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Jim Walker's Blog

By Jim Walker | Agent in Carmichael, CA
  • Is the talk about a sellers market a ploy to get buyers to overpay?

    Posted Under: Market Conditions in Sacramento County, Property Q&A in Sacramento County  |  May 20, 2012 5:14 PM  |  1,400 views  |  1 comment
    I have seen market frenzy before. 

    There are currently 2781 active listings in El Dorado, Placer and Sacramento counties,
     739 active short sale listings.
    A total of 3520 listings advertised as available.

     I assume about 15% of them are not really available for the following reasons:

    Many are "verbally" accepted, or are actually accepted, yet not entered as pending or ASC in the MLS yet. 
    I estimate the real 3 county inventory at about 3000.
    In the past two months (60 days) there have been 5195 closed sales.
    There are currently 8881 pending, pending bring back up, and active short contingent listings.

    I will use  a formula borrowed from this web site:  Three Pounds of Real Estate 

    http://3poundsofrealestate.com/2009/05/10/what-makes-a-buyers-market-or-a-sellers-market/ 

     

    A buyers market is when there is more than 7 months supply of homes in a given market, a seller’s is when there is less than 6 months supply of homes in a given market and 6 months supply is called a neutral market.

    So how do you determine how many months supply of homes on the market?

    A market is any given set of parameters. Area, Price Range…

    So once you pick an area, a price range

    Then you determine the # Active Listings

    Then add the Sale Pending and the Sold listings for the last 60 days

    Divide that number by 3, then divide the active listings by it.

     

     - May 20. 2012

    Lets look at 3 counties:  Sacramento, El Dorado Placer, all price ranges

    3520 Active Listings

    8881 Listings that have a sale pending, or active short contingent

    5195 listings sold in the last 60 days

    We add the  (pending) and  (sold 60 days back) and get 14,706.

    We divide the 14,706 by 3 = 4692

    Then we divide 3,520 (active listings) by 4692 = 22 day Supply of homes.

    Based on that we have a extreme seller’s market. 


     

    Narrowed to 3 zip codes: The Folsom/ Granite Bay/ El Dorado Hills Month supply of homes

    Actives and short sales: 329

    Pending and short contingent 562

    Sold (60 days back) 380

    We add the  (pending) and  (sold 60 days back) and get 942.

    We divide the 942 by 3 = 314

    Then we divide 329 (active listings) by 314 = 32 day Supply of homes.

    Statistically an extreme sellers market.

    ----

    For the $300,000 to $700,000 price range for all 3 counties:

    We add the  1383 (short contingent + pending) and 962 (sold 60 days back) and get 2,345.

    We divide the 2,345 by 3 = 781

    Then we divide 1194 (active listings) by 781 = 46 day Supply of homes.

    Also a very strong sellers market. 

    ---
    Want a buyers market? over a million snickerdoodles there are 168 listings. 21 sales (60 days) 30 pendings.  168 /17 <=  10 month supply  

    This extreme sellers market has developed very quickly over the springtime of 2012.  One must expect that more inventory will arrive on the market over the next few months to take advantage of the rising prices. "Laws" of real estate economics predict price increases to accompany and follow supply and demand imbalances such as we are  currently seeing.  Traditional market analysis tools such as comparative market analysis of recent sold comps, are counterproductive to buyers and buyers agents because they direct our clients to offer prices that are too low to be accepted. Listing agents that rely on sold comps to determine asking price are deluged with dozens of multiple offers. Even with overbids, there is a chance that underlisting a property may leave some money on the table that might have otherwise flowed to the sellers bottom line. 

      
    I 
    feel that reliance on recent comparable sales and pending contracts for pricing guidance is leading us to an inaccurate current valuation for currently listed properties. So is this talk a ploy? Well if you don't ploy you don't play!  What seller acting in her own rational economic interest will accept a lower offer because it is based on comps when there is a higher offer on her property from someone who thinks comps are just yesterdays news?

    Pricing a listing correctly, or figuring how much to offer has always been a little bit art, a little bit science, some statistical analysis, some psychology, and a little bit of voodo from a  gris gris bag.


  • Just how good a deal are those short sales, anyway?

    Posted Under: Market Conditions in Sacramento, Home Buying in Sacramento, Home Selling in Sacramento  |  January 19, 2012 2:49 PM  |  1,999 views  |  2 comments
    What is with those short sale listings that come on the market listed at unbelievably low prices?

    Please read my statistical analysis below:
    Make sure you have a comfortable chair, this is really long.

    The answer may be: "Those low list prices might just be that: unbelievable."

    I sampled 11,550 residential short sale listings that  were sold, withdrawn or  expired in 2011.
    Database was Metrolist Services, Inc. MLS.

    Criteria: Sold, Expired or Withdrawn between Jan 1st 2011 and Dec 31st 2011
    Placer, El Dorado, and Sacramento Counties.

    Of 4740 Expired and Withdrawn listings the average list price was $192,909 for an average price per square foot of $106.05.

    The average median price was $169,900 for an median price per square foot of $104.61.

    Of 6810 Sold short sales, the average sale price was $219,846 the average price per sold square foot was 112.97. 

    The median sold price was $195,000 for an median sold price per square foot of $113.57.
    There was no difference between median list price and the median sold price. The median list to sale price ratio was 100%. 

