wright report: residential market statistics

January - June, 2014

www.WrightRealEstate.us (916) 726-8308

Wright Report

Perspectives and Overview of Northern California’s

Residential Real Estate Market:

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

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

January to June, 2014

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The Wright Report

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Prepared By: Joel Wright

Document Version: Final

Last Updated On: August, 2014



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TABLE OF CONTENTS

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

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

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

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

MARKET UPDATE: ............................................................................................................................ 8

MACRO ECONOMIC CONDITIONS: ................................................................................................ 12

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

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

COUNTY STATISTICS: ..................................................................................................................... 17

Sacramento County ..................................................................................................... 17

Placer County .............................................................................................................. 18

El Dorado County ......................................................................................................... 19

Yolo County ................................................................................................................. 20

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

HISTORICAL PRICE GRAPHS: .......................................................................................................... 23

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



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EXECUTIVE SUMMARY:

A Normal Market? Since 2001 residential real estate in the

Sacramento Metro Area has been anything but normal. We have

experienced (in the following order) artificially inflated markets,

collapse of demand, price collapse, a healthy bounce along an artificial

bottom, a rebounding price boom as strong as the high point in the

previous artificially inflated market, and then in the last half of 2013 a

flat, unstable market. Now in 2014 we are seeing something a little

different… something slower… something not so frenetic… something

perhaps normal.

2014 started with a bang with Obamacare and its surrounding

insecurity as millions of Americans scurried to sign up after being

bounced by their previous health care providers. Perhaps this

redirection of energy caused the break from business as usual that

generated the GDP’s Q1-14 decline of -2.1%.

At the same time new Qualified Mortgage laws began to take effect.

These nationally instituted guidelines for screening loan applicants

have the added benefit of protecting the lending banks from possibly

having to buy back bad loans from the GSEs (Fannie & Freddie) if the

borrower defaults. This mostly affected smaller banks that gave more

latitude in their lending requirements to qualified borrowers who don’t

fit into conventional guidelines. The result? Loans are harder to

obtain for buyers and small banks have less flexibility to lend.

The U.S. economy is making slow progress and residential markets are

beginning to slow moving into the summer months. No longer are

large hedge funds buying properties to rent out, and large banks are

still reeling from losses in recent court battles and hesitant to mess

with foreclosures. So Wall Street money and distressed sales are

moving away from real estate, which means more stability.

Overall it is beginning to look and feel like a more normal real estate

market. Ironically, normal numbers do not feel normal when we have

become accustomed to bidding wars and distressed sales.



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THE EXPERTS WEIGH IN:

Sacramento Appraiser: Ryan Lundquist

What does it mean to be a normal real estate market? That is what the Sacramento real

estate market is trying to figure out. There has been a normal season uptick during the

first two quarters of 2014, but the market this year was nothing like we saw in 2013.

Inventory is higher, interest rates are higher, there are less cash investors, and the rate

of appreciation has been far less aggressive.

After a small seasonal uptick these past two quarters, the market now feels as if it is

cooling since some properties are being priced at similar levels to the most recent sales



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(or slightly lower in some areas). The market is competitive because inventory is still

relatively low, but at the same time it is very price sensitive. Buyers are not offering on

listings that are priced too high, and they are not willing to pay top dollar for outdated

homes either. In a hot market buyers tend to look past some negatives when inventory

is really tight, but that’s becoming less common now.

Cash sales are down 13% county-wide compared to where they were one year ago

(down 16% from their peak). There has been a dramatic decrease of cash in the

Sacramento market, and it has really made the rest of the market adjust or “normalize”

so to speak. What does it look like to be a market that is not driven by cash investors

from outside of Sacramento? That’s what the housing market is trying to figure out.



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The keys drivers for the real estate boom in 2012 and 2013 were cash investors,

historically low interest rates, and incredibly low inventory. Now the “layers” of the

market have shifted though where inventory is increasing, interest rates are no longer in

the 3s, and cash investors have sincerely stepped back their involvement. This means

we have a real estate market that is much more sensitive to the health and strength of

the local economy instead of being driven by rates and out-of-town investors. Key

factors to watch over the next two quarters are inventory, sales volume, and interest

rates.

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.



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MARKET UPDATE:

The median price across the United States increased dramatically in

the first half of 2014 ending the year in December 2013 at $197,700

and rising 12.8% to $223,000 by June 2014. In CA median sold price

hit $457,630 in June, up 4.5% from December and up 6.8% from

June, 2013. That median price is 87% higher than the 2009 bottom of

$245,230. The CA market is still 23% below the 2006 high of

$594,530.

