Yolo County Market Trends for April 2024

My goal is to regularly produce local real estate market trend analysis on a monthly basis, focused on my primary markets of Yolo County and Northern Solano County. I’ll have Solano County analysis next week. I’ll also mix in relevant news and articles of interest.

New California Realtor Forms

The California Association of Realtors (CAR) is revising most of their forms for compliance to the recent settlement regarding buyer broker compensation. These changes are scheduled to be released the week of June 25th.

Because we are required to analyze purchase agreements by USPAP, you should take a look at the upcoming changes. It’s probably good practice going forward to request a copy of the Buyer Representation and Broker Compensation Agreement and Cooperating Broker Compensation Agreement until local markets adjust to the settlement. The forms are being finalized but should be essentially the same.

CAR June 2024 Forms Release Quick Summary

On the good news front, the Fair Appraisal Act Addendum, the form released in 2022 to address bias claims, is being retired with the language moved into a paragraph on another form. I appreciate that CAR is de-emphasizing this language unfavorable to appraisers.

Yolo County Market Trends

The never-ending story of residential is interest rates. Last year at this time I frequently heard predictions of mortgage rates near 5%, like here:

The Mortgage Bankers Association predicts rates will fall to 5.5 percent by the end of 2023 as the economy weakens. The group revised its forecast upward a bit — it previously expected rates to fall to 5.3 percent.

Here’s the reality:

Not quite 5%?

Freddie Mac’s Len Kiefer publishes a chart, below, showing the impact of rising interest rates on affordability.

The vertical scale shows loan amount while the horizontal scale shows interest rates. The blue lines show the payment for a given loan amount and interest rate combination. In 2021, the average loan amount of approximately $400,000 meant a monthly payment of about $1,900 per month. The 2024 average loan amount, approximately $475,000, requires a monthly payment of about $3,100, a 63% increase. Yikes!

We’re still in high interest rate environment with significantly reduced purchasing power from two years ago, reducing demand. At the same time, because so many homeowners locked in rates at 3% or lower, supply continues to sit below pre-pandemic levels.

Yolo County Data

Below is a breakdown of sales in 2024 by community for residential sales on 60 acre or less lots, excluding condominiums, townhouses, and halfplexes. Note that small acreage residential sales are included in this snapshot. All data from Metrolist MLS.

Yolo County 2024 Sales by Community

Most of the sales in Yolo County occur in Woodland, West Sacramento, and Davis, especially in early in the year.

Below shows the growth in mean sale price for Yolo County since 2016. Prices have increased significantly over the past eight years.

Yolo County Monthly Mean Sale Prices since 2016. I see the pandemic in the data, do you?

Let’s see how the market has reacted since the rise in interest rates in early 2022.

Mean Sale Price for all homes sold in Yolo County since 1/1/22

Prices peaked in early 2022 and declined the rest of the year as the market digested the massive change in affordability. Prices recovered somewhat in early 2023 and have tended towards stability since. However, prices are slightly down on a year-over-year basis, discussed below.

Inventory fell to historically low levels during the pandemic and rose in reaction to the interest rate increase in early 2022 but still sit well below pre-pandemic levels at present.

Inventory remains below pre-pandemic levels

Monthly mean days on market are slightly elevated from pre-pandemic numbers and need to be watched.

Monthly mean days on market are slightly above pre-pandemic numbers

Another measure of market strength is the sale price to list price ratio, or how much the sale price of a home changes from the reported list price. A ratio is greater than 100% shows prices getting bid up while under 100% shows sellers forced to discount.

List Price/Sale Price Ratio for Yolo County sales, another measure of market strength

On average, buyers are paying more than the initial list price in Yolo County at present, a sign of market strength.

Yolo County Monthly sales volume is down

Sales volume continues to be suppressed below pre-pandemic levels.

Yolo County Summary

April 2024April 2023Change
Active Listings (May)19914240%
Inventory1.7 Months1.5 Months13%
Sales1099712%
Mean Sale Price$696,669$728,080-4%
Mean PSF$366.79$388.41-5.5%
Sale Price/List Price Ratio100.27%100.54%-0.2%
Mean Days on Market28 Days34 Days-18%
Mean Number of Offers2.12.8-25%

For Yolo County, listings are up, inventory is up slightly, sales volume is up, and prices are down slightly year-over-year. Market heat is down with decreasing sale price/list price ratio and fewer offers on average, but marketing time has decreased. Overall, the Yolo County residential market is softening.