    The success ratio for closed short sales to failed short sale listings was 59%.to 41% of the sample. Congratulations to banks, agents, sellers, buyers, HAMP, HAFA, and other participants that have made these tremendous strides. I did this same analysis at the start of 2008. Back then, the success rate in 2007 was 12% successful short sales 88% failures.

    This success failure rate does not take into account all the failed offers that happen during a listing, 
    Dig through this samples listing history pages and you will see thousands of listings that have had a series of changes from active short to "in contract", back to active, back to short contingent, back to active, then back to short contingent again. From a buyer perspective,  (if a buyer were given a true perspective) the short sale failure rate is still well over 50%. 

     What makes the price per square foot comparison interesting is this statistical fact; the sold price per square foot was $9 higher than the median psf for failed short sale listings. 

    The next sample was 19,722 This included all not short sales, including REO sales and traditional. So this sample had a significant population of "distressed property sales'. The average sold price was $221,686 at $121.94 psf The medians were $185,000 and $115.09 psf. Sale price to list price ratio was just under 99%.

    The non short sale expireds and withdrawns for 2011 numbered 7955.  sold listings ratio to failed listings ratio was 71% to 29%

    The median list price of failed non short sale listings was $235,000 and their median psf was $136.78
    The average list price of failed non short sale listings was $316,741. The average psf was $156.95

    What I want you, dear reader, to take away from these stats,  is for you to ask "are short sale listings more likely to fail because they are priced below market", and "are non-short sale listings more likely to fail when they are priced over the market value"

    I know my answer to that question. 

    Recap the most significant stats that led to my question: Median sold price per square foot for short sales and for not short sales were only  $1.52 apart. (about 1.3%) - I will inject some opinion here: I think this minor difference is probably due to the better condition of traditional sales and renovated flips that are in the mix. If adjusted for condition, closing cost concessions and other factors besides price per square foot, but not adjusting for the buyers frustration and patience (sorry no dollar value on your angst, pal)  I would bet, that for buyers, short sales on average are worse values than non-short sales. Maybe we could get a real statistician to crunch those numbers.

    Failed short sales were listed for much less per square foot ($9 or about 7.7% less) and then failed to sell, though one could say they were "priced to sell"

     Failed NOT short sales were priced 18.8% higher than successful NOT short sales.

    Listing failure rates for short listings at 41% of sample were 30% higher than NON-short failed listings at 29%. of sample.

    The higher listing failure rate is only a pale caution for buyers, because a listing can eventually succeed to sell  even if it runs through a handful of buyers.

    The following statement is opinion, not statistical fact.
    For willing, able and ready buyers however, the chance that your seller or your sellers bank will fail to honor your contract as you wrote it due to the short sale contingency is still well over 50%.- even if you agree to the list price. Banks are almost never parties to the short sale listing contract.




     
  • Comparing Fair oaks and Carmichael to Folsom: Statistical analysis

    Posted Under: Market Conditions in Fair Oaks  |  August 28, 2009 10:17 AM  |  1,074 views  |  No comments
    Statistics pulled from Metrolist raw data: Metrolist is not responsible for any math errors made by this blogger. Opinions are those of the blogger, not those of Metrolist or Trulia. 

    Past 90 days (June 1st to today) compared to the 90 days immediately preceding (March 1st through May 31st) No vacant lots or res income properties included. 

    Folsom: Lower,,,, Carmichael : Mixed { higher on median, lower on average.} and Fair Oaks: Higher 

    In the earlier period Carmichael had 122 completed sales, Average sold price was $290,079 The median was $238,000 The costliest house was $960,000 

    In the recent period Carmichael had 130 sales (+6.5%) Average sold was $284,942 (-1.7%) Median was $245,250 (+3%) Top sale was $1,700,000 (+77%) 

    In the earlier period Fair Oaks had 90 completed sales, Average sold price was $262,197 The median was $235,000 The costliest house was $610,000 

    In the recent period Fair Oaks had 103 sales (+11.4%) Average sold was $279,028 (+6.4%) Median was $250,000 (+6.3%) Top sale was $770,000 (+26%) 

    In the earlier period Folsom had 192 completed sales, Average sold price was $376,799 The median was $355,000 The costliest house was $895,000 

    In the recent period Folsom had 189 sales (-1.6%) Average sold was $360,833 (-4.2%) Median was $351,000 (-1.1%) Top sale was $850,000 (-5%) 

    My analysis of the stats above: Fair Oaks had both median and average price increases in the 6% range. The decline in average price seems to cancel out the increase in median price for Carmichael. The Folsom median decline was 1.1%, if extrapolated out to a full year would be at a 4.4% annual rate of decline. Not a huge drop for a single year, but not attractive either when other areas are flat. 

    I see the price chart as relatively flat for the past six months in all 3 areas. For future value growth over the next five to ten years, I would put my money into the older areas of Carmichael and Fair Oaks. 

    Folsom did not decline as deeply during the real estate crash as other parts of Sac county. The median price in Folsom is now 40% and 43% higher than the median sale prices in Fair Oaks and Carmichael, in the earlier period the Folsom premium was 51% and 49% respectively. 

    This suggests a trend that Folsom's dominant pricing power position eroded slightly in the past ninety days. 

    I predict that a few years from now the premium for Folsom over Fair Oaks and Carmichael will be less than 30%. 

    Strictly my opinion: For long term percentage gains; Fair Oaks. Carmichael comes a close second. Folsom will continue to be a great place to live.
 
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