National real estate expert Barry Habib has the perfect metaphor. He says the
market used to be driving 80 mph, but now it’s driving 30 mph. In other words,
we’re still seeing progress with price growth, but it’s been a much slower pace.
stepping away from the market; sales
in the 10-county Capital Region were
down 10 percent during the last half of
the year.
But in 2019, the market has rebound-
ed since rates went back down. It’s as if
last year’s dull vibe has been swallowed
up to create a more normal feel. Low
rates have been a steroid to help buy-
ers put their foot back on the gas pedal,
showing just how sensitive our market is
to rate changes. As rates presumably rise
at some point in the future, we can ex-
pect our market to damper once again.
After prices increased for seven years
in a row in the Sacramento region, many
are concerned about a possible down-
turn. Some even believe in the “seven-
year rule,” which contends the market
changes directions every seven years.
I can understand this idea because the
market really does tend to have a cycle
where it shifts every decade or so, but
let’s remember there’s no law that says
prices have to change every seven years.
Real estate markets go up and down
— just like relationships, the stock mar-
ket or my pants size. The market tends to
have a pattern where prices go up for a
number of years before we see a change
in direction. In Sacramento we saw pric-
es dip in the 1980s, 1990s and 2000s, and
we know at some point the market will
change again because that’s what mar-
kets do.
We do seem to be closer to the top
of a price cycle since affordability is be-
coming more of a struggle and price
growth has slowed. Yet we don’t know
when the market might turn or how se-
vere it would be. Some think we’ll see a
collapse like 2005, others say the market
will correct by 10 percent, and some say
the market will just level off. All three
ideas have one thing in common —
they’re guesses.
No matter what the market does,
here are a few quick suggestions for both
sellers and buyers:
1
Price for today: Don’t make the mis-
take of pricing for the more aggres-
sive market from yesteryear. Look
at the most similar properties going
into contract and price accordingly.
It doesn’t matter how competitive the
market feels; what prices are doing is
the key.
2
Be careful of real estate prophets: We
are flooded with real estate predic-
tions, and there are many people tell-
ing us what the future will look like.
The problem is when predictions are
made and they don’t come true, the
prediction timeline keeps moving
forward. So at some point a “prophet”
could end up being right despite be-
ing wrong for so many years.
3
There is no formula: With so much
talk about market change, it’s impor-
tant to remember there is no such
thing as a “bubble” formula. More
than 10 years ago, we experienced a
severe housing collapse stemming
from rampant loan fraud, and that
sort of change isn’t now a recipe for
how every downturn or market cor-
rection needs to look in the future.
Ryan Lundquist is a certified real estate
appraiser at Lundquist Appraisal Com-
pany. Read more at sacramentoapprais-
alblog.com. On Twitter @SacAppraiser
Questions on the
real estate market?
TWEET US
@COMSTOCKSMAG
I gave a big talk a few months back to
a room of investors and afterward some-
one asked me, “What’s the market going
to do over the next three years?” And I
told him, “I’ll tell you in three years.” n
June 2019 | comstocksmag.com
29