Davis and Woodland

This analysis only includes sales of homes on less than one acre of properties labeled as “single family residences” in Metrolist, the local MLS. The same rules apply to the West Sacramento analysis below.

Sales volume has drifted downwards for both Davis and Woodland.

Declining sales is the clear trend for Davis
Sales volume trending down in Woodland

Number of offers on average for Davis and Woodland are trending up and are above pre-pandemic numbers.

More competition for listings in Davis
Competition for listings is rising in Woodland too

Davis and Woodland Summary

DavisWoodland
Active Listings as of May 93027
Sales Last Month1845
Inventory1.7 Months0.6 Months
Mean Sale Price April 2024$1,124,972$608,554
12 Month Change
Mean Sale Price
Mean PSF

13%
5%

12%
7%
Sale Price/List Price Ratio104.39%99.25%
Mean Days on Market April 20241827

The summary table above captures a point in time. Below are scatter graphs of all homes sold in Davis and Woodland since 1/1/23.

Davis prices evolve around UC Davis. Note the seasonal hump and decline following the university schedule

Davis is showing the typical seasonality we’ve seen prior to the pandemic, tracking the university schedule. Prices in 2024 are slightly ahead of 2023 prices.

Not captured above in the summary is that Woodland prices have been essentially stable in 2024

In contrast, Woodland shows no seasonality with prices increasing into late 2023 but relatively stable since. Notice how the summary table above misses the switch to stability in Woodland.

West Sacramento

Sales volume is down in West Sacramento as shown below.

West Sacramento declining sales volume

Offers received per sale in West Sacramento are below the pandemic era but above 2018 and 2019.

West Sacramento number of offers remains above pre-pandemic levels

West Sacramento Summary

Active Listings as of May 933
Sales Last Month29
Inventory1.1 Months
Mean Sale Price April 2024$628,097
12 Month Change
Mean Sale Price
Mean PSF
1%
-5%
Sale Price/List Price Ratio98.39%
Mean Days on Market April 202419

West Sacramento trends are mixed, showing increases on a sale price basis and declines for most of 2023 with an uptick in early 2024 on a price per square foot basis-see the two graphs below.

West Sacramento Sales on a price per square foot basis. Note the decline through most of 2023
Sale price trendline for West Sacramento sales since 1/1/23. Prices have mostly increased during this time frame

Why do we see declining prices in one graph and rising prices in the other?

This third graph will explain.

Home size over time for West Sacramento sales since 1/1/23

The graph above shows the reported living space for every home sold in West Sacramento since 1/1/23. The red trendline shows that the average size of homes sold increased 1 sf every three days, or about 150 sf from the start of the period to now. This change in home size is known as a composition effect, which I wrote about here.

The move towards larger homes pushes up the sale price trendline and pushes down the price per square foot trendline. For 2023, prices were stable to decreasing in West Sacramento but appear to be stable to increasing at present.

Summary

The overriding story for housing in Yolo County at present is the continued elevated interest rates and resulting lack of affordability. Supply continues to be restrained while demand is reduced by the reduction in affordability. Sales volume and inventory are both below normal pre-pandemic levels.

Countywide, prices have declined slightly on a year-over-year basis with other indicators of a softening market. Davis has rediscovered seasonality while Woodland prices are up year-over-year but have been relatively stable in 2024. West Sacramento indicators are mixed but prices have ticked up in early 2024.

I hope you find this useful. I’ll cover Northern Solano County next time.

The 5th Annual Northern California Residential Appraiser Conference Recap

Thanks to the Northern Solano County Association of Realtors for hosting us

Thanks to everyone who came to the 5th Northern California Residential Appraiser Conference jointly hosted by the Real Estate Appraisers Association (REAA) and the Northern California Chapter of the Appraisal Institute last week. While attendance was somewhat lighter than in past years, it was great to see so many in person. We had fantastic speakers, starting with Sandra Adomatis, SRA, 2024 National President of the Appraisal Institute.

AI National President Sandy Adomatis

Sandy gave us an update on current industry trends and the Appraisal Institute. I enjoyed hearing about PAREA, the training program alternative to the traditional appraiser apprenticeship, and am hopeful to see younger folks entering the profession. She shared a slide showing most states ready to accept PAREA now or very soon.

