite a few people coming to the state too. Last year in 2019 there were 480,204 people who moved to California. It’s interesting that many residents moving here are from some of the top destination states.

3) Where are Californians MOVING THE LEAST?

This visual shows the locations where California residents moved the least in 2019. Does anything surprise you?

4) How can the population still be growing with so many leaving?

Last year we saw more people leave than come to California and that’s been the trend for at least ten years according to the American Community Survey (without considering international migration). So how is our population still growing? Well, in short we’ve had more births to offset the numbers. This is really important because we often hear things like, “Dude, our population keeps growing, so clearly we don’t have more people leaving. That’s just a made-up narrative.” Look, it’s both. We actually do have more residents leaving than coming, but births are helping our population continue to grow. On a side note, I wonder if we’ll see the birth rate go up in light of the pandemic. You know, will sheltering in place lead to more babies?

5) Aren’t more residents moving to Idaho?

It seems like Idaho is all the rage as a destination, so it might be surprising to see only 17,722 California residents moved to Idaho last year. But keep in mind these are 2019 stats and we could see the numbers increase in 2020. Let’s remember Idaho only has a total population of about 1.75 million people though, so having nearly eighteen thousand California residents move last year is huge because it essentially boosted the population by 1%. That’s enormous growth for Idaho, but it’s really just a drop in the bucket for California since we have over thirty nine million residents.

Thanks Meghan for letting me use the photo.

6) Less than 2% of the population moved last year

It seems like everyone and their Mom is leaving the state, but it’s really not true when considering the numbers from the U.S. Census Bureau. I’m not trying to minimize over 650,000 residents leaving last year, but that’s less than 2% of the state. It’s worth noting that over 98% of residents did not move last year.

7) Will the pandemic cause more people to move?

The stats above DO NOT reflect the pandemic because 2020 stats aren’t out yet. I’m anxious to see what new stats bring in light of so many residents being able to work from home now. By the way, here are three ways the pandemic has affected buyers.

8) Migration resources:

You can make your own visuals like mine by checking out the U.S. Census Bureau. But there is also a fun tool called the Census Flow Mapper that helps us see county to county migration (the only downfall is data only goes through 2018 so far). We can also look at migration reports from moving companies. Here’s a sampling of migration reports from Atlas Van Lines, United Van Lines, and North American Moving Services. We can also consider search queries to get clues for places people are thinking about, but I tend to put more weight on stats that show where people actually moved.

9) Why are people moving?

This is a huge question. It’s a dissertation and I won’t pretend to be qualified to answer it. But the usual suspects such as retirement, lifestyle, job change, politics, etc… are surely factors. I’d love to hear your take in the comments.

QUESTIONS FOR REAL ESTATE PROFESSIONALS
Who are your clients going to be over the next few years?
Who is coming to the market?
Who is leaving the market?
Who is going to be participating in the future market?
What steps do you need to take to position yourself for the future?
Where can you meet future clients?

I hope this was helpful.

Questions: Does anything surprise you about the stats above? Why are people leaving? Did I miss anything?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

How much are buyers paying above the list price?

By 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?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

What would happen to the housing market if we went on lockdown again?

By 19 Comments

Lots of us are wondering about the future as COVID-19 cases are rising. When will this be over? What’s it going to take to beat it? And in terms of real estate, what would happen to the market if we went on lockdown again?

This isn’t about fear or politics, but conversation. This isn’t a prediction post either. My only purpose is to consider things that might affect housing. So let’s talk.

LOCKDOWN THOUGHTS:

1) Suppressed demand: There are many things that can affect a housing market. Mortgage rates, jobs, the economy, access to financing, etc…. and even the government. A mandated lockdown, whether national or statewide, is something that can suppress demand because the market isn’t able to operate as it normally would. When I say “lockdown” I’m talking about something akin to earlier in the year where occupied properties were not allowed to be shown.

2) Buyers & agents have learned: This time around we have more experience. The real estate community has learned to show homes virtually and buyers are more used to the idea also. However, if buyers and agents don’t have full access to real estate because of imposed rules then it’s hard to imagine seeing no effect on the housing market.

