The market is slowing. Most who work in real estate have sensed this and felt a “disturbance in the force” so to speak (Star Wars). The signs are clear, but sellers are slow to catch on because they’re stuck on “hot” headlines. Anyway, let’s talk briefly, and then for those interested I have a big market update.
QUICK TAKEAWAYS:
1) Slowing isn’t a surprise: You know what would be odd? If the market didn’t slow down for the season. Real estate tends to be cyclical and at some point each year it’s no surprise to see prices begin a downward descent after a high-altitude spring flight.
2) Not everything is slowing: Some markets throughout the country are in a stage of softening, but that’s not true everywhere. Moreover, let’s remember different price ranges, neighborhoods,and property types could be experiencing different trends.
3) Being an expert: For real estate professionals wanting to position themselves as market experts, it’s critical to be able to recognize the symptoms of a slowing market and to be able to communicate those to clients. It’s far too easy to speak in clichés or write in boiler plate, but the market is always changing, so let’s say something different as it does change.
4) Sellers: Are you listening?
I hope that was helpful. Feel free to use the image above as you see fit.
—–——– Big local monthly market update (long on purpose) —–——–
The market is slowing. I’m not saying it’s cold or declining. And this doesn’t mean it’s not competitive either. It is. But there are clear signs the market is shifting for the season. Housing inventory is increasing. It’s starting to take longer to sell. Many prices metrics softened slightly or flattened in June. We’re seeing more price reductions. The sales to list price ratio declined 1%, and even the number of multiple offers declined last month from the previous month in Sacramento County. No matter how we look at it, the market is slowing.
EARLY SLOWING: When real estate begins to slow people often freak out because it’s easy to think the market is starting to crash. Right now the stats look consistent with what we’d expect to see at t his time of year though, so I’ll keep saying this is a normal seasonal slowing unless I have a reason not to. Yet it’s interesting to see the market did begin cooling about a month early this year (that could be due to having more inventory so far in 2018).
LOTS OF INVENTORY: Housing supply in the region is up almost 20% this year compared to last year at the same time, and that makes a difference with how the market feels. Keep in mind inventory is still very low, yet this is something to watch because changes in inventory really do affect the feel and pace of the market. For any “bubble hunters” out there, be cautious about comparing this increase in housing supply with 2005 because so far the market is handling the listings that are out there (besides the overpriced ones). In 2005 housing supply literally doubled in Sacramento County in about 90 days, and sales volume dropped 40% over one year. That’s not the same thing as today.
MY FAVORITE CHART EVER: I made this visual a few days ago and I think it’s fascinating to see price changes like this. You like?
SALES VOLUME RHYTHM: Sales volume has seemed to find a rhythm lately. Before 2005 there was a huge uptick in sales, but then volume crashed when the market imploded. In recent years it looks more stable. As you can see during the first two quarters of the year the market has tended to have somewhere around 13,000 or so sales lately.
I could write more, but let’s get visual instead.
DOWNLOAD 57 graphs HERE: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).
SACRAMENTO COUNTY (more graphs here):
SACRAMENTO REGION (more graphs here):
PLACER COUNTY (more graphs here):
DOWNLOAD 57 graphs HERE: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).
Questions: In what ways if any are you seeing the market slow? What are you hearing buyers and sellers saying about the market? I’d love to hear your take.
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Great post! We are seeing some of the signs of a slowing market as well in North Texas. Median sales prices are still increasing but at a slower pace. The volume is down, inventory is increasing slightly as well as DOM. Thanks for your insight and great explanations!
Thanks Shannon. I appreciate it. I’m so glad you keep a close eye on your market. I love your blogs.
Any opinion of how the new tax reform will damage CA real estate?
Hi Gil. Thanks for asking. I will say in my area there are less high-dollar homes. Sacramento County really tends to top out around $4M for residential. In fact, there have only been four sales above $4M in Sac County ever. Some surrounding counties command higher prices though. I mention this because my market in particular might be less impacted. I do think this is going to be an issue though along the coast and in higher-dollar pockets of housing because there is real money at stake. When people are losing money or have less incentive to buy at higher prices, then that can soften the market. I’ve been reading Jonathan Miller’s notes and the market in portions of New York has seen some cooling. In part he attributes it to the new tax laws. To be fair I think we still need a little more time to see what impact there will be. This hasn’t been law for very long. Any thoughts?
Great post as always Ryan. On the lending side we are happy to see our clients more likely to get accepted when they are up against 1 or 2 offers instead of 10.
As you pointed out some sellers are slow to get the memo along with less seasoned realtors. Some late to the show are throwing properties on the market that are over-priced and sure to sit as the buyer pool has more inventory to pick from and is motivated but still reasonable.
Thank you so much Matt. I appreciate it. It must be nice to have buyers get into contract sooner. On a side note, I actually just ran some more detailed stats on multiple offers. Last month in the region 49% of all sales had multiple offers and 51% had only one offer. A few months back close to 53% of the market had multiple offers. This doesn’t seem like a significant difference, though it does show in a small way the market is in a cooling phase (not a free fall phase).
I totally agree with you about “getting the memo” on market trends. We have to stay in touch with the temperature of the market and act accordingly. If we don’t, then it’s like going to the snow without a jacket. Let’s know the season and be prepared for it…..
All great stuff Ryan. You truly are a real estate market Jedi. Hopefully I used that correctly, I’m not really up on Star Wars. 🙂
The Force is strong with you Gary. Thank you.
I really like your first chart too, Ryan. It’s interesting to see how the lower priced homes are decreasing as a percentage of the overall number sold. I did read elsewhere that builders are not building many entry-level homes but they are building higher price ones. I know these numbers include existing homes but I wonder how much this plays into the stats?
Great info Ryan! Our El Dorado Hill market is still pretty hot. Inventory is climbing which is normal for us as summer goes on but it was still down in June 30% from last June!