Of the 70,000 appraisers in the US at present, 4,000 are SRAs, 8,400 are MAIs, and another 1,400 hold reviewing designations. She also mentioned how the AI will be pushing back on the trend of using property inspectors in appraisals and the misperception of appraisers as mostly biased.

Heather Sullivan, NAA Appraiser of the Year

Next up was Heather Sullivan, head of learning and development for Aloft Appraisal, and the National Association of Appraisers Appraiser of the Year! Congrats Heather!

Heather’s talk was applying the business book classic Who Moved My Cheese? to the current state of the residential appraiser industry. Because of PTSD from my past life working for a rapidly growing music wholesaler, I can’t recommend the book, but I can recommend her talk. She discussed the changes coming and the overall process of accepting change, leaning heavily on WMMC. If you’ve been in the appraisal industry for any length of time, you’ve seen many changes (typewriters, 24-hour photo, MLS books for data, the 1004, UAD, online data availability, etc.). We’re about to see more change with property data collection, new automated tools for analysis, and new appraisal “forms.” Clients are pushing for faster production and if we’re going to serve those clients, we’ll need to adapt.

Heather shared a breakdown of the new appraisal report coming soon to a lender near you. There will be one report instead of the 15 or so different reports we deal with today with options to show sections as they apply. You start by selecting the type of property to be appraised, then the software will display required sections for every report (summary, assignment information, subject property, site, sketch, etc.), with optional sections able to be added by the appraiser as needed (energy efficiency and green features, manufactured home details, rental information, income approach, cost approach, etc.).

Side view of Jeff Bradford

Heather handed over to Jeff Bradford, CEO of Bradford Technologies. Jeff continued the discussion about the new forms coming soon and likened it to filling out your taxes with Turbo Tax. Not the most exciting description. He went into detail about the difficulties developing the new software and some challenges the industry might see. Both Heather and Jeff see the appraiser’s role in this new world to evolving even further into data analysis.

Jeff sees a problem with splitting the data collector role from the duties of the appraiser with a potentially lower income in the future the outcome. His solution-build software to help the appraiser preserve relevance in the residential lending valuation process. We then saw a demonstration of Bradford Technologies solution, NightHawk. Jeff showed us how this tool, in development, would allow for fast analysis with lots of ways to search and analyze competitive sales data, plug into an appraisal, and quickly report the results. I can’t wait to see NightHawk roll out.

From Left: Jon Reiter, Susan Reiter, Stephanie MacLean, and Amy Bolton-Christopherson. The panel was organized by Lou Rusert, standing far right

After lunch, we shifted gears to a panel of local builders. We heard from Amy Bolton-Christopherson, president of Christopherson Builders, Stephanie MacLean, CEO/President of Blue Mountain Enterprises, LLC, and Jon and Susan Reiter, owners of Reiter Fine Home Building.

This panel was especially interesting because each builder occupied a different market segment. Blue Mountain is a production home builder with communities across Northern California. Christopherson Builders is based in Santa Rosa and aims for the custom, higher quality market. I recognized Christopherson because they have rebuilt homes destroyed in the LNU Complex Fires north of Vacaville, one of my prime markets. Reiter Fine Home Building is a top of market spec builder in the Wine Country, with homes starting at $15,000,000 going up to more than $65,000,000.

Amy from Christopherson emphasized the difficulty in building new homes in California because of regulations and high indirect costs. Her example of a 1,200 sf accessory dwelling with a base price of $558,600 was eye-opening.

Stephanie from Blue Mountain reviewed the process her company goes through for developing a subdivision, from conception through feasibility, acquisition, marketing, and selling. She highlighted a new subdivision in Elk Grove with entry-level homes at $400,000, very reasonable and attainable for many in the Sacramento region.

Reiter Fine Home Building is different. Jon Reiter described their model of staying current with the latest trends in the very top tier of new homes in the US, designing and building one at a time. He discussed the importance of site selection for privacy and views for those who can afford a $65,000,000 home and emphasized that home size is less in demand in the top tier. He also discussed evolving tastes and how his company moved from Mediterranean to barndominium to modern.

All three panelists were kind enough to answer questions at the end of their presentations.

Yours truly in the deadliest slot, last

The final section was a discussion of short-term rental properties. Seth Carlsen, a Sacramento-based real estate investor, shared with us an introduction and lessons learned in acquiring and managing his 21 short-term rental properties. He reviewed AirDNA, the primary data source for short-term rentals, and provided comparisons to data provided about his properties by AirDNA and the actual data. He warned us to be careful to compare properties with similar amenities and maximum guest count, and to use multiple data sources.

