wright report q3-4, 2014

July - December, 2014

www.WrightRealEstate.us (916) 726-8308

Wright Report

Perspectives and Overview of Northern California’s

Residential Real Estate Markets:

Statistics and Trends for the United States, State of California, and Northern California

Counties: including Sacramento, Placer, Yolo, El Dorado & San Joaquin Counties.

July to December, 2014

TTHHEE WWRRIIGGHHTT RREEPPOORRTT



Wright Report

The Wright Report

Prepared by:

This work is licensed under the Creative Commons Attribution-ShareAlike 3.0 Unported

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Prepared By: Joel Wright &

Hayley Cooper

Document Version: Final

Last Updated On: June, 2015



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TABLE OF CONTENTS

TABLE OF CONTENTS ....................................................................................................................... 3

EXECUTIVE SUMMARY:.................................................................................................................... 4

THE EXPERTS WEIGH IN: .................................................................................................................. 5

Sacramento Appraiser: Ryan Lundquist ............................................................................... 5

Real Estate Attorney: Stephen Beede .................................................................................. 7

MARKET UPDATE: ............................................................................................................................ 9

BANKING & LENDING: ................................................................................................................... 14

DISTRESSED PROPERTIES: .............................................................................................................. 15

COUNTY STATISTICS: ..................................................................................................................... 16

Sacramento County ............................................................................................................ 16

Placer County ...................................................................................................................... 17

El Dorado County ................................................................................................................ 18

Yolo County ......................................................................................................................... 19

San Joaquin County ............................................................................................................ 21

HISTORICAL PRICE GRAPH: ............................................................................................................ 23

RESOURCES: ................................................................................................................................... 24



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EXECUTIVE SUMMARY:

Uncertainty! An emotion, definitely present in residential real estate

today. While it has not yet devolved into frustration, over the last half

of 2014 the National and California residential real estate markets

seem to be full of it.

At the national level the economic and job growth numbers look very

promising. They are the strongest since the end of the “Great

Recession” in 2009, yet they are not reflected in the housing market

with increasing prices.

From June to December 2014 the Median Sold Price for resale homes

in the U.S. declined 6% from $222,000 to $208,200. In California

they declined 1.1% during the same period to $452,570, and in

Sacramento Median sold price dropped .7%.

So as our national, state, and local economies are moving past the

Great Recession, people seem to have taken their mind off of real

estate.

Perhaps buyers feel the market is too overheated, or they are just

enjoying a semblance of economic normality before they get back to

sorting out their housing situation. If it is fears of an overheated

Residential Real Estate Markets, then the fears do not seem to be

strongly supported. While 38% of 157 markets across the country

(tracked by National Association of Realtors) are higher than they were

at their peak, (including the Bay Area and other areas with strong job

growth), 61% of metro areas show an average recapture of price of

48%, or half way up from its most recent low to the previous high.

It should be mentioned that with interest rate so low that the

mortgage payment for homes in those metros with historic highs is still

much more affordable than before the downturn.

With rate hikes being inevitable (and coming soon), the economy

mending, positive job growth, new construction increasing, commercial

real estate revitalized, it will be interesting to see what 2015 brings.



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THE EXPERTS WEIGH IN:

Sacramento Appraiser: Ryan Lundquist

Mild appreciation during the first half and flat for the second half

In 2014 the housing market saw mild appreciation, but any gains were found in the first

two quarters rather than the second half of the year. Overall the last two quarters of

2014 can be characterized as flat.

The graph above shows an increase in value at the beginning of the year, but then the

market was basically flat for more than half the year. Moreover, the market experienced

a normal seasonal lull during the Fall months. The median price increased by 6% from

December 2013 to December 2014, the average price per sq ft increased by 3.5%, and

the average sales price increased by 4.5%. When considering all these metrics, it

equates to values in most neighborhoods having a modest increase anywhere from 2-

4% over the year.

One of the big reasons the market felt flat for the second half of the year was increasing

inventory and less cash investors. All year long housing inventory was hovering between

2 to 2.5 months of supply, whereas in early 2013 there was only a one-month supply of

homes for sale.



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Having a more reasonable level of inventory helped normalize the market to a certain

extent. In fact, one of the struggles during the latter half of the year was sellers being

realistic about pricing their homes. Sellers seemed to lag behind the market, meaning

the market cooled off, but sellers were still pricing as if it was the most aggressive

season of 2013. This led to many months of price reductions, which also kept the

median price flat for six months straight before taking a dip during the Fall. Additionally,

there were actually 38% fewer cash purchases this year in Sacramento County. Having a

substantially lower level of cash sales in 2014 began to give us a picture of what demand

really looks like in the Sacramento market.



