The number of homes sold in Davis was up about 10 percent for the first six months of 2012 — but the pace of home sales continues to lag behind historic averages. And according to County Assessor Joel Butler, the city of Davis showed “a modest increase” of 2.09 percent in assessed values of properties on the tax rolls as compared to the previous year — even as West Sacramento and Woodland showed a 3.09 percent and 1.29 percent decline respectively.
At the same time, the average price of a Davis home sold during the first six months of 2012 showed a very slight decline compared to the same six months of 2011. But that statistic is a little tricky, since prices are actually up in some Davis neighborhoods. And the differential between the average sales price (a dollar figure reflecting the average of all homes sold) and the median home price (the middle point at which half of homes sold for more, and half sold for less) is narrower than it was last year at this time.
What to make of these mixed trends? How can assessed values be ticking ever-so-slightly upwards while the overall average sales price moved down incrementally?
Let’s start with the assessed valuations on the tax rolls. County Assessor Joel Butler began by pointing out that “Davis didn’t see as much of a decline” in property values as other parts of the region. And since many Davis homeowners are living in houses they bought in the 1990s (or earlier, at prices in the $150,000 to $250,000 range, and since basic property taxes can only go up two percent per year under 1978’s Proposition 13, many Davis homeowners continue to pay property taxes at an assessed valuation that is significantly lower than the market value of their home. For instance, a modest East Davis home that was purchased in 1995 in the mid $150s now has an assessed value in the $190s, in many cases — even though the current market value of that home would probably be roughly double the current assessed value. “That accounts for a big chunk” of this year’s 2.09 percent increase in the assessed value of Davis homes.
“And of course there are always some houses that change ownership,” Butler continued. “When those homes are sold, their assessed value domes up to the current market value — though the current market value is still not as high as the market was in 2006-2007. And there is some new construction — people adding pools or bedrooms — as well as a few new houses being built.”
In other words, the assessed value of Davis homes continues to move slowly upwards, in large part because the assessed value is still catching up with the steep rise in market values during the past decade-and-change … even though some of those gains were erased as home prices fell, locally and nationwide, when the housing market began to chill in 2007-2008.
In terms of sales trends, Dave Taormino, co-owner of Coldwell Banker Doug Arnold Real Estate, said the number of Davis homes sold “is up about 10 percent” for the first half of 2012. Taormino predicted that when all is said and done, something like 425-430 Davis homes will have changed hands in 2012 — more than in the last few years, but still below the typical figure of around 550 homes sold per year in more typical times.
Taormino added that for the time being, “Prices are fairly flat, or maybe a little bit less — you have to go house by house. Some properties are commanding higher prices, but on average the sales price is a little bit less.” The slight decline in the average sales price — around $475,000 in the first half of 2011, to around $450,000 for the first half of 2012 — reflects in part that “high-end homes make up a smaller percentage of sales than last year.” Much of the movement is in the $350,000 to $600,000 range, Taormino said. And there are fewer properties moving in the $700,000-and-up range. So the overall average comes down a bit.
Herb Cross, vice president of Lyon Real Estate, said “we have to keep in mind that the fluctuation in the average and median prices are very neighborhood specific. If you take North Davis, South Davis, East Davis, West Davis and Central Davis, we find differences. There is movement in the average in every one of those areas. It’s difficult to generalize. There are areas of Davis moving in different directions, price ranges moving in different directions. But generally, the market is improving.”
There’s no question that mortgage interest rates are at historic lows, which is spurring some prospective buyers to get off the fence and make an offer. “The last time I remember these kind of interest rates was when I was a child in the 1950s,” Taormino said. “I remember my mom and dad had a 3 and 5/8ths percent loan in 1952, on a duplex.”
The trend in sales in Davis is also markedly different than in some neighborhoods in Sacramento, Woodland and elsewhere, where home prices nosedived by 55-to-60 percent in many cases. Investors have been moving into those Sacramento neighborhoods and snapping up foreclosed homes at fire sale prices (in the $100s, or lower) with all-cash offers, and then renting out those properties to generate quick cash-flow. “There is a lack of supply in Woodland,” Taormino said. “My agents are bemoaning the fact that they have a surplus of buyers, and not enough houses for sale.”
Published reports suggest that 1-in-4 single family homes in Sacramento is now owned by an investor, rather than the home’s occupant. Some Sacramento renters are effectively locked out of the home buying process because they’ve been through a recent foreclosure — other prospective buyers are simply spooked by the sharp decline in home values, and opt to keep on renting. And some prospective Sacramento buyers do make offers with a conventional down payment, but are passed over by sellers in favor of an all-cash offer from an investor. There’s no question that mortgage lenders are more careful and selective than they were five or six years ago.
Davis home prices didn’t come down as far as they fell in Sacramento — you can get different opinions, but a 25 percent decline (roughly equivalent to the national average) is a figure often heard. And with Davis homes selling, on average, in the mid-$400s, “it doesn’t make economic sense” for an investor to buy a house in Davis with cash in hopes of recouping a quick return through rental income, the way investors are buying homes elsewhere nearby. Typically, Davis home buyers are much more likely to be buying a home in order to live in it.
— Reach Jeff Hudson at [email protected] or (530) 747-8055.