I wrapped up the day with a comparison of short-term rentals to the standard rental properties residential appraisers deal with on a regular basis and warned about the relatively common request appraisers receive from lenders to provide a “rent survey” for short-term rentals. I encourage everyone interested in the topic to read John Dingeman’s article about the issues regarding lender rent survey requests and short-term rentals.

Thanks to host Northern Solano County Association of Realtors for allowing us to use their excellent facility. Thanks to all of our speakers who traveled near and far to share their wisdom and expertise. Thanks to Lisa Estes from the Appraisal Institute for managing the logistics so well. And thanks especially to my fellow committee members Lou Rusert and Chris Daniels, SRA for their work in planning this event.

Quiet, too quiet, and upcoming speaking engagements

I had a problem earlier this week with this website reverting to a 2016 version but was able to quickly fix with the help of the fine folks at my host, SiteGround. When reviewing the issue, I noticed that my last post was last summer. Yikes! Here’s the first effort to be more timely with my writing.

The Northern California Residential Appraiser Conference

Friday, May 3 (tomorrow), I am speaking at the Northern California Residential Appraisal Conference in Fairfield, California. My topic is a brief introduction to short-term rental (STR) properties with a focus on the issue of what to do when a lender asks for an appraiser to report “rental income” for a STR on the 1007 form.

Denis DeSaix, Penny Woods and I came together to produce the first joint conference between the Real Estate Appraisers Association (REAA) and the Northern California Chapter of the Appraisal Institute (NorCal AI) in 2018. Our goals were to bring the excellent teachers from NorCal AI to REAA residential appraisers and to build connections between the two organizations. Tomorrow is the fifth annual conference (Covid canceled the 2020 event) and we have a great group of speakers.

More information here

Other upcoming classes

The California Probate Referees Association has invited me to speak at their conference on Monday, May 20. I plan to discuss market change adjustments and contrasting, two quick and easy tools every valuation professional should use. This event is not open to the public but if you’re a probate referee in California, I hope to see you there.

Tuesday, June 4 I am teaching a time adjustments/market change adjustments class via Zoom for REAA. I will discuss time adjustments in detail here in a series of posts over the next several weeks.

Click here for more information or to register

What I’ve been doing instead of updating my website

I immensely enjoyed my trip to Palm Springs for the Community of Asset Analysts meeting in January. It was great to see in person many of my valuation friends. Below are some photos from the trip.

From upper left clockwise: George Dell speaking at the Community of Asset Analysts meeting; my fellow asset analysts; Brad Bassi in real life!; first time in Palm Springs; Joshua Tree NP was amazing; Yosemite Valley in the snow on the way home

Yolo County Market Trends August 2023

Here are Yolo County residential real estate market trends as of August 23, 2023, based on analysis of sales in Metrolist MLS for my presentation at the Yolo County Association of Realtors marketing meeting last week. In the past, I’ve not included county-wide data nor West Sacramento. I’ve added both at the request of local agents.

The Elephant in the Room-Interest Rates

Every presentation I’ve done since the pandemic started has included a discussion of interest rates. The drop in interest rates at the start of the pandemic helped fuel the rapid increase in prices we experienced. The rapid increase in interest rates in early 2022 put the brakes on residential real estate, especially in California, by hammering affordability.

Thanks to Len Kiefer for this graph

The graph above shows the longer run of interest rates this century, trending down to a low below 3% during the pandemic with a rapid return to 2002 levels in less than two years. Interest rates are now at their highest point since I started my career as an appraiser in June, 2002.

This graph explains the residential real estate inventory effects from the change in interest rates since 2019:

Thanks again to Len Kiefer

Almost 2/3 of current mortgages have interest rates below 4%. There is a very strong financial incentive for anyone with one of these mortgages to not sell their home because a replacement will trigger a much higher monthly payment, thus reducing the available inventory.

Let’s look at the demand side:

Thanks again Len

This graph is a little difficult to decipher but tells a crucial story for residential real estate. The left Y-axis shows the monthly payment for the given terms. The right Y-axis shows the average loan size. The X-axis shows the interest rate. The dots show the meeting of the average interest rate, loan amount, and monthly payment for each year.

To buy the typical house in 2021, the payment was approximately $1,800 per month. Now, in 2023, the typical house payment is $3,000 per month. Affordability has been hammered by the rise in interest rates and not helped by increasing prices.

