Archive for the ‘Investment Properties’ Category

Sacramento County Real Estate Market Update, December 2010

Encouraging Trend for Buyers

Sacramento County real estate market update in December 2010 presents an opportunity for those looking for long-term investment in this picturesque county. The volume of houses sold in December is up, considering the same situation one year ago. The prices are lesser than what they were in December last year. The overall changes are moderate, and there is not any big gap in the volume and prices in December this year compared to the same time last year.

Moderate Increase in Volume

Sacramento real estate market has witnessed an increase in the number of units sold in December 2010. The total number of houses sold stands at 1,644 compared to 1,548 exactly one year ago. This 6.2 percent rise is moderate and mainly attributed to climbing foreclosure sales. Following the November 2010 trends, the total number of foreclosures sold has gone up by 16.6 percent, which constitute 45 percent of total units sold. There were 634 foreclosures sold in December last year. In December 2010, this number went up to 739. This noticeable increase, however, is not visible in short sales and nondistressed sales, which together constitute 55 percent of the total Sacramento real estate business.

Short sales constitute 22.6 percent of the total units sold in December 2010. However, statistics show a slight decrease of 2.1 percent compared to the available data of December last year. It stands at 371 this December compared to 379 same time last year. Sacramento County real estate nondistressed sales statistics has almost remained the same. Though there is just 0.2 percent or one unit difference between the two years, the share nondistressed sales in total units sold has come down by 4.1 percent.

Slight Decrease in Prices

The price of real estate in Sacramento County has gone down compared to December last year. Though the price remained the same as they were a month ago, there is moderate decline compared to the price one year ago. The price of per square feet witnessed a decrease amounting to 6.6 percent, from $122.94 a year ago to $114.78 at present. However, the decline in average size of homes is nominal, 1,680 sq ft in December 2009 and 1,674 sq ft in December 2010. There has been more than 5 percent slump in both average list price and average sale price. You can also notice decline in median sale price despite increase in volume. It has gone down by 6 percent, from $180,000 in December last year to $169,250 this December.

Inventory Status

Foreclosure sales continue to have the lowest inventory average of 2.4 months. However, average months to get through the inventory have increased somewhat for short sales and nondistressed sales in the past six months. Short sales have to go through 12-month inventory listing.

Sacramento County Real Estate Market Statistics for December, 2010

The following data in tabular form presents a quick review of trends of Sacramento real estate market in December 2010 compared to that of December 2009.

Unit Volume Data

Units Sold December, 2009 December, 2010 Change
Foreclosures Sold 634 739 16.6%
(% of total units) 41.0% 45.0%  
Short Sales Sold 379 371 -2.1%
(% of total units) 24.5% 22.6%  
Nondistressed Sold 535 534 -0.2%
(% of total units) 34.6% 32.5%  
Total 1548 1644 6.2%

Price Data

Prices December, 2009 December, 2010 Change
Sold Price / Square Foot $122.94 $114.78 -6.6%
Square Feet 1680 1676 -0.3%
Average List Price $207,480 $196,650 -5.2%
Average Sale Price $206,634 $192,436 -6.9%
Median Sale Price $180000 $169250 -6.0%

Inventory (Based on 12 months of prior sales)

Sale Type Average Sales Per Month Active Months of Inventory
All Sales 1530 7773 5.1
Foreclosures 620 1461 2.4
Short Sales 367 4229 11.5
Nondistressed 546 2093 3.8

Inventory (Based on 6 months of prior sales)

Sale Type Average Sales Per Month Active Months of Inventory
All Sales 1473 7773 5.3
Foreclosures 608 1461 2.4
Short Sales 351 4229 12.0
Nondistressed 516 2093 4.1

Foreclosures: Contradictory Messages and Different Numbers?

The California Association of Realtors announced recently that foreclosure sales have increased 92.3% year over year in March 2010. In February 2010 this increase was 24.2% as compared with February 2009. This information comes directly from ForeclosureRadar’s March foreclosure report. Elsewhere there is information that real estate prices are set to fall once again.

I just want to jump into this and clarify the difference between foreclosure sales as reported by companies like ForeclosureRadar and this website. Our information comes solely from the MLS and what our website calls “foreclosure sales” are those homes that have been placed on the open real estate market by banks and listed by a real estate broker. These homes are considered REOs, or “real estate owned” by the bank, houses that have been foreclosed on by banks due to lack of mortgage payment by home owners.