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Lastly, it is important to be aware of the current context of the market. The median

price in Sacramento County currently resembles the median price from Q1 2004 and Q1

2008. Overall the median price is still roughly 33% lower than it used to be at the peak

of the market in 2005.

Ryan Lundquist is a Certified Real Estate Appraiser in the Greater Sacramento

Area. He also specializes in reducing property taxes. Check out his great Blog at

www.SacramentoAppraisalBlog.com or contact directly at (916) 595-3735.

Real Estate Attorney: Stephen Beede

2015 has started out with more questions than answers. The real estate market

remains relatively flat since the supply of homes for sale caught up with the supply of

buyers. The Fed is still talking about an interest rate increase but so far has held

off. Perhaps, like me, they feel this recovery is still too unsettled to absorb a rate

increase.

Perhaps the only possible good news has been the announcement in December that the

Debt Forgiveness Act has been extended once again although only for 2014. Every

upside down owner trying to figure a direction wants to know whether it will be back for

2015. But there is no clarity. It's being talked about in Congress and it's in President

Obama's Budget proposals but no-one knows if and when it will get acted upon.

Another December passage only impacts those who rolled the dice and short-sold or

had a foreclosure. Significantly, most people (and agents) forget that the Debt Relief

Act is only one of 5 different ways of avoiding this tax.

One thing however does seem clear: the chances of getting a loan modification are

nearing zero even for those with the greatest hardships. Why? It's simple, rising prices

have made it more attractive for lenders to force a short sale or foreclosure so they can

clear bad loans off their books. So Loan Mods are being rejected using the Net Present

Value (NPV) test where the lender or investor simply determines that they'd be better

off getting whatever they can now. Need proof? Since last June, foreclosure starts have

skyrocketed while mods have disappeared. For most upside down owners, short sale is



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the only solution. But maybe not for high asset debtors unwilling to disclose their

financials.

On the positive side, the recovering market has spurred new housing development as

well as commercial building, particularly projects connected to our aging population

such as assisted living facilities. We're working on several of these right now. Further

our law practice is booming with Probates, Trust Administration, and lots of litigation

related to increased prices finally creating equity in properties and battles over whether

they should be sold now or held for more growth. And of course, there's always title,

easement, and other issues to be resolved.

As we get further into this year, look to the Wright Report to give you a summary of our

evolving real estate universe.

Stephen Beede is a prominent local attorney with very wide experience with

residential real estate that he brings to his law practice. He can be reached

online at www.bpelaw.com and [email protected]. He also keeps an

excellent blog at www.stevebeede.com; contact him directly at (916) 966-2260.

If you or your clients have any immediate legal needs, please consider us to gain

direction and, when needed, legal representation. Our flat fee, one hour

attorney consultation is usually the best way to start. To schedule an

appointment, please call our office at 916-966-2260 or you can e-mail me at

[email protected].



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MARKET UPDATE:

National & State

The median price across the United States hit $208,200 in December

2014, rising 5.3% year over year. Conventional homes averaged 66

days on the market. Nationally, December closed with 4.4 months of

inventory, while Sacramento only had 2.2 months of inventory at the

close of the year.

In December, the median sold price in California hit $452,570 down

1.1% from June ($457,630.) That median price is 85% higher than

the 2009 bottom of $245,230. The CA market is still 24% below the

2006 high of $594,530.

Affordability, the percent of people in California who can afford to

purchase the median priced home with 20% down payment, is down 1

point to 31% from Q4-13 to Q4-14. Sacramento’s affordability is at

49% in Q4-14: 2 points lower than in Q4-13 and up 1 point (48%)



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from Q2-14. This increase in affordability is due to lowering interest

rates at the end of 2014.

The 2014 National Home Ownership Rate decreased to 64% in Q4 of

2014. The demographic seemingly most affected are individuals age

35 to 44.

Sales of SFR (Single Family Residence) Resale Homes across the

nation reached 4.34 million units in 2014, a 3% decline from 2013’s

4.48 million.

SFR New Home sales reached 435,000, just 1.4% higher than the

429,000 units sold in 2013, but nowhere close to the historical

average of more than a million units built and sold annually. The

median New Home sales price for 2014 was $283,600, up 5.5% from

the 2013 median sales price of $268,900.