Combined, we have very reduced inventory combined with reduced demand. In 2022, the demand reduction “won” in our region, leading to price drops. In 2023 so far, the reduction in supply seems to be “winning” with price increases common. The residential real estate industry is probably the biggest loser in 2023 with significantly fewer sales this year compared to previous years.

Yolo County Data

Below is a breakdown of sales in 2023 by community for residential sales on 60 acre or less lots, excluding condominiums, townhouses, and halfplexes. Note that small acreage residential sales are included in this snapshot.

2023 Yolo County Sales by Community

Most of the sales in Yolo County occur in Woodland, West Sacramento, and Davis.

Below shows the growth in mean sale price for Yolo County since 2016. Prices have increased significantly over the past seven years.

Yolo County Sales

A closer look at sales since 1/1/22 shows a different story:

Prices peaked in the spring of 2022, declined the rest of the year, and started to increase again in the spring. The last two months show some softening of prices.

Current inventory countywide is above the lows of the pandemic era but significantly lower than typical:

Yolo County inventory is on the low side at present

Inventory is lower than typical but monthly mean days on market countywide is back to pre-pandemic levels:

Days on market are closer to longer term averages

Another measure of market strength is the sale price to list price ratio, or how much the sale price of a home changes from the reported list price. If the ratio is greater than 100% shows prices getting bid up while under 100% it shows sellers forced to discount.

Homes are selling for close to asking at present

This measure increased dramatically during the pandemic, dropped after the rise in interest rates in 2022, and has recovered to a somewhat stronger level.

Sales volume drop is the biggest issue for real estate professionals looking for work

Sales volume is depressed below pre-pandemic levels because of lack of inventory meeting lack of demand. After two/thirds of 2023, Yolo County has about half the number of sales typical year to date before the pandemic.

Countywide, prices are stable to increasing with low inventory and typical days on market. Let’s take a look at the larger Yolo County markets.

Davis and Woodland

This analysis only includes sales of homes on less than one acre of properties labeled as “single family residences” in Metrolist, the local MLS. The same rules apply to the West Sacramento analysis below.

Sales volume has drifted downwards for both Davis and Woodland:

Davis sales volume since 2018 per Metrolist
The change in sales volume is more pronounced in Woodland

Metrolist tracks how many offers were received for each sale, another indicator of market activity. Davis and Woodland both show elevated numbers of sales receiving multiple offers in 2023 so far:

Multiple offers imply a seller’s market

Below are summary statistics for Davis and Woodland:

Inventory is relatively low but above pandemic levels. Days on market, multiple offers, and the sale price/list price ratio show both markets overall are leaning towards sellers at present.

Davis price trends since 1/1/22 show a peak in the spring of 2022 followed by decline to a low at the start of 2023, with prices increasing so far since:

Woodland follows a similar pattern:

To recap, Davis and Woodland are showing low inventory, low sales volume, some buyer competition, and increasing prices.

West Sacramento

The story is familiar for West Sacramento.

Sales volume for 2023 so far is about half prior to the pandemic with two-thirds of the year gone with the longer trend declining.

Multiple offers in West Sacramento are elevated but appear somewhat more volatile than in Davis and Woodland:

West Sacramento Summary:

Price trends in West Sacramento follow the same pattern as in Davis and Woodland: peak in the spring of 2022, followed by decline to a bottom in early 2023, with rising prices now.

West Sacramento is trending along the same lines as Davis and Woodland

Yolo County Small Acreage Residential

Finally, let’s look at the Yolo County Small Acreage Residential market. In this analysis, I included homes sold on 1-60 acres reported to be one home on a lot, two homes on a lot, manufactured homes, or modular homes. I excluded Davis and Dunnigan addresses because these two markets trend differently from the rest of the county.

Inventory is on the low side at present in shortage. This market typically has 6-12 months of inventory but is somewhat more volatile because of lack of activity.

Recent price trends are stable to increasing. Please keep in mind that conclusions are significantly more uncertain because of lack of conformity between the properties sold.

Note that this market did not have the same protracted dip seen in other Yolo County markets throughout 2022.

Takeaways

  • Rates continue to dominate our local residential real estate markets.
  • Very low supply is overriding low demand.
  • Prices switched from declining to stable to increasing throughout the county.
  • We have a very low number of sales.
  • Valuations are difficult at present because of changing market trends and few sales to use for sales comparison.

