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appraisal apprasiers – Sacramento Appraisal Blog

Sellers parted ways with some of the stocks they acquired over the past few years. In Sacramento, we actually lost 40% of the pandemic profits since May. Today I want to talk about price trends, and I hope it’s helpful – whether you’re local or not. Move down quickly or digest slowly.

White wood texture background with the title, "To say goodbye to some home ownership."

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11/15/22 Sacramento Bee Q&A at 12pm (RSVP here)
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12/5/22 SAFE Credit Union Market Update on Zoom (Register Here (Free))
1/18/23 WCR Market Update in Cameron Park (details TBD)
1/19/23 Big Market Update at SAR on Zoom (details TBD)
1/23/23 Residential RoundUP (register here (free))

A meme from Dumb and Dumber with Jim Carrey and two actors in the front seat of a truck.  Carrye has his hands over his ears.  The caption reads, "Sellers don't listen to the market."

THE POSTER CHILD FOR CHANGE

The trend is not going to be the same in every location across the country, but we see some markets showing similarities. I suggest you look at many areas, but pay attention to pockets like Sacramento, Boise, and Phoenix that all seem to be the poster child for rapid market change.

40% OF PANDEMIC PRICE GAIN GONE

We’ve seen sharp price declines over the past six months as the median price in the Sacramento region has dropped $75,000 (or 12%) since May. It’s about three times the normal speed for seasonal mitigation. This doesn’t mean that every property is literally 12% less worth, but I have to say the change is significant when looking at neighborhood companies and hearing feedback from real estate agents lately. Sellers, did you hear that?

Alter: The median price has risen $185,000 since the start of the pandemic, and $75,000 of that increase has disappeared in the past six months. Or we can say the median price is still $110,000 higher as of March 2020.

A bar chart from early 2020 to October 2022 to show the median price in the Sacramento region (a big increase and a significant decline recently).

SEE WASTE IN THE NEIGHBORHOOD

It’s easy to fixate on the median price, but when I’m rated in neighborhoods, my trend lines also show a sharp change. Here’s an example with the 95747 zip code in Roseville. As I talked about recently, I definitely check the “decreasing” box in my appraisal reports.

95747 ZIP Code Market Trends in Roseville (a yellow scatter plot to show the recent downward trend line)

THE MARKET IS NOT A PARKED CAR

I heard someone talk about the housing market as if it were a parked car, but I disagree with the analogy because the market has not literally stopped. For example, over the past two months in the region there were 1,800 fewer sales compared to last year, but there were almost 3,400 sales that did take place. I find it easy to fixate on the conspicuous part of the market that is missing, but let’s not forget to notice the part that is happening.

NO PRICE CLASS IS IMMUNE FROM THE NINTH

“My neighborhood is very special.” I know, it really is, and so are you. But all ships rise and fall with the tide. What I mean is that every price range has seen an effect from higher mortgage rates. Keep in mind that volume is also down in every single price range in the region, reinforcing this point. However, the bottom half of the market saw the biggest change in volume, suggesting that buyers who are more sensitive to rate changes are having a tougher time.

A bar graph to show the median price in various counties in Sacramento since May

FLIRTING WITH LAST YEAR’S PRICES

The median price in the Sacramento region is exactly the same as it was at the same time last year. On the one hand, this feels like a major event to write home about, but it’s really not a shock as prices have changed quickly to match a dramatic shift in the monthly mortgage payment. In other words, a sharp change in rates led to a sharp change in the statistics.

A bar graph to show the median price is the same as last year in the Sacramento region

Sac Region Median 11 8 22 2

OPEN DOOR GET BODY CLOSED

This market has not been easy for iBuyers. 76% of Opendoor’s active listings are listed below their acquisition price. This is blatant carnage. Keep in mind that Opendoor usually has a 5% seller credit, but even that is not enough to be profitable in many of these deals.

A chart to compare Opendoor acquisition prices to the current list price among active listings in the Sacramento region (a bar chart)

NO REAL HELP WITH AFFORDABILITY YET

Prices have fallen, but that hasn’t translated into more affordability as rates have continued to rise. Some people are predicting lower rates in 2023, but we will have to wait and see what happens. Almost no one gets their rate predictions right, and I don’t pretend to have a crystal ball.

A DOUBLE WHAMMY FOR VENDORS

The problem with overpricing is that prices fall, so the longer you are in the market, the more you lose. Not only will you have to drop the price because you were overpriced to begin with, but you now have to drop even more because of prices that have dropped since you listed. It’s a double whammy.

A table to show the percentage and number of properties with price reductions currently in the Sacramento region by county

LAST LOST ABOUT 2.5% PER MONTH

For five months running, the median price has fallen by about 2.5% each month, and this image helps show the change. The red line is the pre-pandemic average so we can see what “normally” happens from month to month. For example, from September to October the median price normally decreases by -0.07% (red line), but this year in 2022 the decrease was -2.65% (black line). Remember, this does not mean that every property has literally lost 2.5% in real value. Moreover, not every province showed the same loss by the month.

I cannot stress enough how important it is to look at the neighborhood companies to understand the market. In other words, DO NOT automatically force a 2.5% downward adjustment (big mistake). But don’t take these statistics lightly either. If anything, these numbers should be a cold shower to wake up sellers to get them right. The truth is there is a smaller pool of buyers currently active, so it pays to meet buyers where they are.

A line graph to help show monthly median price change in the Sacramento region.  There is a red line to show what normal looks like and then a black line to show 2022.  In short, the black line has been well below the red line lately.

YEAR OVER YEAR STATISTICS:

Here’s a look at stats compared to last year. Remember, closed sales in October really tell us what the market was like in September when most of these properties went into contract. Look at the hit volume lately. We’re down 40% from last year, which is a big number.

Sac Region Yoy Oct 2022

Sac County Yoy Oct 2022

Placer Yoy Oct 2022

El Dorado Yoy Oct 2022

Yolo Yoy Oct 2022

MONTH TO MONTH:

Looking at consecutive months is also key so we don’t just get stuck or hyper-focused on last year (the past).

Sac Region M To M Oct 2022

Sac County M To M Oct 2022

Placer M To M Oct 2022

OTHER PRICE VISUALS:

Placer Yoy Median

Sacramento Yoy Median 11 8 22

Median Change 11 8 22 2

Weekly Oct 29 As Of 11 8 22

Weekly Avg Oct 29 As Of 11 8 22

MARKET STATE: I’ll have lots of market stats on my social channels this week, so check it out TwitterInstagram, LinkedIn and Facebook.

Thank you for being here.

SHARING POLICY: I welcome you to share some of these images on your social channels or in a newsletter. If it helps, here are 6 ways to share my content (not copy verbatim). Thank you.

Questions: What stands out to you above? What do you see happening with prices now? I would love to hear your opinion.

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