3) Sellers: One thing to watch is sellers pulling their listings from the market or waiting to sell if strict rules were imposed or if COVID numbers got out of control. Throughout the pandemic we’ve seen substantially fewer listings and it wouldn’t be surprising to see fewer during a lockdown or grave situation. Yet not all sellers are the same and there will be people who list no matter what.

4) Buyers: I imagine mortgage rates below 3% will keep propelling lots of buyers to hunt for homes because that’s exactly what’s been happening these past months. In short, mortgage rates have pulled far more buyers into the market than the coronavirus has pulled people out. In other words, so far the pandemic hasn’t hampered buyer demand. But what happens if access to real estate is limited or a feeling of uncertainty about the economy, housing, or future ensues? All I’m saying is we need to continue to watch buyer sentiment because it’s not something that always stays the same.

5) It is a real market: When the pandemic first began I heard things like, “This isn’t a real market,” but that wasn’t true. Prices slowed. There were far fewer pending contracts. And the market felt dull. In other words, we had real trends and stats even though there was an element of the market feeling suppressed due to governmental regulations. That didn’t make it a fake market though.

6) No effect whatsoever: Our market has done very well within the confines of current restrictions, so if those persist we may not see too much difference as long as demand remains high. But if the rules change and access to the market changes, that’s where we might expect to see a difference in the way the market feels (or a change in the stats). As a guy who follows the market closely what I am looking for is a change in buyer or seller sentiment or a change in something that would affect access to real estate.

7) Could we see a “W”? When the pandemic began we saw a huge drop in volume and then a massive recovery. This created a “V” shape because there was a drop and then an increase. Well, if we have a second round of outbreak and a lockdown, could we see another “V” which would then form a “W”? I wrote about this a few months back in a conversation with an economist. Or would the crazy momentum we have right now simply press through a lockdown? This is the question and we’re going to have to wait to see how it pans out. If anything we ought to be wary of predictions. I don’t think anyone at the beginning of the year predicted the market we’re in right now… This doesn’t mean we need to be shy about asking questions about the future though.

8) Commercial real estate: This has been a brutal year for many business owners and a second round of lockdown could be a deathblow. What happens to business owners and commercial property owners over the next few years?

9) Other: What else do we need to consider? What is on your mind? I’d really like to hear your take in the comments or via email.

Free webinar: I’m doing a big market update this week for SAFE Credit Union on November 19th from 9-10am PST. It’s free to anyone and it’ll hopefully be some good background noise while working. Register here.

Thanks so much for reading my post today.

Any thoughts?

———————- (skim or digest slowly) ———————–

For those interested, here’s a big Sacramento market update:

MARKET SUMMARY: In short, the market has been slowing for the season, but it’s still best described as a “hot” market. I keep saying that this fall has not been normal because the market hasn’t softened like it normally does. It’s really felt more like spring than anything… With that said we have begun to see sales volume drop for the fall, but properties are still selling very quickly. In fact, half of all home sold in six days or fewer in the region last month. We literally have about 50% fewer listings right now, inventory is at historic lows, and we had 39% more multiple offers last month compared to a year ago. The big news is sales volume has finally caught up to last year after being down due to a slump at the beginning of the pandemic. What I mean is as a result of the past four months of heightened demand we’re finally back to 2019 levels. Well, Sacramento County is still down, but El Dorado and Placer County being up has effectively pushed us back to normal.

WAY TOO MANY VISUALS:

You are welcome to use these in newsletters and social media with proper attribution. Scroll quickly or digest slowly.

SACRAMENTO REGION:

SACRAMENTO COUNTY:

PLACER COUNTY:

EL DORADO COUNTY:

Other visuals: I have lots of other graphs. Check out my social media in coming days and weeks. I am posting daily stuff.

Thanks for being here.

Political comments: I will not approve any comments that are exclusively political because this is a blog about housing. We can touch on politics as it affects real estate, but overt political rants are best for other blogs.

Questions: Do you think we’ll go on lockdown? What are you seeing out there right now?

If you liked this post, subscribe by email (or RSS). Thanks for being here.