Category Archives: Appraisal

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

Davis, Woodland, and Arbuckle Market Update for April and a quick discussion of appraiser shortages

I hope you’ve had your Covid-19 vaccine shots. If not and you’re in California, sign up now here.

Inventory continues to be low in the region with rising prices and competition for most properties. Sales volume is rising as shown below for Davis and Woodland:

Activity is up in Davis from the previous 12 months
Woodland sales volume continues to increase

Inventory has risen in Davis but is still on the low side. Woodland continues to run significantly below normal.

Prices overall are increasing rapidly in Woodland and moderately in Davis. Keep in mind that specific market segments may be trending differently depending upon demand.

Includes only single family homes in Davis city limits sold through Metrolist
Woodland sales reported to Metrolist in city limits of single family homes only

Multiple Offers

Everyone is talking about competing against 15 offers and prices 30% over initial list. Davis and Woodland are competitive, but not that competitive, as shown below.

Mean number of offers received trending up in Davis. Source: Metrolist
Woodland showing a significant increase in offers received

Arbuckle Market Trends

Arbuckle is an unincorporated community of approximately 5,000 people located about 45 minutes northwest of Sacramento along Interstate Highway 5 in Colusa County. It features homes built in the 1940-50s plus newer subdivisions built over the past 20 years and is surrounded by farmland.

Inventory is very low, not that unusual given how small the Arbuckle market is. Sales volume in 2020 was down 10% from 2019, not unusual for the area. Prices have increased significantly over the past 12 months as shown below.

Rapid price increases in Arbuckle during the pandemic per Metrolist

A longer look shows the effect of the pandemic on pricing:

Prices were stable heading into the pandemic but increased as most markets I cover did over the past 12 months
Arbuckle, CA is surrounded by farmland and split by I-5

Of the 37 homes sold in Arbuckle since 1/1/20 in Metrolist, 17 had one offer and 20 had more than one with a peak of 17 offers for one property. Competition has picked up in Arbuckle, following trends throughout the area.


Every day I receive calls and offers from lenders, agents, and buyers hoping I can help them with a purchase appraisal. I’m very fortunate to be busy and can’t finish anything quickly now because of my workload. I strongly suggest everyone to be patient if an appraisal is part of your transaction. This graph below from Freddie Mac will help explain the situation.

Source: The Effect of COVID-19 on Appraisal Volume – Freddie Mac Single-Family

Appraisal volume ties directly to interest rates. When rates fall, mortgage financing rises and drives appraisal volume up. When rates rise, appraisal volume falls. However, as shown above, the number of appraisers in the US who work with lenders has been relatively stable over the past eight years. The interest rate cycle rises and falls much more rapidly than the time it takes to develop a productive appraiser, causing appraiser shortages in times like now.

Good luck.

Davis, Woodland, and Northern Yolo County Small Acreage Residential Market Update for March, 2021

The pandemic has changed all of our lives in the past year. In local real estate, activity paused in March and April as shelter-in-place orders took effect. The Fed dropped interest rates to zero, pushing mortgage rates to historic lows. Homes became more affordable but inventory (the amount of time to sell the current number of active listings in a market) tightened because people didn’t want strangers walking through their homes during a pandemic. Low rates combined with low inventory has supercharged the local residential market.

Davis and Woodland have very few homes for sale at present with multiple offers received on most listings. The lack of inventory, very low interest rates, and lots of competition are pushing prices up as shown on the graphs below.

Davis has relatively few sales in January and March so take the 26% price increase with a grain of salt-that number is likely influenced by a change in what sold, potentially a compositional effect. I wrote about compositional effects recently.

Woodland prices have increased relatively rapidly during the pandemic on a price per square foot basis but have leveled off on a sale price basis.

Because of seasonality, I look at 12 month change in prices for Davis. Prices have increased the past 5 months compared to the previous year. Davis is a clearly appreciating market at present.


Much of my work is in unincorporated Yolo County appraising small acreage residential properties. The graph below shows a significant upward trend in these types of properties. Once again, part of the increase can be attributed to a compositional effect: the average size of homes and lots have increased, pushing up the sale price trendline somewhat. That said, prices are still increasing in this market.

Inventory was 2.5 months when I compiled this graph at the beginning of the month, shockingly low. I have not seen this market with less than 5 months of inventory in the past 10 years. Buyer preferences have shifted to having more space away from neighbors.


My friend Ryan Lundquist posted an interesting question last week: How much have prices risen since 2012?

This was the bottom of the market for the Sacramento region. Here’s the summary from his post:

If your timing was great, your median home purchased in 2012 for $199,000 has increased $311,000 to $510,000 today!

The Best Part Of My Job As An Appraiser

I enjoy many aspects of my career as a residential real estate appraiser. I’m self employed so I have no one to blame but myself; I set my own hours; I get to see a lot of places in the region; I spend much of my time trying to find meaning in data then communicating my findings; I even get to use a laser.

The best part of my job is the great animals I get to meet every day. I grew up with dogs in the house and have always gotten along with them. After college in the first year of our marriage, a friend offered us a kitten, Damien, who enriched our lives for 21 years. Thanks Dave.