Thanks for reading. Please leave any comments or questions.

Review: Residential Market Analysis and Highest and Best Use

Review of Mark Ratterman’s book

I wrote the following for the December, 2022 Appraisal Today newsletter. This month Ann O’Rourke has published my article “Appraising in a Changing Market” which I will publish here next month. That said, if you’re a residential appraiser, you should sign up for the Appraisal Today newsletter. Each newsletter has advice that I can use in my business or my appraisal work. Go here for more information.

Disclosure: This book was provided by the publisher, the Appraisal Institute, free of charge to Appraisal Today to review. Ann provided it to me so I can share my thoughts about it.

Cost is $75/$60 for Appraisal Institute members for either the soft cover book or the PDF. 252 pages

I don’t understand why the PDF is the same price as the book. Apparently, the cost approach does not apply.

This is the book to get you thinking about residential market analysis.

As noted in the Acknowledgements, this book is based on Stephen Fanning’s Market Analysis for Real Estate, the general appraiser’s market analysis book. Residential Market Analysis and Highest and Best Use follows the same outline as the other book but focuses on residential properties. Both books use the same 6 step process for market analysis and 8 step process for highest and best use analysis. Most of this book is spent discussing and reviewing the 6-step market analysis process with highest and use analysis left for the last chapter.

The book discusses the difference between fundamental market analysis and inferred market analysis and provides advice on how to know what to include for your assignment. Much of the book is timely with many examples from the Covid era plus specific discussions of rapid interest rate increases and the impact of concessions on market value.

The explanation of the market analysis process is the framework for the author to share many suggestions for best practices. For example, Mr. Ratterman makes a strong case for almost always completing at least a very basic, high-level land valuation to support the highest and best use conclusion even if a cost approach is not necessary. A specific example included in the book of a mistake that residential appraisers make, not seeing that an attached duplex could be split into two one-unit properties, was a mistake I made twelve months ago. My client was kind enough to let me rewrite the appraisal instead of suing me. Examples and advice like this are what sold me on the book.

Mr. Ratterman’s writing is easy to read. As Ann’s previous reviews of his books note, his writing is the opposite of the academic, stilted style I see in other appraisal books. He repeats important concepts and provides useful examples.

I have a couple of minor quibbles. First, I found numerous typos, unexpected in a $75 book purchase. None were significant but all were distracting. The other issue I had was with the example in the Statistical Analysis chapter. I applaud Mr. Ratterman for including a detailed example of using linear regression to value a vacant lot. His example walks through the steps to do the analysis and includes a very useful discussion of how to choose the best predictor/unit of comparison (in this case, price per acre). However, his discussion is undermined because he doesn’t mention time. It was strange to read a book where market changes are discussed at length but not included in the most detailed example.

Who is it for?

The primary audience of this book is the seasoned residential appraiser with some experience appraising complex 1-4 unit properties. The book is ideal for residential appraisers working on upgrading to certified residential. It’s also ideal for folks like me working on their SRA designation. Less experienced residential appraisers may avoid future issues by reading this book.

Conclusion: I’m keeping it. Ann saved me from having to buy it. Thanks Ann.

Click here if you want more information on purchasing this book from the Appraisal Institute. (I am not getting paid for any sales)

Table of Contents

  • Acknowledgements
  • Introduction
  • Chapter 1: Overview of Market Analysis and Highest and Best Use Theory
  • Chapter 2: Market Research in Real Estate Appraisal
  • Chapter 3: Levels of Market Analysis
  • Chapter 4: Urban Patterns, Development, and Externalities
  • Chapter 5: Location
  • Chapter 6: Productivity Analysis: The Subject Property
  • Chapter 7: Market Area Delineation
  • Chapter 8: Demand Analysis
  • Chapter 9: Competitive Supply Analysis
  • Chapter 10: Evaluating Market Cycles
  • Chapter 11: Marketability Concepts
  • Chapter 12: Data Sources
  • Chapter 13: Statistical Analysis Tools
  • Chapter 14: Highest and Best Use

About the Author

Mark R. Ratterman, MAI, SRA, has been a real estate appraiser and broker in Indianapolis since 1979. He initially worked as a residential broker only but soon moved on to focus on real estate appraisals. He has written ten books about real estate and appraisal with a focus on both residential and nonresidential topics.

