Category Archives: West Sacramento

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.

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.