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buyers and sellers

How will the pandemic shape buyers and sellers?

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How will this pandemic shape buyers and sellers? What will people do differently when it comes to real estate? Here are some things on my mind. What do you think? Please comment below.

Rural areas: I’ve heard data firms and colleagues talk about growing interest in rural areas, so this is something to watch to see if it pans out. The idea is people are craving more space, so they’ll embrace a country lifestyle.

Land: A friend the other day was talking about land on the outskirts of the region. Owning a couple acres for $20K is appealing in light of the idea of having more space. Here’s a list of thirty lots under $50K.

Family & Divorce: Some people may want to move closer to family while other households are going to be splitting due to divorce.

Buyers more sensitive about location & condition: For years buyers have been exhibiting sensitivity to adverse locations and homes that are not in pristine condition. In other words, buyers have higher expectations about what they are buying and they aren’t overlooking the true condition of a home or paying top dollar for junk. I expect going through a pandemic will only inflame this dynamic.

Accessory dwelling units: I’m guessing accessory dwelling units will be more useful and desirable for extra income as a rental, housing family members, helping friends who lost jobs, and working from home. Here are all sales in MLS over five years with a listed guest house (I may do a deeper post on this soon). Some of these properties of course had more of a pool house, but many do have a legit ADU / second-unit / apartment thingy.

Moving out of state: This pandemic may motivate people to finally make that move they’ve been talking about to a different county or state. I’ve heard some locals say things like, “I’m heading to Texas as soon as this ends.” And I imagine some Bay Area residents are declaring, “I’m going to Sacramento when this is over.” Migration has been a trend already, and we’ll see how it evolves.

Home office: We’ve all been having Zoom meetings and figuring out ways to work from home lately. I suspect many businesses will go back to normal, but some may adapt their model. Thus having dedicated space for working from home could prove to be more valuable over time. I don’t know that buyers at the moment are actually shopping with this in mind, but if we see a bigger change in business models this will be something that becomes more important.

Cash out at the top: Some people are concerned about the market changing directions, so we’ll see certain owners try to cash out at the top so to speak. I’m not saying we’re at the top of a price cycle. I’m only saying some people think the pandemic has pushed us or will push us into a new price cycle.

Downsize & Upsize: There are households in need of more space because they’ve learned their home is too small. In contrast, maybe it’s time for some to sell, buy a smaller home, and pocket cash (or invest in hand sanitizer and toilet paper).

Gardens: It seems like everyone and their Mom is either baking bread or starting a garden (except for my house). Thus I expect to see more gardens in coming time when visiting properties. The other day someone asked me if a one-acre parcel would now be more appealing because of all the extra space to start an urban farm. Well, in my mind most people are not looking to have a garden of that magnitude.

No effect at all: Let’s be real that lots of people will come out of this not doing anything differently.

Other: What else? I’d love to hear your take in the comments.

Okay, moving on.

FRESH STATS: 

Like I said last week, buyers are starting to get more used to this market, and this week it looks like pending contracts are on pace again to outpace the previous week (we’ll know more in a few days).

RESOURCES:

New market video: Here’s a fresh market update. It’s 20 minutes and I talk about the future (NOT a prediction video). Check it out below or here.

SAR market event (free): On Monday May 4th at 10am I’m doing a free big market update with the Sacramento Association of Realtors. This will be about an hour and it’s for anyone (not just members). Register here.

Videos this week: I’ve been doing lots of video conversations lately. I figured I would post the recorded ones here in case anyone wants to listen.

4/22/2020 Conversation with Madison Chase Team
4/24/2020 Conversation with Rico Rivera
4/24/2020 Conversation with Jenica Williams
4/27/2020 Conversation with Kristin Cooper

Appraiser John Carlson GoFundMe: John is a well-known appraiser in Southern California and he is going through a difficult time as he was diagnosed with cancer and hospitalized. I invite you to pray for him and donate if you can. See more here.

I hope this was interesting or helpful. Thanks for being here.

Questions: How do you think quarantining will shape buyers and sellers? What else would you add to the list? What did I miss?

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Are buyers & sellers getting used to the pandemic?

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Quarantine. Wearing masks. Social distancing. It’s so weird that these are regular things now. The world indeed has changed over the past month and so has the housing market. Let’s talk about some new developments.