Additionally, Mr. Ratterman has written courses and seminars for the Appraisal Institute and has been a teacher of appraisal courses and seminars for over 35 years. He has lectured in 45 states and four foreign countries and has written over 20 seminars for both online and classroom presentation. He has been published many times in The Appraisal Journal.

Mr. Ratterman lives in the Indianapolis area with his wife of 36 years, Jeanine. They have four grandchildren who all live in their area. His contact information is listed on the Appraisal Institute website (https://www.appraisalinstitute.org/) and can be located by clicking on “Find an Appraiser.”

Northern Solano County Residential Real Estate Update April 2023

This update is based on a presentation at the Northern Solano County Association of Realtors on April 25. I pulled the data on April 24 from Metrolist/BAREIS.

The key story in residential real estate over the past 18 months has been the rapid rise in interest rates in early 2023. Here’s the picture:

Interest rates 12 months ago were below 4% and are now above 6%, significantly reducing affordability for buyers and buyer demand overall. Sellers locked into low rates have strong motivation to stay in their homes, reducing supply. In Northern California, many markets have reached a new equilibrium of significantly fewer buyers, sellers, and transactions.

Below is a summary for Northern Solano County.

Dixon, Fairfield, Suisun City, and Vacaville are properties reported in Metrolist/BAREIS on less than one acre and reported to be single family residences. Northern Acreage are properties located in unincorporated Solano County with Dixon, Vacaville, and Winters mailing addresses on 1-60 acres and include single family residences, two homes on one lot, manufactured homes, and modular homes. Note that there were 0 sales of acreage properties last month but 3 the month before, low but not unheard of.

Listings are less than homes in contract for the cities, indicative of a stronger market. Sales volume for all five markets are less than March, 2018, and March, 2019 sales volumes.

12 Month Change in sale price is a common metric in residential real estate. All five markets are trending lower than 2022, as expected based on the larger market trends. However, focusing on 12 Month Change can miss when a market changes direction.

Below are scatter plots showing trends in each market area:

Dixon

Dixon Sale Price trendline for homes sold since 1/1/22

Fairfield

Fairfield Sale Price trendline for homes sold since 1/1/22

Suisun City

Suisun City Sale Price trendline for homes sold since 1/1/22

Vacaville

Vacaville Sale Price trendline for homes sold since 1/1/22

The four Northern Solano cities show similar trends. Prices peaked in the spring of 2022, declined for the rest of the year, and hit bottom in late 2022/early 2023. Prices are now relatively stable.

In contrast, take a look at the Northern Solano small acreage residential market:

Northern Solano County small acreage residential sales since 1/1/22

Prices peaked later, in the summer, and declined since. This is a declining market at present. Note that the Northern Solano County small acreage residential market has more uncertainty because of fewer sales and significant differences in property characteristics.

Context

Prices appear to have bottomed out, at least temporarily, in Northern Solano County communities with the exception of small acreage residential properties. Low demand is matching low supply with a new, maybe temporary equilibrium.

This simple analysis shows trends for all homes sold in each market. Each market is made up of a collection of individual submarkets that can trend in different directions. For example, I recently appraised two homes in Woodland with the only real difference between the two was one was 2000 sf and the other was 2800 sf. The 2000 sf home’s submarket was declining like the overall market but the 2800 sf home’s submarket was increasing. Each home requires its own analysis to determine trends and value.

I hope to write more this year. If you have something you would like me to discuss here, please leave a message or email me.

Thanks to my friends at the Yolo Association of Realtors

Rachel Medina and I receiving the 2022 YAR Affiliates of the Year from Don Sharp

I’m grateful to my friends at the Yolo Association of Realtors for naming me, along with Rachel Medina, the 2022 Affiliates of the Year for the association. Sharing this with Rachel, on the same night my friends and colleagues Don Sharp and Francisco Jimenez were named 20222 Realtors of the Year, made the recognition special.

I spent much of last year in presentations sharing photos of my favorite mountains since the local markets had clearly peaked. Here’s hoping I can share valley photos in 2023….

Here’s hoping I can retire peaks from my market presentations and start sharing valleys

Early 2022 Sacramento MSA Rental Vacancy Rate

It’s tough to be a renter in the Sacramento market now. Per the US Census Bureau, the Q1 2022 rental vacancy rate dropped to 3.0%. Good luck to anyone trying to find a home to rent.