Most companies that keep track of real estate sales data that are not primarily a real estate brokerages also count the “sale” of a home back to the bank as a foreclosure sale, which is why their numbers always appear more numerous than our totals. In their case, the foreclosure of one home can appear twice – one sale to the bank, the other to a homebuyer, while we would only count the latter. It is an important difference to remember.

Sacramento Area Investment Properties (Agent Rant Included at No Charge)

As I mentioned the other day, I’ve been working on a new database for residential income properties, so I can offer you the ability to browse such properties.

Here then is the revised Sacramento Investments Properties home page, which has plenty of links to the listing pages.  As good a starting point as any for that is the list of all multi-unit properties for Sacramento, El Dorado, and Placer County.  From there you can click the links on top to drill down by county or by the number of units available.

I realize that a better approach to this data would be to display financial information and let you sort by things like income, expenses, Cap Rate, or the like.  I would have loved to have provided this, but unfortunately many of my colleagues feel they have better things to do than to list their properties correctly.  36% of the 856 listings in the database so far include no gross income information, and 813 of these listings ( 95% !!!) contain no information about Total Operating Expenses.

Oh, I’m sorry, am I not supposed to make “unsolicited comments” about other practitioners because I’m a Realtor®?  Be that as it may, having a 5% success rate entering data into a field that’s essential for a buyer to make an informed decision about a property is pretty darned pathetic.  Don’t you think anyone’s looking?  Do you really need the other agent to call and ask you that badly?  What, are you lonely, is that it?

For investors who haven’t yet selected one of these underachievers, if you want your multi-unit property listed right, call me at (530) 672-9160.  We’ll go over what information needs to be in the MLS to help you get your property sold, and I’ll personally review the listing to make sure it’s entered correctly, and send you a copy so you can double check it as well.

Working.  What a concept.

"Son of Duplex" Residential Income Property Listings Coming Soon

Once upon a time, there was no real estate blogosphere for me to occasionally fit in with. There were about ten real estate bloggers, and I was the eleventh.

Or heck, I don’t know. I didn’t run a survey. Maybe I was twelfth — darn, that eleventh guy is so touchy I have to watch everything I say!

I do know that at the time my web site was pretty cobbled together. I was running RadioUserLand to blog. Also, I’d yet to create a database of listings of my own to play with, so when I wanted to publish listings, I used to upload custom CSV files for every type of listing, and instead of importing them into a database, I’d just parse the CSV files and display them.

Looking back on it now, it’s a wonder I didn’t stir coconuts for electricity and close my car doors with duct tape.

Later on I created a listing database, and naturally that made things a lot easier.  This database became the core of such features as the maps and listing lists on SacramentoHomeShopper (see for example the listings-by-zip-code lists for Sacramento County, Placer County, and El Dorado County). The same database also feeds the condo listings section, the new homes section, and the foreclosure search page.  Etc. etc.

Now all that was well and good, but one thing that I never did get around to until this week was creating a database table for the original duplex listings. The table’s in place now, as code to import the data from Metrolist, so it shouldn’t be long before the completely old and long-in-the-tooth duplex page gets finally fixed (no, I’m NOT linking to it until it is) and gets a few new siblings, the triplex, fourplex, and everybody-plex pages.

Give me another couple of days to code it or so and I should have an announcement.

Sacramento Duplex Market

February was a fairly strong month for duplex sales in Sacramento County, with twenty-five units selling, as opposed to eighteen units last February and an average of 19 units selling each month over the previous years.  As will residential properties, duplex prices have fallen sharply over the past year.  The average sale price of a duplex in Sacramento County fell 27.3% from February to February:  from $348,420 last February to $231,000 this February.  During the same period, the median sale price fell by 33.7%, from $348,420 last February to $231,000 this February.

It’s a tough time to be a duplex seller, with the duplex inventory still high at 14.6 months.  Though the median sale price of a sold duplex in February was $231,000, the median list price of the 279 duplexes in inventory is $329,000.

