sacramento regional appraisal blog

The story of Zillow’s last house in Sacramento

October 17, 2022 By Ryan Lundquist 14 Comments

Goodbye. Zillow sold their last house in Sacramento. After announcing failure as an iBuyer in late 2021, they recently got rid of their final unit. And the cherry on top is they sold this property to Opendoor.

UPCOMING (PUBLIC) SPEAKING GIGS:
10/18/22 Orangevale MLS Meeting Q&A (9am)
10/20/22 How to Think Like an Appraiser (9am-12pm) (Sign up here)
11/15/22 Sacramento Bee Q&A at 12pm (RSVP here)
11/17/22 DEI & Fair Housing Lunch & Learn (details TBD)
1/18/23 WCR Market Update in Cameron Park (details TBD)

HOUSING GENIUS OR FLOP?

It’s easy to look at Zillow like some sort of real estate savant because their exit was announced months before the hot housing market began to turn. But let’s not revise history because Zillow’s failure had nothing to do with market conditions. This was about a lack of effective strategy. Zillow basically went on a purchasing rampage in a handful of markets across the country, and they lost a ton of money. I wrote about their failure here. In short, with hindsight their timing looks really good, but this was a flop instead of foresight in terms of actually making money.

Anyway, I announced the news of their last sale about two weeks ago on my socials, and it created a ton of conversation.

ZILLOW’S LAST HOME IN SACRAMENTO

In September 2022 Zillow sold their last unit to Opendoor. This home in the Natomas area of Sacramento was originally purchased for $700,500 in November 2021, and it was listed for sale in February 2022 for $694,100. There were multiple price reductions until the listing was eventually cancelled on 9/13/2022 at $624,900. There were two pending statuses, but for whatever reason it didn’t close.

DID ZILLOW GIVE OPENDOOR A DISCOUNT?

You be the judge. The sale to Opendoor at $354,500 was far lower than literally any competitive sale on MLS (blue dots), and much lower than any model match sale (red dots). A model match sale hasn’t sold this low since before 2016. When looking at this visual, do you think there was a reduced price?

ZILLOW SOLD LOWER THAN ANYTHING IN THE NEIGHBORHOOD

Here’s a different way to look at it. The orange dots represent every MLS sale in the neighborhood, and the off-market price to Opendoor was lower than literally all neighborhood sales (of any size). Also, Opendoor typically gets about a 5% credit from the seller, and if that’s what happened here, Opendoor got an even better deal.

THE VERDICT: YES, THEY SOLD AT A DISCOUNT

Unless there was something that went seriously wrong with the condition of this property within the two-week period of this home being pulled from the market and sold to Opendoor, it’s pretty obvious this unit sold at a discount. Why did Zillow sell it so low when buyers would have been lining up at that price? Will Zillow get a better tax write-off for their loss? Or does this have anything to do with Zillow and Opendoor recently establishing a multi-year partnership? Does this benefit Opendoor’s profit on paper so they can show higher numbers from buying low and selling high?

NOTE: I’ll follow up when this house does sell again.

iBUYERS RIGHT NOW

I’ve noticed Opendoor has seemed to slow their acquisitions lately in response to the market changing so quickly. This makes sense as a way to pause and pivot in a different market. Locally, Opendoor is the largest iBuyer as they have about 280 units, while OfferPad only has 11, and Redfin owns 24. Opendoor normally has about 330 homes in the region, but now it’s closer to 280, which is why I’m saying they’ve been slowing their acquisitions. Opendoor was struggling in Sacramento when I wrote about them in August, but they’ve seemed to get more of their units into contract in recent months. I’m not sure if it was strategic price reductions or the $3,500 incentive they offered (maybe both). Still, only 25.6% of everything Opendoor has listed for sale is pending, so most of their stuff is sitting instead of selling. Ultimately, if we continue to see prices drop it’ll be key for iBuyers and any flippers to acquire properties for lower amounts to anticipate future declines. I’ve said all along there is room in real estate for multiple models to exist, but no matter what the model, the numbers need to work to make profit. Anyway, iBuyers are still here, and they’re trying to pivot. Will they be successful? Only time will tell.