Affordability, the percent of people who can afford to purchase the

median priced home with 20% down payment, is down 6 points to

30% in California from Q2-13 to Q2-14. Sacramento’s affordability is

down to 48% in Q2-14: 8 points lower than in Q2-13.

In Sacramento County, the median price rose 8% from December to

June to end the quarter at $270,000. That is an increase of 9.8%

from the year before in June. The average sold price for Sacramento

County for June 2014 rose to $293,884, up 7.24% from June 2013.



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COUNTY Average Sold Price %

Change

13-Jun 14-Jun

Sacramento $274,051 $293,884 7.24%

Placer $404,911 $420,892 3.95%

El Dorado $390,080 $420,176 7.72%

Yolo $343,567 $427,921 24.55%

Since the market turned downward in September 2005 the median

price for single family homes (SFR) declined 59%, with the lowest

point reaching $160,000 in January 2012. Since that point the market

has risen 69%, a full $100,000, through June 2014.

In June 2014 13% of sales were distressed sales (Short Sales or REO);

down from 18.6% in December 2013. Short sales made up 7.1% of

sold properties in June, and REOs (foreclosed bank owned sales) made

up 5.9% of sales.

The inventory of homes available for sale increase substantially from

June 2013 with 1,553 SFR units available for sale to June 2014 with

2,752 units on the market, an increase of 77%. June 2014 also had

approximately 1.9 months of unsold inventory.

COUNTY Inventory for Sale %

Change

June-13 June-14

Sacramento 1,553 2,752 77%

Placer 671 1,284 91%

El Dorado 548 791 44%

Yolo 164 256 56%



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In June 2014 homes sold for 1.4% below the original asking price,

reflecting seller’s desire to test market prices. In June 2013 homes

sold for 3% above the original asking price. This is mostly due

primarily to large numbers of Short Sales priced unusually low and the

sales price being raised by the short selling bank during the sale.

In June 2014 REOs sold for an average of 1.5% below original list

price, and conventional sales sold on average 1.7% lower. Short Sales

sold for 3% higher than the original listing price.

Inventory continues to remain low with just under 2 months of

inventory available for sale and just over 3,000 listings available for

sale at the end of the second quarter on July 1, 2014. While 3,000

homes for sale, 2 months inventory, is generally considered very low it

is a great deal more than has been available since the market

bottomed in January 2012.

Sales of SFR resale homes across the nation reached 4.48 million units

in 2013, and as of June 2014 is estimated to be slightly lower at 4.43

million units sold.

SFR (Single Family Residence) New Home sales is expected to reach

412,000, slightly less than the 428,000 units sold in 2013, but



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nowhere close to historically average of more than a million units built

and sold annually. The median New Home sales price for June 2014

was $280,000 up just 1.6% from December 2013 ($275,500).

http://economistsoutlook.blogs.realtor.org/2014/07/25/new-home-sales-in-june/

A concern across the nation among builders is the lack of inventory,

aka. buildable lots. The time to get lots ready and costs for

entitlements continues to increase costs and reduce annual homes

sales, at least in CA which will be reflected in higher prices for the

consumer.



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MACRO ECONOMIC CONDITIONS:

While residential real estate nationally has increased in price and with

moderate sales numbers and seems to be approaching more normal

market status, the U.S. economy appears to be lagging behind.

A growing economic concern for the US is GDP growth. Q1-14 started

the year close with a GDP that was revised down to -2.1% for the first

three months. Q2-14 rebounded to 4%, but that is still just 2%

growth for the first six months of the year.

Employment is growing consistently with over 200,000 new jobs

monthly through the first 6 months of the year. This would be more

substantial if there were not 150,000 new people entering the work

force monthly.

In addition to slow job growth is the lack of new good paying jobs and

with it wage stagnation. This is not a problem when inflation remains

at or near zero, but when inflation returns it will be with a vengeance.

Much of this slow job growth is affecting the millennial generation

(aged 25 – 34) of whom 23% are living with family, running into

student loan debt, and postponing new family creation. The effect of

this will be felt in the residential market for some years to come.

The income gap between the middle class and top 1% does not

concern me as much as the lack of viable job growth through the U.S.

Washington continues to enact laws resulting in little economic growth,

the results of which trickle down to small businesses making them

equally unwilling to expand and/or risk a new hire. Business owners

are not expanding, hiring, building, and growing… they are putting

their heads down and working defensively. It seems, in fact, that

reserves from Main Street, rather than being invested locally, are

going to invest in Wall Street and the stock market.