Being able to read animals and owners is a key skill. I have yet to be bit after entering more than 5,000 homes over the past 18+ years which shows I’ve been successful.

(So that means I’ll get bit on my next inspection, I know how it works)

Anyway, here are pictures of some of the animals I’ve met over the past year.

I even met some goats recently.

And this is Brooke, our rescue from the pound, and Cat, who showed up on our patio.

Brooke, the walker who loves to play fetch
Cat. My son gave him a name but it doesn’t work for me.

What has been your experience with animals while inspecting? Any harrowing stories to share? Or have you been lucky like me and not yet bitten?

Analytics for Appraisers Zoom class

This REAA Zoom class will be on Thursday, March 18 from 6:30-8:30 PM and is approved for 2 hours of continuing education in California (only). Brian Melsheimer and I will provide a walk through of using Microsoft Excel for residential appraisal analysis. Given the limitations of our time in the class, this will be a relatively quick run through of some basic skills including creating a scatter graph, linear trendline analysis to determine time and GLA adjustments, contrasting/grouped pairs analysis, and basic Excel setup tips. We’ll also discuss online tools for appraisers.

Cost is $20 for members/$30 for non-members. Registration closes on March 17. Sign up now at this link: Leveraging Analytical Tools to Assist the Appraiser

To receive CE, you must connect to the Zoom class with video and stay in frame during the class. Also, you must have a free account on the REAA website.

Let me know if you have any questions. Hope to see you soon at the class.

The Freddie Mac House Price Index Is Your Retrospective Friend

Are you familiar with the Freddie Mac House Price Index? Go take a peek.

Freddie Mac House Price Index

The FMHPI is your friend. The index reports monthly change in house prices for national, state, and metropolitan statistical areas (MSAs). The data series starts with January, 1975 and usually runs two to three months behind the current date. The data is available in Excel or text files with seasonal adjustments or non-seasonally adjusted.

As an appraiser, I use the FMHPI in several ways for current work:

  • Regional market trends.
    I use this data set if I want to show how house prices are trending in my home regions of Sacramento or Fairfield/Vallejo.
  • Market areas with little activity.
    I cover Stonyford, a small community on the eastern edge of the coastal mountains with very few sales. I trend surrounding MSAs to show regional activity and offer this as the best evidence available for market trends in Stonyford.
  • Market areas with significant non-conformity.
    I cover the Sacramento Delta area, a place with a mix of small towns and small acreage residential properties plus some high quality mansions. Market trends are often influenced by the mix of sales and frequently are not reliable so I use the Sacramento MSA instead.

Where the FMHPI really shines is with retrospective work. My local MLS has data going back to 1998 for my county. That’s great for the past 23 years but what if a client wants a date of value before then? In the past two years I have had requests for appraisals dated in the 1980s and early 1990s on multiple occasions. Each time I used the FMHPI to determine market trends and calculate time adjustments.

Normally I download the data into Excel and generate the chart I want, discussed below. However, you can use the pre-built chart and table tool. This is the default chart:

FMHPI default chart

You can add multiple states or MSAs for comparison by clicking the blue button:

FMHPI with Sacramento MSA

You can also adjust the time period on the chart by sliding the time frame below:

FMHPI Date Range Adjusted

Once you have the chart you want, you can print or download it as a PNG file to stick in your report or work file:

Print or download a PNG graphics file

This tool is versatile and includes a table view showing percentage change.

However, I normally download the data into my Excel work file and create my own graphs. The FMHPI MSAs Excel workbooks are two sheets with MSAs A-L on Sheet 1 and M-Z on Sheet 2. Column A is the Month with MSAs in columns in alphabetical order like this:

Month on the far left column, MSAs in alphabetical order

Here’s my simple process to deal with the way dates are formatted.

Click the link

Download the Seasonally Adjusted MSAs Index:

  • Click the link 
  • Open the file and copy the Month Column into your Excel work file plus the columns of data for any MSAs you want to analyze.
  • Leave a column to the immediate left of the MSAs you want to work with to fill in Excel-readable dates. I usually label it “Date Sold.”
  • Then fill in the Date Sold column matching the dates in the FMHPI Month Column. 1975M01 is 1/1/75, 1975M02 is 2/1/75, etc. Fortunately, once you have the pattern, you can use Excel to autofill to the bottom:

Copy the columns, leaving space for Date Sold, autofill date sold

You can now use this data in Excel to make line graphs or scatter graphs. If you don’t need all 46 years of data in your chart, graph only what you need. Here’s an example of how I would prepare the Sacramento MSA data for the past two years and past 10 years plus the graphs:

Data copied from original columns for ease of creating graphs

And here are the resulting graphs:

Line Graph Example

Scatter Graph

I hope you can see the value of this data. Let me know in the comments if you have questions or are already using this data.

If you have questions about this data, there is an FAQ from Freddie Mac.

Thanks to Penny Woods for encouraging me to share this with her Retrospective Appraisal class.

And thanks to Len Kiefer for sharing the charting tool built into the Freddie Mac website.