UPDATE (NEW STATS): I pushed out Redfin iBuyer stats on Twitter yesterday to help show how much lower most of their listings are compared to the acquisition price. This sums up the dynamic out there right now with iBuyers.

Thanks for being here.

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Questions: What stands out to you most above? How does Zillow selling to Opendoor sit with you? I’d love to hear your take.

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

Who is buying in today’s housing market?

October 5, 2022 By Ryan Lundquist 20 Comments

Nobody is buying today. Everyone has left the market. Or wait, I mean, it’s only buyers at the very highest prices who have backed off. No, maybe it’s first-time buyers who are getting crushed. There are lots of ideas floating around, so let’s take a look at some stats. I hope this is helpful, whether you’re local or not.

UPCOMING (PUBLIC) SPEAKING GIGS:
10/07/22 Market update with SAR (9am-10:15am Sign up here)
10/11/22 Folsom MLS Meeting (9:15am)
10/13/22 Market update in Midtown (12-2pm Sign up here)
10/18/22 Orangevale MLS Meeting Q&A (9am)
10/20/22 How to Think Like an Appraiser (9am-12pm) (Sign up here)

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The goal today is to offer a glimpse into current buyers. This isn’t a full picture because we’re still at the beginning of change.

ALL SHIPS RISE AND FALL WITH THE TIDE

We’ve seen a dip in sales volume at every single price point. This means no price range has been immune from the trend. In other words, all ships rise and fall with the changing tide. This is a new visual. Do you dig it?

IT’S NOT JUST A DIP AT THE TOP

Here’s a different way to look at volume with the number of sales instead of percentages. This gives a different view of things, and it’s clear that change isn’t just happening at the top of the market. The housing narrative is often that it’s really the high-end that’s experiencing change, but that’s simply not true when looking at the numbers. So, we often talk about the median price being affected by fewer sales at the top, but let’s not ignore lower-priced sales also. The median price in the Sacramento region in September is $569,000 for reference, and what happens at lower prices can affect price metrics too.

THE SKINNY (FRESH STATS)

Here are a bunch of different stats to try to get a sense of what is happening. Remember, we are living in the midst of change, and we’ll understand more fully what is happening as we have more time and stats.

NOT JUST ONE BUYER

This is a perfect tweet from my friend Erin Stumpf because it shows there isn’t just one buyer out there. It’s easy to fall into the trap of thinking this market only makes sense for one group of people, but that’s not true. The market is never all good or all bad for everyone, so we need to be careful about sweeping statements about entire groups of people. This isn’t me sugarcoating the problem of affordability either, so save your hate mail.

CONCESSIONS, GET IN MY BELLY

The percentage of sales with concessions to buyers are increasing, which is to be expected in this market as sellers are bending toward buyers to help get deals done. We pretty much see sales with concessions throughout all price ranges, but there are clearly more credits happening at lower prices.

A CREDIT IS NOT A SILVER BULLET

The truth is a credit to the buyer doesn’t guarantee you’re going to sell at or above the original price. In other words, giving a credit isn’t a silver bullet to keeping the price higher (even though it likely helps). This visual shows how properties with concessions sold in relation to their original list price. Anything above the 100% line sold above the original list price, while anything below this level sold below. In short, the bulk of sales right now are selling below the original list price in the entire market, and it’s not a shocker to see that happening with homes getting credits too.

WHAT FINANCING ARE BUYERS USING?

Watching the financing buyers are using will be a clue into the market. Over the past few months, we’ve seen slightly more FHA, a dip in conventional, and slightly more cash.

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Thanks for being here.

Questions: What stands out to you today? What sort of buyers are you seeing out there right now? Who is winning and struggling?

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

Changing housing temperature

August 29, 2022 By Ryan Lundquist 26 Comments

The housing market went from steaming to stagnant a few months ago, and now it seems to be slowing down a bit. Now that some time has passed, we’re getting more stats, so let’s crunch some numbers to show what’s happening with sales volume. By the way, I have a free download if you want to make charts like this.

dark brown rustic aged barn wood planks background. There is a white rectangle in the middle of the image with black text that reads, "Changing housing temperature."