What’s encouraging is that we’re seeing more and more properties that pencil out fairly well.  One duplex that’s listed now, for example, yields a positive cash flow of $48.00 per month assuming a 20% down, a 10% vacancy factor and a property manager — if you managed it yourself that number would be more like $198.00 per month.  Three years ago I’d be hard pressed to find a duplex in Sacramento County that provided any kind of cash flow.  Today I found this one after about five minutes of looking — and I’m sure there are others out there.

Admittedly, the cash flow numbers for the “middle of the market” may not be too impressive.  Nevertheless, there are bargains to be had, and I believe that as prices on some duplexes and other multi-unit properties continue to fall, sales in this category will pick up throughout 2008 and beyond.

One Man’s Price Decline is Another Man’s Cash Flow

So much of the heat (and not light) that’s shed on real estate market writing contains the implicit assumption that falling prices are bad.

Are falling prices bad? Well, they are if you have no choice but to sell now, and you owe more than you own.

Falling prices are also bad if you’re buying and your position is such that you’ll have to sell while prices are still falling.

For everyone else, falling prices are much less of a catastrophe than melting ice caps, because we’re likely to see the situation turn around in a relatively short term.

Falling prices are actually good if you want an investment 1) that you can afford and 2) that provides positive cash flow.

For the longest time, I didn’t see too many properties that penciled out positive in Sacramento County. Today I stubbed my toe on a condo that seemed offhand to pencil out so well that I threw some conservative numbers such as a 25% vacancy rate at it, and I still ended up $5 per month in the black.

There’s probably an improvement of $100 per month that one could make in the vacancy rate, and you can take out the $85 per month in management fees if you want to rent it out yourself. The other thing that’s conservative about this analysis is that this is based on the list price of the home. On the flip side one should inquire about utilities and factor in an estimate for maintenance.

Granted, five bucks is not a lot of money. But lots of folks who bought when it was “a good time” because prices were going up were happy enough to be upside down by hundreds of dollars. (Like the seller of this condo — which is now bank owned? Could be!)

Cash Flow Worksheet

Before you Knock Down a Wall…

Yes, I know. I’ve become a bit of a T.V. correspondent for Sacramento-Home lately, but then who else is watching out for you and bringing you the latest trends? One thing I observe again and again from clients and others is that when they start to renovate a home and / or want to sell a home (a flip or otherwise), a lot of them want to tear down a wall and make a space more open.

While there is a lot to be said about light and bright spaces, you can also consider building a wall. Surprised? You shouldn’t be. “Designed to Sell” recently had a show in which an awkward area with a platform of sorts stuck out like a sore thumb, invading the family room and drawing attention away from it.

The solution? A wall. The wall was built to hide the platform and hide the awkward space, making it more of a storage area, but in a way that didn’t take away from the family room. Of course, it was done very professionally and molding was added to make sure it matched the rest of the home.

Sometimes, adding a wall can add more value than tearing it down.

2 bed, 1 bath House for Rent Available Now!

image

4431 45th Street
Sacramento, CA 95820

This beautiful rental is available for rent for just $1050 a month with $1200 deposit.

Don’t miss your chance to see it this Sunday September 30th! Call Purva Brown at 916-712-4255 for more information.

This home has been impeccably maintained – has fresh paint, hardwood floors, a large backyard, a fenced front and back, and comes with a washer, dryer and refrigerator. Water and garbage included in the rent!

See more here.

Sacramento Duplex Market – A Serious Buyer’s Market

We haven’t looked at residential income properties in quite some time, but last time we did, we found that the market for residential income properties in Sacramento County was a lot slower than the market for single family homes and condos. Sure enough, that’s still the case today.

Let’s take the case of duplexes. This August, one third fewer duplexes sold than last year. (The numbers are twenty units for last year and sixteen for this year). The average duplex sold this August for $355,969, down 4.8% from last year’s average of $374,021. The median sale price dropped 11.9% during this time, from $392,500 last year to $345,750 this year.

We don’t have figures for square footages or REO information on duplexes, unfortunately, so we can’t talk about those. However, inventory and the expired to sold ratios are the twin smoking guns that point to a market that is every duplex seller’s nightmare. There are 418 units in inventory, which works out to 18.7 months of unsold inventory based on average sales of 22 units per month. However, if you take just August’s sales as a basis, you come up with 26 months of inventory. Either way you slice it, that’s a lot of unsold duplexes people are trying to move.