FIVE WEEKS AGO: About five weeks ago the real estate market started to have a strong reaction to the coronavirus. I look to March 12th as our day of change as that’s when things started to kick into high gear with events cancelling and sellers and buyers backing off the market.

OBSERVATIONS RIGHT NOW:

1) Pendings and listings declined heavily for a few weeks.
2) Pending contracts have begun to increase again.
3) More new listings are hitting the market.

Here’s a closer look at the numbers. These are single family detached homes without condos. I don’t include condos because they’re a different market that can water down the data. If you include them in your numbers, that’s cool.

Here is a look at new listings. There has not been a dramatic uptick, but we are seeing more new listings compared to a month ago (the first week we had sheltering in place). 

SOME CLOSING THOUGHTS:

1) Goodbye cliches, hello experts: In a market like today it forces us to place our cliches, canned statements, predictions, and positive or doomy narratives aside. We simply must look to the numbers to understand the market. When trends change it creates opportunities for experts to arise. It also creates opportunity for credibility to be destroyed by making predictions that don’t come true and getting swept up in every single sensational headline.

2) Other markets too: This dynamic of the market seeming to hit a bottom a few weeks ago is something that is happening in some other areas across the country too as reported by Mike DelPrete in his email yesterday (a must follow). I’ll talk about this more in my weekly video at the end of this week. Please know I’m not saying prices or other metrics have bottomed out. I’m only saying it looks like listings and pendings (for now) have begun to increase again.

3) The future: We still don’t know the future, so I’d exercise caution in saying definitively the market has begun a recovery or rebound and will move forward from this point onward. We need time to see how everything shakes out and we’re still living in the midst of so many unknown factors that could sway the market in many ways. The reality is what we say about the market could be different next week based on new data.

4) Getting used to the pandemic: For now it looks like buyers and sellers have started to get a little more used to this pandemic market, which is evidenced by more pending contracts and an increase of listings lately. It’s possible some of this could be attributed to real estate agents being deemed essential too. Will this continue? Is this a trend we’ll see more in coming weeks? To be determined. 

GRAPHS: I plan to make a tutorial soon on how to make a few of the graphs I’ve been posting. Appraiser colleagues, I haven’t forgotten.

I hope this was helpful.

Okay, moving on:

RESOURCES:

New market video: Here is a fresh market update video. This is 25 minutes and perfect for the background while working. Check it out below or here.

 

Interview with The Appraiser Coach: I did an interview with Dustin Harris to talk about not waiting for sales to see pandemic data. Watch below (or here).

Interview with Brad: I did a Facebook Live Q&A with Brad L’Engle last week to talk shop. Enjoy here if you wish (you don’t need Facebook to watch). 

I hope this was interesting or helpful. Thanks for being here.

Questions: What do you make of the stats above? What are you hearing in escrows from buyers and sellers? If you’re not local, what are you seeing happen in your market?

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The players in the market & normal pendings

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Who are the players in the market? Who is buying and selling? Who is coming? Who is going? These are questions we have to ask to grasp a local market. And for real estate professionals, knowing who the players are helps us serve clients well and sometimes even make future business plans. 

Well, let’s talk about a new player in town called Opendoor. This company is trying to gain a foothold in about 20 markets across the country right now. If you’re not local, are they in your area?

Opendoor posted up in Sacramento last year and they’ve begun to make a splash. They’re not dominating the market by any stretch, but in the region over the past few months they bought over 90 homes. I don’t fully understand the fine print of their business model yet, but in a nutshell they buy from owners privately and then put these homes back on the market to sell to the public. In fact, mostly all of their private purchases are currently re-listed on our local MLS. Opendoor also has an affiliation with Lennar – a local builder.

My real estate antennas: Any time I see a group buying a larger amount of homes, I pay attention. In the past I talked heavily about Blackstone, and in the future I’ll discuss other players whether they’re making a splash or shaping the market (like Blackstone did). Any stories or thoughts?

Now for those interested, let’s talk about the market – especially pendings.

I hope this was interesting or helpful.

—–——– Big local monthly market update (long on purpose) —–——–

The market slumped during the second half of 2018, and now it’s an interesting spot. Let’s talk about it.

THE SHORT VERSION:

  • Pendings were normal for January
  • Sales volume has slumped for 8 months in a row
  • Prices are barely up from last year
  • Most metrics softened as expected for January
  • The market is starting to wake up for the spring
  • This post is long on purpose. Skim or pour a cup of coffee.