Sacramento County

In Sacramento County the average price rose 1% between June to

December to end the year at $294,094. From December 2013 it rose a

total of 4.8%.

Here are the Average Sold Prices for the four counties making up the

Sacramento Metro Area:

COUNTY Average Sold Price %

Change

Dec-13 Dec-14

Sacramento $280,714 $294,094 4.77%

Placer $403,136 $429,140 6.45%

El Dorado $381,985 $415,284 8.72%

Yolo $334,559 $361,556 8.07%

Since it reached its lowest point in January 2012 with a median price

of $160,000, Sacramento County’s median sold price has risen 67.5%;

a full $108,000 to $268,000 in December 2014.



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December 2014 saw 12.7% of sales as distressed sales (Short Sales or

REO); down from 18.6% in December 2013. Short sales made up

6.7% of sold properties in December, and REOs (foreclosed bank

owned sales) made up 6% of sales.

In California, year over year, bank owned property inventory

decreased to 38,788 from 41,559. This 7% decline means that

distressed sales make up an ever smaller section of inventory

In Sacramento County the inventory of homes available for sale

increase from December 2013 with 2509 SFR units available for sale,

to December 2014 with 2799 units on the market; an increase of

11.6%. There were 2,210 listings available for sale at the end of Q4-

14 on January 1, 2015.

December 2014 also had approximately 2.2 months of unsold

inventory; which is generally considered very low.

Sales of SFR homes in December 2014 saw some 54% selling for a

price below the listed price, with the median price drop being $7,500.

In December 2013 47% of homes sold for below asking price. So

while the number of homes that received price reductions off of the

listed MLS price went up, so did the price through the year.



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MACRO ECONOMIC CONDITIONS:

Residential real estate nationally has increased in price since the low in

2012 and sales numbers are stable, though not as high as right before

the recession.

The GDP is estimated to have increased 5% in Q3 and 2.2% in Q4.

Consumer confidence is growing and consumer spending also rose

4.3%. Both the increase in GDP and an increase in consumer

spending help contribute to a general increase in market confidence.

Beginning in 2014 new air regulations affecting coal burning power

plants began New Year’s Day. These and other regulations to come in

the first half of 2015 may affect consumer electricity bills in the year to

come. Higher electricity bills will help to undermine at the roots of

household disposable income.

The US unemployment rate was 5.6% in December, over a 1 point

decrease from 6.7% in December 2013. In California the

unemployment rate was 7.1% in December. California showed an

increase of 320,300 jobs for 2014, which came to an increase of 2.1%



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year over year. Sacramento’s unemployment reached 6.3% in

December 2014.

http://www.zerohedge.com/news/2015-01-21/total-announced-job-cuts-2015-just-topped-32000

Even though unemployment continues to decline the labor force

participation rate (the % of the population actually working) is also in

decline dropping through the first half of 2014 to 62.8% in June and

hovered there through December, with a rate of 62.7% after seasonal

adjustments.

The lack of wage growth through the U.S. is concerning. The Center

for American Progress reports that average wages, adjusted for

inflation, have grown .7% in the last five years. Housing costs, both

rent and mortgages, are outpacing wages.

The Mortgage Forgiveness Debt Relief act was extended for some

participants at the end of 2014 is again hotly disputed by Congress

and if it is not extended will have serious tax consequences for those

needing to short sale this year.



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BANKING & LENDING:

In 2014 the average FICO score for FHA mortgages was 684. In 2013

the average score for the same loans were 11 points higher at 695.

For conventional mortgages, there is less change. In 2013, the

average credit score for borrowers was 759, and this year the average

dropped down 4 points to an average of 755.

QM (Qualified Mortgage) requirements went into effect in 2014. Part

of these requirements is a debt-to-income ratio limit of 43%: student

debt included. These requirements are restricting the type and

improving the quality of loans banks are doing, which affects the

number of borrowers that can qualify.

Interest rates declined to 3.86% in December 2014 from 4.46% 1 year

earlier. This is just a ½ point higher than the all time low of 3.35% we

saw in November and December of 2012.

Freddie Mac is predicting to raise rates to 5% by late 2015. When the

FED Funds rate increases, we will see a reciprocal rise in mortgage

rates.

There is nothing unusual about talk of shifting interest rates. It is no

argument that interest rates have been historically low for over the



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last 5 years, and it is possible that hesitation on the part of the Federal

Reserve Bank to raise interest rates is due to the implications an

increase will have on U.S. public debt and the motivation cheap loans

bring for business expansion.