The expired to sold ratio also tells a story of listings just sitting there. Last August the expired to sold ratio was 204.2%, meaning that roughly two homes expired for every one sold. This year the ratio is 318.8% — fifty-one listings expired and 16 sold.

Contrast these numbers to August, 2005, when duplexes were emblematic of the hot seller’s market. In that month, 78 duplexes sold at an average of $436,694.

Buy or Hold? For first-time buyers, it’s a no-brainer!

It’s nice to know I’m not the only person running around saying, Buy, buy, buy.

I was listening to the radio the other day and heard someone very respected for his opinions on finance (no, I will not drop names, but I will say this person is respected because he’s a self-made millionaire) say that if you are a first-time buyer you have almost nothing to lose by buying now. So what if prices fall another 10% – if you plan on holding on to the house for five years or so, you will still walk away with a nice profit, tax-free. However, if you get too cute about trying to time the bottom of the market, you will most likely miss it.

And yes, I know I get paid to sell homes. But even if I weren’t, this would be my advice: buy a home. Especially if you’re a first-time buyer. The opportunities are out there. And so are the bargains.

Labor Day Weekend is not a Real Estate Shopping Weekend

True. And I will not be working this weekend either.

However, this morning while browsing property for some prospects in the Colonial area (If you haven’t figured it out yet, I own and sell quite a bit of property in that neighbrohood) I found some eye-popping deals. This 95820 neighborhood features older homes built in 1952 with three bedrooms and one – two bathrooms. Almost all homes here have hardwood floors and minimal detail (crown molding improves the look instantly). Almost all have fireplaces.

Take it from someone invested in this neighborhood, if you want to buy low and sell high, this is the place. If you want to buy low and rent it out to cash flow (especially in this market!) this is the place for you!

I saw at least two outstanding deals today. Oh, and don’t think they’re all short sales. This neighborhood has a lot of homes that are paid for, so there’s also the possibility of seller financing if you have no money down.

Maybe Labor Day weekend is not such a bad time to be driving around and looking at homes after all!

Planning your Next Move in Real Estate

I’ve become absolutely obsessed lately about playing chess on my computer and likening pretty much everything I come across to it. And I began to think – well, how different is investing in real estate from chess anyway?

Besides the fact that there’s no king to kill or threaten? Well…

Both chess and investing require you to think about your next move especially in an if-then circumstantial way. You could get into serious trouble in both if you don’t plan for contingencies. The more you do both, the better you get at them.

Oh, and by the way – no one else cares about it as much as you do.

Free 1031 Seminar Coming in Sacramento

I wrote about the free 1031 seminar and a little bit about why it’s important for investors and landlords to know about a 1031 exchange but it seems like we’ve all been hit with the lazy bug lately and have received no responses so far.

So I must reiterate in John Lockwood style, maybe:

It’s free.

“Free, really free?”

Yes. You pay nothing.

What is a 1031 exchange?

“It’s a vehicle that allows you to exchange your non-cashflowing rental into a cashflowing property – even a commercial property, if you so choose – and defer paying taxes.”

Details?

“Attend the seminar.”

When?

“Just drop me an email and let me know you’re interested at purvabrown@msn.com and I’ll let you know! Seriously, shouldn’t you learn more if you could save thousands?”

Of dollars?

“Cut it out, John. You know I mean dollars!”

Sacramento’s Most Stable Neighborhoods

I’ve always maintained that all real estate is local. And while sales have slowed all over Sacramento, there are still neighborhoods that have maintained their value. And according to the SacBee, if you’re a buyer and are concerned that as soon as you buy a home, its value will drop, these are the zip codes and neighborhoods in which you should be shopping:

1. 95616 in Davis

2. 95603 in Auburn

3. 95678 & 95661 in Roseville

4. 95655 in Mather

5. 95816 – downtown Sacramento

6. 95841 in Foothill Farms

Of course, Land Park, Curtis Park and the Fab 40s as always made the list without being needed to be listed.

Sacramento Real Estate: all not lost!

The Sac Bee today reports that an Irvine-based foreclosure liquidator sold a house a minute to investors hungry for a bargain on Sacramento homes. For all the fear of a real estate bubble that everyone seems to be talking about, you have to admit a house a minute bodes well for all of us invested in our homes and investment properties.

Buyers on the fence, are you listening?