The stock market has grown past historic highs, and as of this writing

has not turned downward. Yet if these companies whose stocks we



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purchase were doing so well it seems like the economy should see

income growth, stronger job numbers, and a general feeling of

increased security. From my layman’s perspective I do not see it

happening.

The unemployment rate continues to decline ending Q2-14 (June) at

6.9% for Sacramento, which is lower than CA (7.4%), but not as good

as the US rate at 6.1%.



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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.

BANKING & LENDING:

There are some shifts in the lending world as the results of previously

implemented programs begin to be seen. The introduction of QM

(Qualified Mortgage) requirements at the beginning of 2014 to the

lending world has slowed the number of loans made by smaller banks,

while not affecting the pipeline of larger banks.

This is likely because smaller banks are more likely to look at a client’s

historical qualifications as a borrower and their relationship with the

bank when providing the loan. Long term relationships and in depth

consumer knowledge is not something QM takes into account. As a

result small banks are more limited in what they can do for their

clients who may not fit perfectly into QM guidelines, which naturally

hurts the bank’s ability to serve and their potential borrower.

Large banks are still dealing with legal issues resulting from the

foreclosure debacle that began in 2007 and 2008 and their

intentionally selling bad loans and securities to their investors. For

this the price tag keeps rising and several multi-Billion dollar

settlements have been reached to date.

Lending guidelines are still quite restrictive and borrowers continue to

complain about not being able to qualify for loans. Congress is still

trying to get rid of the GSEs (Fannie & Freddie) even though they are

now bringing in sizable profits quarterly.

Interest rates have gone down for the first two quarters of 2014 from

4.46% in December 2013 to 4.16% in June 2014. They are the lowest

we have seen since the increase in June 2013. The FED continues to

keep interest rates from rising and they are projected to remain low



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over the next year. The current rate of just over 4% is still historically

low when you compare it to the last 40 years, which from 1974 to

2014 has averaged 8.5%.

DISTRESSED PROPERTIES:

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

throughout the Sacramento Region. In June 2014 only 9% of SFR

properties for sale were distressed. That is lower than the 13% of

inventory in June 2013.

Sales of distressed properties have dropped dramatically over the past

year. In June 2014 13% of all homes sold were distressed: half the

26% sold in June 2013.

Despite reduction in the number of sales the sold price of REOs and

Short Sales continue to remain below the average price for

Conventional sales within the Sacramento region.

Here are some of the price variations between seller types:



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SELLER TYPE Average Sold Price by County (June 2014)

Placer Sacramento

El

Dorado Yolo

Conventional $427,868 $305,080 $435,720 $450,968

Foreclosure $309,889 $199,893 $230,184 $193,490

Short Sale $351,694 $235,323 $425,864 $344,675

This is due in part because REOs typically take place in more

economically distressed neighborhoods where prices are not as

resilient and/or owners may not be as motivated to keep the property.

This causes a disproportionately low average price compared to other

conventionally sold homes.

Another reason for price differentiation is property condition. To

become an REO the owner must stop paying their mortgage for an

extended period of time. When they do they become emotionally

detached and are frequently unwilling to improve or keep up the

home.

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

fell 25% and NOT (Notice of Trustee Sale) filings fell 24% from June

2013 to June 2014. The number of properties that went back to the

bank increased 18.3% during the same period to 1,395 from 1,179 in

June 2013.

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

Default) in California was down 24% to 35,635 (June 2014) from

47,094 (June 2013). NOT (Notice of Trustee Sale) inventory is down

29% for the same period to 17,915 units, and the number of bank

owned inventory (REOs) is down 11% to 39,414 in June from 44,405

units in June 2013.



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COUNTY STATISTICS:

Sacramento County

Q2-2014 ended with 3002 listings on July 1, 2014, up 56% from the

1,928 listings 1 year earlier - July 1, 2013. REO (Real Estate Owned-

foreclosed properties) inventory dropped slightly to 126 listings and

Active Short Sale listings were up 8% over the same period.

Conventional sales inventory was up 62%.

Pending: Pending sales are down 7% from June 2013 to June 2014:

from 2,248 to 2,089 homes. Pending foreclosures are down 31% and

pending short sales are down 58% for the same period. Pending

conventional sales are up 3.8% to 1,832 homes.