DOWNLOAD 70+ graphs: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

THE LONGER VERSION:

Here’s some of the bigger topics to consider right now.

We need time: We don’t have a totally clear picture for where the market is going yet in 2019. We still need more time. Here is what I am specifically looking for in the stats over these next few months.

Normal pendings: It’s big news that pending sales were normal this past month compared to last January. We’ve had a slump in sales volume for eight months, so what does this mean? Well, it could be the market trying to find some normalcy after two quarters of sluggishness. Though the real cause very likely stems from mortgage rates recently declining. It’s amazing how that can affect buyers and even sales volume. Remember, pendings in January will likely close in February and especially March. So if we start to see a normal level of pendings in January and February, we may see sales volume show normalcy for the time being.

Yeah, most metrics softened: We saw the typical signs we’d expect to see at this time of year with most metrics. It look longer to sell last month, prices dipped, inventory increased, and sales volume sloughed. Though overall the softening in most metrics felt way more pronounced.

Low rates are steroids: Mortgage rates declined and that’s seeming to draw some buyers back into the market. Low rates are like steroids for demand – at least temporarily.

More listings this year: There’s more listings this year compared to last year at the same time. In fact, it’s been about five years since we’ve started the year with this much housing supply.

Waking up: I’m hearing from many agents about more buyer attention on their listings lately. More traffic at open houses. More offers. It’s still to be determined what this spring market will look like exactly, but for now the spring season is starting to move.

Not seeing aggressive price gains: The rate of price change has slowed. What I mean is in years past we’d see 7-10% price increases when running stats, but now we’re seeing modest 2-3% year-over-year price gains. 

In case you need slumping trivia to impress friends: Last month we saw the worst sales volume in 11 years for a January. We’ve had eight months in a row of year-over-year sales volume declines. That’s a dismal stat and there’s no sugar-coating it. If this trend doesn’t change we’re going to have a much different market. Yet this is why seeing normal pendings for January is a big deal because today’s level of pendings could presumably show a normal number of sales in a couple of months when these properties close.

The Tallest Graph in Sacramento: Here’s a look at over 60,000 single family detached sales in Sacramento County. This graph is inspired by Jonathan Miller.

Less offers: Here’s an interesting way to see the market has slowed. Multiple offers are down about 11% this year.

More concessions in new construction: Lots of builders are offering credits and concessions to help get their deals done lately. This is a symptom of a slower market. It seems more sellers are also offering concessions and credits too. Buyers, don’t be afraid to negotiate with sellers since the market has slowed, but at the same time don’t think you are driving the market either. Keep your perception of power in check. And sellers, talk with your agent about whether credits or concessions might need to be an option on the table.

Final thought before the graphs: In closing, the market is in an interesting spot. It feels like it’s juggling uncertainty from last year with a striving for normalcy today. We only have one month of data and we need to keep watching to see how this market is going to emerge.

I could write more, but let’s get visual instead.

BIG ISSUES TO WATCH:

1) SLOWING MOMENTUM: The stats show the market is slowing down when we look at the rate of change by year. Looking at monthly, quarterly, and annual numbers helps give a balanced view of things.

2) SALES VOLUME SLUMP: It’s important to look at sales volume in a few ways to get the bigger picture. Here it is by month and year.

SACRAMENTO COUNTY:

Key Stats:

  • January volume down 21.5%
  • Volume is down 4.7% over the past 12 months

SACRAMENTO REGION:

Key Stats:

  • January volume down 17.7%
  • Volume is down 5.8% over the past 12 months

PLACER COUNTY:

Key Stats:

  • January volume down 10.9%
  • Volume is down 7.7% over the past 12 months

3) LAST YEAR VS THIS YEAR: Here’s a comparison of last year compared to the same time this year. What do you see?

NOTE: Placer County had very few sales this January, so I wouldn’t put much weight on the price figures for this month.

SACRAMENTO COUNTY (more graphs here):

 

SACRAMENTO REGION (more graphs here):

PLACER COUNTY (more graphs here):

I hope that was helpful.

DOWNLOAD 70+ graphs: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

BLOG BASH: Just a reminder I’m hosting a blog party on March 2nd from 3-7pm. You’re invited to celebrate my blog’s 10th birthday. I know, that sounds a little cheesy. But I’ll be buying the first 100 beers… Details here.

Questions: Any stories to share about who is playing the market right now? What are you experiencing right now in the trenches with buyers and sellers?

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