For appraisers and real estate agents, this data is published for the top 75 markets in the US by the US Census Bureau. Go here to grab the data plus some other cool stuff from the Feds.

Like many appraisers, the past two years have been crazy for me. Life is starting to slow down so I hope to post more frequently.

Davis, Woodland, and Northern Yolo County Small Acreage Residential Update

For my appraiser friends: will this pass an FHA inspection? image copywrite Joe Lynch

Hey, it’s been a while. Since the start of the pandemic, demand for appraisal services has gone through the roof, limiting my ability to write. Thank you if you’ve sent me work. That said, I hope to write more frequently in 2022. This is the start.

Market Analysis Ground Rules

Below are market updates for Davis, Woodland, and the Northern Yolo County small acreage residential markets. My data source is Metrolist, the MLS for my region and part of the Norcal MLS Alliance. I’m very fortunate to have such great data partners.

For suburban markets like Davis and Woodland, I limit the analysis to sales of single family residences on one lot. I exclude condominiums, townhouses, halfplexes, and small income residential properties (2-4 units) because these types of transactions in general add noise to the analysis in markets I cover. For small acreage residential properties, I include one house on a lot, two houses on a lot, manufactured homes, and modular homes outside of city limits. I usually narrow the lot size range of transactions included in the analysis. For example, the analysis below is limited to sales on lots with 1-60 acres of area.

Davis

Sales volume in Davis was significantly higher year-over-year in early 2021 because of lockdowns in 2020 but over the past six months are down year-over-year because of the surge in late 2020.

Davis 12 Month Change in Sales Volume

My favorite way to measure sale price trends in Davis is to look at monthly year-over-year metrics because of the high degree of seasonality in the Davis market. Look at the graph below. The past six months prices are up on average 20% overall in Davis. Pre-pandemic, prices were stable to declining slightly…

Davis residential real estate prices have increased rapidly over the past year

Woodland

Sales volume in Woodland has been distorted by Covid, too. Volume in early 2021 increased significantly over the prior year but were below 2020 over the summer of 2021 and are mixed most recently.

Woodland year-over-year change in monthly sales volume distorted by the pandemic

Woodland is a much less seasonal market than Davis so I use a sale price or sale price per square foot scatter graph model to show market trends. Prices have continued to rise in Woodland significantly over the past 12 months.

Woodland prices continue to increase strongly

Davis and Woodland Recent Activity

as of February 16, 2022

Prices continue to show strong appreciation. The key issue is the lack of inventory. Normally, Davis and Woodland have 50-100 single family homes listed for sale. Lack of inventory is driving competition and prices.

Another sign of lack of inventory

Competition is frantic in Davis now with the vast majority of homes receiving multiple offers. Woodland homes are receiving multiple offers at a higher than typical rate, too, but not at Davis levels. Great time to sell, terrible time to buy.

Cash Buyers in the Market

Another heat check

With most listings receiving multiple offers, I’m not surprised to see a rising percentage of all-cash buyers.

These trends are telling the same story.

Northern Yolo County Small Acreage Residential Market

As noted above, I analyzed sales of properties on 1-60 acres sold in unincorporated Yolo County. I excluded Dunnigan because it is a different market from the rest of the county with 1 acre lots next to the interstate and many manufactured homes adding noise to the analysis.

Northern Yolo County Small Acreage Residential

With so few transactions, best way to understand the market is by sales per date scatter graph. First shows all sales from the start of 2020:

Sale scatter graph showing increasing prices

Longer view:

Sale scatter graph since 1/1/10

Those familiar with this market will be able to explain the price bump in 2016 and subsequent flattening. In early 2016, Yolo County changed the code to allow for medical marijuana grows on small acreage lots. This led to a rush in outside investors competing for small acreage residential properties and rapid price increases. When Yolo County put a clamp on new permits, prices stabilized and were relatively flat heading into the pandemic. The overall lack of inventory and desire for separation from neighbors led to a return of price increases.

The Elephant in the Room

image copywrite Pixabay, free to use

The Covid pandemic surprised many of us by leading to rapid price increases driven by low inventory and historically low interest rates. Low inventory is still here but interest rates are rising rapidly:

Thanks Len.

If trends continue, at some point rising interest rates will reduce affordability enough to reduce sales activity and prices. Here’s hoping for a soft landing.

Brownie points to anyone who was not on the Yolo County Association of Realtors call last week who can tell where this is:

Small acreage residential (but not Yolo County) image copywrite Joe Lynch