Is the Sacramento market too hot ?

Question

I just sold my 7 year 'flip' rehab and was looking to buy another.

But the market seems too hot in Sacramento.  The low end homes have doubled in price in the last two years.  Every trashed home has multiple offers the first day on the market.

Is the market too hot?

David Oldenburg · Answer

@Jack Murray I have been doing this a very long time, and there really is no good or bad market to flip homes.  It's all about buying cheap, and knowing your exit.  You can flip in a hot market and you can flip in a down market.  Do you have the ability to pay cash for your next flip?  Watch the "back on market" homes in MLS that need work.

Each day there are homes that were taken off the market because they had a buyer in escrow, but put back on the market when they buyer can't perform.  This makes for a very motivated seller.  The typical reason for falling out is financing. The buyer could not get a traditional or hard money loan. If you have cash, this is when you can get a great deal.

With the new TRID rules, a seller could be looking at another 2-3 months of waiting for money, by time they get the home back in MLS, get another offer, and go through another escrow.  If they really need the money (to buy another home or move etc..),  a cash offer with a 2-5 day close looks very attractive.  If you have questions, let me know!

Joe Bertolino · Answer

Not in my opinion.  2016 will be stronger than 2015.  My crystal ball starts getting cloudy in 2017.

Derek Daun · Answer

I should add that when I talk about speculation, I am still assuming that you can find a property that at least breaks even after expenses. The required speculation/appreciation is to make a good profit in the short term. These properties can still be found.

Derek Daun · Answer

From my perspective, the MLS deals have just about dried up, but they can still be found. The profits will be lower than previous though, and there's definitely a good amount of speculation built in.Yeah, the "trashed" houses have stepped up a lot in price in the lower market. Whether or not these prices are too hot can also depend on the neighborhood. A trashed house in Oak Park might be a much better bet than a similar property in North Highlands. I suspect a lot of the out of town buyers don't have as good of a feel for the neighborhoods, and might be causing some places to be hotter than justified.

I've noticed the difference between current list prices and prior sales comps to have taken an unseasonably big leap in the last month. Part of this is sellers getting optimistic, but I also think it's due to less experienced flippers needing to list higher to make out. Overall, I think everyone is getting a head start on the hopeful frenzy that might start up in March 2016.

On the other hand, a lot of the development that started 10-15 years ago is really starting to pay off, and Sacramento is blossoming into a fairly cosmopolitan city offering similar amenities and lifestyle as the coastal cities. Compared to those cities, we're a bargain. Employment opportunities (other than government) still need to catch up, I see that trend improving as well.

For those with a little stomach for speculation, there's definitely a huge amount of opportunity.

David Hutson · Answer

@Jack Murray,

I believe it's a hot market from the perspective there is not a lot of inventory and the good stuff goes fast.  I think 2016 will remain the same except we will have more people, than we already have, coming to Sacramento from the bay area as it is tough to find good deals there also.

I am done buying here as it's too hot for me so I make one less person in Sacramento looking for deals but I meet several people a week are looking for deals here and are not moving to other markets.  As stated earlier, the number of available homes are significantly lower and most people out there looking for homes are focusing on $300k and lower as they don't have funds for the higher priced deals.  If you can afford fix and flip the number of homes to look at will be greater.  I believe we have the buyers for those higher priced homes also.

Find a few good relationships at a REIA meeting or someone who is in the "in" crowd for the off market deals.  It may be an oxymoron but there deals where agents aren't involved.  The seller is looking to save on the commissions and it may help with the price you pay.  It may not get you the best deal but you may be able to preview the deals prior to it hitting MLS, when everyone gets a chance to bid on it.

Jack Murray · Answer

Could you explain how being a Wholesaler works?  Can you give an example of a property that you have available?  Where do you get houses at wholesale?

Valentyn Svit · Answer

@Jack Murray that doesnt really make sense to me, I can almost guarantee that a house like that is going to cost more than 70k in repairs. It looks like a tear down to me. But that's just my opinion. If you want good deals, find a good wholesaler who can sell you a property below market value. I also Wholesale in the Sacramento area.  Feel free to connect with me or any of the other guys on here

Jack Murray · Answer

So does this deal make sense..burned up house sells for $110k.  Comps are $180-200k

Fire damaged entire house via water damage, all floors toast.  Kitchen destroyed, roof sections burned up. electrical main burned up, garage burned up.  All ceiling and drywall must be stripped.

Must be $50-70k  to repair.    How can this make sense?

Jack Murray · Answer

How can you tell if the market is too hot?   My view is when a trashed property in a bad spot that didn't sell for 2 years suddenty has multiple offers indicates the market is too hot.

I haven't looked at higher end properties as its outside my financial resources, but that might be the right place to be at this time, people finally moving up now after not doing it for many years.

Gordon Cuffe · Answer

@jack murray The market is good if you want to fix n flip? The tough part as you know is finding the house at the right price. If your looking for a fix n flip, you will just have to network more and make more offers. There were only 2667 homes for sale in October in all of Sacramento county. That is down from a month ago.In October 2014 there were 3397 homes for sale. So as long as the supply of homes for sale stays low it will be tough for buyers to find good deals.

If a person wants to buy in Sacramento for investment purposes for buy and hold then it is not as good as market because the prices have gone up so much since April 2012. You just need to buy something below current appraised value in case next year we see values level off or start to go down slightly.

Is the Sacramento market too hot ?

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