Sold: Sales numbers for SFR (Single Family Residence) for June 2014

were 1,456 units sold in Sacramento County. Foreclosures accounted

for 6% of properties sold in June. Short sales accounted for 7% of

sales. Conventional sales accounted for the rest, 87% of sales.



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AVERAGE SOLD PRICE by SELLER

TYPE

# Sold June 2014

# Sold June 2013

Yr/Yr % Change

Average Sold Price June 2014


Yr/Yr % Change

Total Sold 1456 1514 -3.8% $293,884 $272,890 7.7%

REO 86 112 -23.2% $199,893 $216,484 -7.7%

Conventional 1266 1117 13.3% $305,080 $295,168 3.4%

Short Sale 104 285 -63.5% $235,323 $207,741 13.3%

Placer County

Placer County ended Q2-2014 with 1,366 listings on July 1, 2014, up

72% from the 796 listings 1 year earlier - July 1, 2013. REO (Real

Estate Owned- foreclosed properties) inventory rose slightly to 28

listings and Active Short Sale listings were up 89% to 53 for sale over

the same period. Conventional sales inventory was up 49%.


from 775 to 692 homes. Pending foreclosures are down 44% and



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conventional sales are down 3.5% to 643 homes.


were 501 units sold in Sacramento County. Foreclosures accounted

for 3.6% of properties sold in June. Short sales accounted for 3.6% of

sales. Conventional sales accounted for the rest, 92.8% of sales.


TYPE

# Sold June 2014

# Sold June 2013

Yr/Yr % Change



Yr/Yr % Change

Total Sold 501 555 -9.7% $420,892 $404,911 3.9%

REO 18 28 -35.7% $309,889 $288,023 7.6%

Conventional 465 466 -0.2% $427,868 $423,601 1.0%

Short Sale 18 61 -70.5% $351,694 $315,785 11.4%

El Dorado County

El Dorado County ended Q2-2014 ended with 851 listings on July 1,

2014, up 41% from the 605 listings 1 year earlier - July 1, 2013. REO

(Real Estate Owned- foreclosed properties) inventory dropped slightly

to 30 listings and Active Short Sale listings were down 44% to 36 units

over the same period. Conventional sales inventory was up 49%.




conventional sales are up 13% to 328 homes.



for 7.3% of properties sold in June. Short sales accounted for 4.5% of

sales. Conventional sales accounted for the rest, 88.2% of sales.



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TYPE

# Sold June 2014

# Sold June 2013

Yr/Yr % Change



Yr/Yr % Change

Total Sold 245 243 0.8% $420,176 $390,080 7.7%

REO 18 28 -35.7% $230,184 $269,327 -14.5%

Conventional 216 188 14.9% $435,720 $418,273 4.2%

Short Sale 11 27 -59.3% $425,864 $319,000 33.5%

Yolo County

Yolo County ended Q2-2014 ended with 288 listings on July 1, 2014,

up 57% from the 183 listings 1 year earlier - July 1, 2013. REO (Real

Estate Owned- foreclosed properties) inventory dropped to 8 listings

and Active Short Sale listings were up 22% over the same period.

Conventional sales inventory was up 68%.




conventional sales are down 1% to 194 homes.



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TYPE

# Sold June 2014

# Sold June 2013

Yr/Yr % Change



Yr/Yr % Change

Total Sold 144 166 -13.3% $427,921 $343,567 24.6%

REO 10 7 42.9% $193,490 $212,464 -8.9%

Conventional 127 127 0.0% $450,968 $370,988 21.6%

Short Sale 7 32 -78.1% $344,675 $263,421 30.8%

San Joaquin County

San Joaquin County ended Q2-2014 ended with 1,206 listings on July

1, 2014, up 70% from the 708 listings 1 year earlier - July 1, 2013.

REO (Real Estate Owned- foreclosed properties) inventory dropped

slightly to 52 listings and Active Short Sale listings were up 24% to 55

listings over the same period. Conventional sales inventory was up

83%.



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from 1,568 to 1,165 homes. Pending foreclosures are down 24% and


conventional sales are up 13% to 799 homes.






TYPE

# Sold June 2014

# Sold June 2013

Yr/Yr % Change



Yr/Yr % Change

Total Sold 617 583 5.8% $286,447 $234,471 22.2%

REO 44 66 -33.3% $212,846 $196,605 8.3%

Conventional 535 378 41.5% $294,916 $256,931 14.8%

Short Sale 38 139 -72.7% $252,425 $191,373 31.9%



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HISTORICAL PRICE GRAPHS:



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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]

wright report: residential market statistics

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