UPCOMING (PUBLIC) SPEAKING GIGS:
9/08/22 SAFE CU “Stats & Mimosas” (sold out)
9/15/22 Market update in Midtown (details TBD)
10/07/22 Market update with SAR (Sign up here – On Zoom)

FREE TEMPLATE DOWNLOAD:

If you like the tables below, click here to download an Excel template to make visuals like this for your area. Just plug in the information from your MLS and the template will do the math for you. I included a longer table and a shorter one. Maybe focus on local cities or ZIP codes, or surrounding counties. Make sure you have enough data to be meaningful. I hope this helps.

A NEW MEME:

Sellers, it’s a much different market today…

A meme with a car making a fast right turn. The left turn says "2021 and the right turn says "negotiate." Then above the car it says "2022." The idea is it's a much different market today where sellers have to negotiate.

SLUMPING SALES VOLUME IS THE BIG TREND:

It’s not a shocker that buyers started to back off the market when mortgage rates shot up earlier in the year. And now that we have a few months of sales under our belt, let’s take a look at actual numbers comparing May to August this year with last year. In short, most areas easily saw 20-30% fewer sales, though the trend isn’t the same everywhere. Keep in mind the numbers can be wonky when there aren’t many sales (so take some areas with a grain of salt).

NOTE: Thank you to those who asked for various areas on my social channels last week. I think I got to mostly everything. I can try to get to a few others in the comments, so don’t be afraid to ask.

SACRAMENTO COUNTY:

A table to show sales volume in Sacramento County between May and August 2021 and the same time period this year (listed by cities and CDPs).

A table with Sacramento County volume changes from May to June 2022 (neighborhoods and a few ZIP codes)

PLACER COUNTY:

A table to show Placer County volume this year compared to last year (May to August)

EL DORADO COUNTY:

A table to show El Dorado County volume last year compared to this year (May to August)

YOLO COUNTY:

A table to show Yolo County sales volume between May to August (last year compared to this year)

WE NEED TIME TO SEE THE TREND:

As time goes by it’ll become more apparent how various price ranges and locations are faring in today’s market. But for now, I hope these stats will at least give a small window into demand, and maybe clues about some different price points. Or maybe they’ll prod us to investigate some areas more.

IS THE MARKET STARTING TO LEVEL OFF?

Since June we’ve seen fewer new listings in the Sacramento area, and that seems to be giving a bit of space for buyers and sellers to adjust to change. It’s as if some stats are starting to go slightly more horizontal lately instead of showing the really sharp change we saw from May to June. In other words, a sharp drop isn’t going to show up in the numbers every single month. For instance, the number of pending contracts has been somewhat flat for the past month or so instead of seeing the same steep May to June decline. Granted, we’re still WAY down from last year, but the May to June rate of change didn’t persist in August. Also, price reductions have been somewhat flat over the past few weeks. I mean, half of actives have had a price drop, so clearly, we have an overpriced market. All I’m saying is it looks like we’re starting to see price reduction growth slowing down or leveling off. Ultimately, we need time to see the trend, so let’s keep watching. Keep in mind that not all stats are leveling off. I’m just saying some of them appear to have flattened. And lastly, if rates shoot up in coming weeks, all bets are off because that could change the dynamic…

Let’s keep watching.

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Thanks for being here.

Questions: What stands out to you most? Are you seeing any differences in the market depending on price point or location? I’d love to hear your take.

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

An open letter to sellers about today’s housing market

May 16, 2022 By Ryan Lundquist 29 Comments

Dear Sellers,

How are things? I hope all is well. It’s been such a crazy market, but things are starting to change. So, let’s chat. This is coming from a good place, and it’s based on observations and what I’m hearing from real estate professionals.

A picture of an envelope with a piece of paper sticking out that reads, "An open letter to sellers."

