Sacramento Appraisal Blog | Real Estate Appraiser

Real estate appraisals for divorce, estate settlement, loans, property tax appeal, pre-listing and more. We cover Sacramento, Placer and Yolo County. We're professional, courteous and timely.

The market is slowing (we’re not surprised)

By 20 Comments

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.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Reader Interactions

Comments

  1. 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!

    Reply

    • 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?

      Reply

  3. 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.

    Reply

    • 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…..

      Reply

  5. 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?

    Reply

    • Thanks Tom. And by the way, I was out of town all last week, so sorry for the delay in response. I’ll say taking a vacation and unplugging sure was great though.

      I think your reading reflects the market pretty well in many areas – and definitely in Sacramento. Builders really don’t have incentive to build small homes at lower prices. While that would really help the public, from a business standpoint it means less profit. It’s frankly more expensive to build smaller homes anyway too, so that complicates things even further. Unfortunately in Sacramento many new homes aren’t included in MLS data as builders don’t enter all their properties on MLS. But even if they did, building is just beginning to get back to where it was about 10 years ago. It’s good to see permits for new construction on the rise, but it isn’t an enormous sliver of the market yet though either.

      Reply

  6. 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!

    Reply

    • Hi DeeDee. Thank you so much. I appreciate hearing your take as always. You are spot on about inventory normally climbing around this time of year. I concur it is still competitive out there and buyers need to bring strong offers.

      Reply

  7. Nice compilation of data. I have two observations.

    1) foreclosures would add to the overall trends
    2) the download all graphs link is busted

    Great data analysis. We have similar issues in Houston.

    Thanks

    Reply

    • Thanks Bob. I appreciate it. I typically share foreclosures and short sales once a quarter. I intended to do so in this post, but I ran out of time to compile the stats this time around. Realistically REOs and short sales are a very small factor right now in the market. Typically REOs are about 1% of sales in the entire region, which is nominal. Nonetheless, I’ll have to remember to post some graphs in the next few weeks though still.

      Thank you for the heads-up on the link. I actually just switched my web host yesterday, and I need to upload the files so the links work like they should. Everything is moved over besides the zip folders (market trends). I’ll hopefully figure that out today or tomorrow. Again though, thank you.

      And for any onlookers, my web host has been having issues for the past two months. The down time has simply become unacceptable and I’ve spent way too many hours on the phone with them trying to troubleshoot problems. Long story short, I switched hosts and I’m very optimistic about the new one.

      Reply

      • Hi Ryan,
        We are seeing an interesting turn. Each buyer seems to have a unique challenge. At least for me there have been no easy slam dunk deals.
        I even had one client want to know if we can transfer the appraisal from the house he just sold, to the new home he is buying. He could not understand why that did not work.
        We are seeing a lot less buyer confidence that they are making a good decision. Deals are falling apart over minor issues. I have had a couple of bad out of the area Appraisers and clients getting gouged on the appraisal costs $800 plus $150 for a re-inspection on a new construction.
        Keep up the good work. I wish we could choose our Appraisers.
        Thanks,
        Rick

        Reply

        • Interesting to hear. Thank you for your perspective. I appreciate it. Yeah, it doesn’t work like that to transfer an appraisal. 🙂 I hope you get some slam dunk deals in place soon. It’s nice to have something seamless every once in a while. Seems like my appraisals haven’t been so cookie cutter either.

          I will say we’ve been bombarded with big real estate articles these past few days. I’ve seen read titles like, “The Southern CA market is crashing,” and “The U.S. market is about to take a big turn.” It’s good to read everything, though I do walk away with questions about data used in these articles too. I know for sure the X-factors to watch in our market are sales volume, inventory, and buyer sentiment. We’ll see any changes to the market first with all three (instead of just a change in prices). Let’s keep watching and figuring things out. Thanks again.

          Reply

Trackbacks

Leave a Reply

Your email address will not be published. Required fields are marked *