DISTRESSED PROPERTIES:

Inventories of Short Sales and REOs (foreclosures) continue to decline

throughout the Sacramento Region. In December 2014 only 11% of

SFR properties for sale were distressed. That is lower than the 15% of

inventory in December 2013.

Sales of distressed properties have dropped dramatically over the past

year as 12.7% of homes sold in December 2014 were distressed

18.6% of all homes sold in December 2013 were distressed.

SELLER TYPE Average Sold Price by County (December 2014)

Placer Sacramento El Dorado Yolo

Conventional $433,197 $304,354 $441,526 $373,041

Foreclosure $407,342 $207,927 $228,100 $195,700

Short Sale $328,733 $240,676 $340,858 $332,167

New Foreclosure Filings: California NOD (Notice of Default) filings

fell 14% and NOT (Notice of Trustee Sale) filings fell 27% from

December 2013 to December 2014. The number of properties that

went back to the bank decreased 21% during the same period to

1,900 from 1,510 in December 2013.

Existing Inventory: Pre-foreclosure inventory (NOD - Notice of

Default) in California was down 17% to 31,847 (Dec 2014) from

38,458 (Dec 2013). NOT (Notice of Trustee Sale) inventory is down

another 20% for the same period to 15,480 units, and the number of

bank owned inventory (REOs) is down 7% to 38,788 in December from

41,559 units in December 2013.



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COUNTY STATISTICS:

Sacramento County

Q4-2014 ended with 2210 listings on January 1, 2015, down 7.5%

from the 2055 listings 1 year earlier - January 1, 2014. REO (Real

Estate Owned- foreclosed properties) inventory dropped slightly to 147

listings and Active Short Sale listings were down 25% over the same

period. Conventional sales inventory was up 12% to 1,917.

Pending: Pending sales are down 11% annually (Jan. 1, 2014 to Jan.

1, 2015.) Pending foreclosures are up 35% to 139 from 103 for the

same period and Pending Short Sales are down 28%. Pending

conventional sales are up 7.4% to 1,091 homes.

AVERAGE SOLD PRICE by SELLER

TYPE

# Sold December

2014

# Sold December

2013 Yr/Yr % Change

Average Sold Price Dec. 2014


Yr/Yr %

Change

Total Sold 1280 1284 -0.3% $294,094 $280,714 4.8%

REO 86 92 -6.5% $207,927 $221,998 -6.3%

Conventional 1118 1046 6.9% $304,354 $291,956 4.2%

Short Sale 76 146 -47.9% $240,676 $237,175 1.5%



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Sold: Sales numbers for SFR (Single Family Residence) for December

2014 were 1,280 units sold in Sacramento County. Foreclosures

accounted for 6.7% of properties sold, and Short Sales accounted for

6% of sales. Conventional sales accounted for the rest, 87.3% of

sales. Average Sold Price increased 4.8% from $280,714 in December

2013 to $294,094 in December 2014. The biggest shift was in the

number of Short Sales sold, which dropped 48% from December 2013

(146) to December 2014 (76).

Placer County

Placer County ended Q4-2014 with 840 listings on January 1, 2015, up

19% from the 709 listings 1 year earlier - January 1, 2014. REO (Real

Estate Owned- foreclosed properties) inventory declined slightly to 28

listings (from 32) and Active Short Sale listings were down 40% to 25

for sale over the same period. Conventional sales inventory rose 25%

also from January to January.

Pending: Pending sales are up 3% annually (Jan. 1, 2014 to Jan. 1,

2015.) Pending foreclosures are down 3.7% to 27 from 26 for the



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conventional sales are up 29% to 370 homes.


2014 were 469 units sold in the County. Foreclosures accounted for

2.8% of properties sold, and Short Sales accounted for 3.2% of sales.

Conventional sales accounted for the rest, 94% of sales. Average Sold

Price increased 6.5% from $403,136 in December 2013 to $429,140 in

December 2014. The biggest shift was in the number of Short Sales

sold, which dropped 50% from December 2013 (30) to December

2014 (15).


TYPE

# Sold December

2014

# Sold December

2013 Yr/Yr % Change



Yr/Yr % Change

Total Sold 469 386 21.5% $429,140 $403,136 6.5%

REO 13 14 -7.1% $407,342 $299,494 36.0%

Conventional 441 342 28.9% $433,197 $407,912 6.2%

Short Sale 15 30 -50.0% $328,733 $397,059 -17.2%

El Dorado County

El Dorado County ended Q4-2014 with 530 listings on January 1,

2015, up 3.3% from the 513 listings 1 year earlier - January 1, 2014.