THINGS TO KEEP IN MIND ABOUT TODAY’S MARKET:

1) You’ve lost power: The market is still competitive, but it’s not what it was in February. The truth is buyers have gained more power lately. Most agents I talk to say they are easily getting about half as many offers compared to a few months ago. So, instead of getting eight offers, you might only get a few. And if you’re priced too high, you’ll probably get zero offers.

2) Buyers are growing more sensitive: Mortgage rates skyrocketing means affordability has taken a beating. Seriously, buyers are easily paying $500 or more each month to get a mortgage this year compared to last year at the same time. This means buyers are becoming more sensitive to price, condition, and location. In other words, if they are paying top dollar, they are growing pickier about what they buy.

A meme with Adam Sandler and Bob Barker fighting (from the movie Happy Gilmore). It says, "The price is wrong...." which is from the movie.

3) Don’t aim for unicorns: Be careful of the idea of a unicorn buyer who is going to swoop in, ignore the comps, and pay top dollar in cash for your home. If that happens, great. Keep in mind only about 15% of sales this year have been all cash in the region. This means 85% of buyers are getting a loan.

4) But Zillow says: Don’t get hung up on what Zillow says your house is worth. The only thing that matters is what real buyers are willing to pay. Nobody gets stuck on a low Zestimate, so why get hung up on a high one?

5) Avoid strongarm moves: “Remove the appraisal contingency, pay me an extra $25,000, and give me your firstborn child.” These things still happen in some price ranges (okay, not the child thing), but the market is starting to see just a little bit more sanity lately. I’ve heard quite a few stories of buyers bailing after the seller countered with a strongarm move that might’ve worked a few months back. In short, buyers are picky about getting into contract AND staying in contract.

6) Sales are old and crusty: Sales tell us what the market used to be like probably 30 to 60 days ago when the properties got into contract. In other words, sales are like historic artifacts that tell us what the market used to be like. In contrast, we see the current temperature of the market with what is happening with listings and pendings. This means it’s key to know the sales, AND gauge any temperature change since.

A meme to show the most interesting man in the world saying, "I don't always overprice, but when I do, I expect a Bay Area unicorn buyer."

7) Be ready to negotiate if needed: I am hearing more stories of buyers asking for credits for repairs, concessions, and price reductions. Sometimes sellers feel they’re losing when this happens, but in some situations it’s simply the ticket to selling for top dollar. In short, listen to what buyers are asking for, and help the deal feel good for them too. This isn’t just about you. Don’t be afraid of FHA and VA buyers either.

8) It’s not time to push the price: Look, sellers aren’t entitled to always netting more than recent sales. My advice? Price reasonably and see what the market gives you. There are some situations where you might need to price lower than recent sales too to generate interest. Forget about record-breaking sales or your overpriced neighbor. What is getting into contract right now? That’s the ONLY thing that matters.

9) Tighten up the details: Buyers have become more sensitive about condition, so it can help to address minor cosmetic repairs before you hit the market (if you can). I’ve talked to a number of buyers who feel discouraged about the condition of homes right now for the price, so a good way to stand out is to be sure your property is tight. Buyers notice details, and solving minor issues only helps give them fewer reasons to say NO.

10) Watch for symptoms of softening: Talk to your agent about the temperature and be in tune with signs of softening. As you see stuff like this, let it influence your strategy for pricing and negotiating.

Symptom of a slower market bubble visual

11) Don’t expect to go $100,000 over: A seller got two offers and said, “Let’s hold out for something higher.” I’m not saying to be hasty about accepting offers, but don’t embrace unrealistic expectations. Headlines from the past talked about bidding wars, but right now headlines are starting to say stuff like, “The temperature has changed,” or “It’s still competitive, but it’s not what it was.” On that note, don’t be afraid to reduce the price if needed. You are not giving up value if value wasn’t ever there in the first place.

12) Other: What other advice would you give? Please comment below.

I hope this was helpful.

Sincerely,

Ryan Lundquist
Certified Appraiser / Housing Market Analyst
Sacramento Appraisal Blog

p.s. Thanks for picking up the dog dookie before the appraiser shows up

sacramento regional appraisal blog

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