REO (Real Estate Owned- foreclosed properties) inventory declined

slightly to 32 listings (from 33) and Active Short Sale listings were

down 38% to 28 for sale over the same period. Conventional sales

inventory rose just 5% from January to January.

Pending: Pending sales are down 15.5% annually (Jan. 1, 2014 to

Jan. 1, 2015.) Pending foreclosures are the same at 17 for the same

period and Pending Short Sales are down 52%. Pending conventional

sales are down 4% to 154 homes.





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Conventional sales accounted for the rest, 93.9% of sales. Average

Sold Price increased 8.7% from $381,985 in December 2013 to

$415,284 in December 2014. The biggest shift was in the number of

Short Sales sold, which dropped 46% from December 2013 (30) to

December 2014 (15).


TYPE

# Sold December

2014

# Sold December

2013 Yr/Yr % Change



Yr/Yr % Change

Total Sold 180 201 -10.4% $415,284 $381,985 8.7%

REO 16 13 23.1% $228,100 $325,188 -29.9%

Conventional 151 164 -7.9% $441,526 $384,687 14.8%

Short Sale 13 24 -45.8% $340,858 $394,285 -13.6%

Yolo County

Yolo County ended Q4-2014 with 182 listings on January 1, 2015,

down 6% from the 193 listings 1 year earlier - January 1, 2014. REO

(Real Estate Owned- foreclosed properties) inventory increased slightly

to 15 listings (from 14) and Active Short Sale listings were down 38%

to 9 for sale over the same period. Conventional sales inventory

dropped 2.5% from January to January.


1, 2015.) Pending foreclosures are down 30% to 7 from 10 for the


conventional sales are down 4% to 99 homes.



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Sold Price increased 8% from $334,559 in December 2013 to



December 2014 (15).


TYPE

# Sold December

2014

# Sold December

2013 Yr/Yr % Change



Yr/Yr % Change

Total Sold 114 118 -3.4% $361,556 $334,559 8.1%

REO 6 8 -25.0% $195,700 $234,404 -16.5%

Conventional 102 96 6.3% $373,041 $351,262 6.2%

Short Sale 6 14 -57.1% $332,167 $277,250 19.8%



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San Joaquin County

San Joaquin County ended Q4-2014 with 1,173 listings on January 1,

2015, up 40% from the 838 listings 1 year earlier - January 1, 2014.

REO (Real Estate Owned- foreclosed properties) inventory however,

decreased to 62 listings (from 82) and Active Short Sale listings were

down just 9% to 76 for sale over the same period. Conventional sales

inventory increased dramatically, 50%, from January to January.


1, 2015.) Pending foreclosures are down 24% to 68 from 52 for the


conventional sales are up 2.6% to 504 homes.


TYPE

# Sold December

2014

# Sold December

2013 Yr/Yr % Change



Yr/Yr %

Change

Total Sold 505 560 -9.8% $285,337 $262,437 8.7%

REO 35 36 -2.8% $192,608 $180,880 6.5%

Conventional 438 434 0.9% $297,788 $276,920 7.5%

Short Sale 32 90 -64.4% $216,334 $225,219 -3.9%



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7% of properties sold, and Short Sales accounted for 6.3% of sales.


Sold Price increased 8.7% from $262,437 in December 2013 to



December 2014 (15).



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HISTORICAL PRICE GRAPH:



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RESOURCES:

ABREVIATIONS

CAR = California Association of Realtors

HAFA = Home Affordable Foreclosure Alternative

HAMP = Home Affordable Mortgage Program

MLS = Multiple Listing Service

NAR = National Association of Realtors

NOD = Notice of Default

NOT = Notice of Trustee Sale

REO = Real Estate Owned by a bank, or foreclosure

SAR = Sacramento Association of Realtors

WRE = Wright Real Estate

ADDITIONAL RESOURCES

MetrolistMLS.com - to search for properties. www.metrolistmls.com

NorthState Building Industry Association (BIA) www.northstatebia.org

Rental Housing Association (RHA) www.rha.org

Sacramento Association of Realtors (SAR) www.sacrealtor.org



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Serving Sacramento since 2000.

Check out our BLOG and additional STATISTICS on the web at:

www.WrightRealEstate.US

For FREE Information and Consulting Services contact us:

Office: 916.726.8308 [email protected]