low inventory

Real estate drama (and a market update)

December 15, 2020 By Ryan Lundquist 50 Comments

I’m not into The Bachelorette or The Real Housewives. It’s just not my thing. But I love me some real estate drama. I’m not talking about HGTV, but the housing market. I know that elevates my nerd status, but I’m hyper focused on fresh stats, ups and downs, and things that make the market move.

(scroll down for a big market update instead)

AN EXCEL FILE FOR CHRISTMAS? Today I want to share some new neighborhood visuals and I’d like to give you an Excel template so you can quickly make these images for neighborhoods in your area. Does that interest you? If I have consensus I’ll post a template with instructions next week.

DRAMA IN THE NEIGHBORHOOD: What can you tell me about this neighborhood (East Sac)? What stands out to you about the relationship between price and square footage, lot size, and bedroom count? I made these images in a couple of minutes with the template I mentioned.

What do you think? Do you like any of these images? Any ideas for something else to show in a quick template like this? Let me know.

UNCLE RYAN’S LAME GIFT: I know it’s odd to wrap an Excel file for Christmas, but let me know if this would be relevant. You can use it for studying neighborhoods, explaining the market to clients, or for newsletters / social media. If there’s enough interest I’ll make a video tutorial. You don’t need to be an Excel guru either. This is something anyone can do with a little effort.

FOX 40 INTERVIEW: By the way, I did a 15-minute live segment last week on Fox 40. We talked about Sacramento being poised to have the strongest market in the country next year according to Realtor.com. Watch here if you wish.

Thanks so much for being here.

Any thoughts?

———————- (skim or digest slowly) ———————–

BIG MARKET UPDATE

For those interested, here’s a big Sacramento market update:

MARKET SUMMARY: In short, we’ve been seeing the drama of a spring real estate season during the fall months. The housing market has been on steroids and the slower fall season we normally have just didn’t happen. Well, technically we are seeing some stats start to slow down as prices have gone sideways lately and we’re seeing fewer sales like we normally do in November and December. But here’s the thing. The “slower” stats are still so elevated from where they should be that it just doesn’t feel slow at all.

HIGHLIGHT REEL:

Half of all sales sold in seven days or fewer last month
For six months in a row sales volume has outpaced last year
We only have three weeks of supply (that’s crazy low)
We have the lowest monthly inventory in 15-20 years (at least)
Buyers made twice as many offers last month compared to last year
The number of listings has been chopped in half
Price metrics are up about 12-14% from last year
November 2020 regional volume is up 25% from November 2019
63% of all sales had multiple offers last month
There were 53.6% more multiple offers compared to last year
Each sale last month had an average of 3.22 offers
Sales volume is up about 2% over the past 12 months
There were 106% more million dollar sales from July to November

WAY TOO MANY VISUALS:

You are welcome to use these in newsletters and social media with proper attribution. Scroll quickly or digest slowly.

SACRAMENTO REGION:

SACRAMENTO COUNTY:

PLACER COUNTY:

EL DORADO COUNTY:

Other visuals: I have lots of other graphs. Check out my social media in coming days and weeks. I am posting daily stuff on Facebook, Twitter, and LinkedIn. Oh, and sometimes Instagram.

Thanks for being here.

Questions: What are you seeing in the market right now? Any stories to share? Are you interested in my Excel template? I’d love to hear your take.

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

Why is housing inventory so low?

September 29, 2020 By Ryan Lundquist 30 Comments

Housing supply is insanely low right now. It’s getting ridiculous. Why is it so low? Let’s make a list. Please add your take in the comments.

SOME REASONS WHY HOUSING SUPPLY IS LOW

1) Not listing during the pandemic: Sellers aren’t listing as often during the pandemic. This has been common in many markets across the country, and in Sacramento in particular where monthly inventory is down about 50% right now compared to last year.

2) More demand: Mortgage rates below 3% have caused buyers to jump off the fence and basically gut the market. Thus increased demand has depleted listing inventory (which was already low).

3) Lack of new construction: We’ve had population growth in the midst of anemic new construction since the housing bubble burst. In other words, we haven’t built enough units and we’re really beginning to feel the sting of it. Check out this visual from FRED to show housing starts today compared with 2005.

4) Shift in demographics: People are staying in their homes longer and therefore not selling as often. Last year Redfin published research stating owners are staying in their homes an average of thirteen years instead of eight years, which means there aren’t as many homes being listed for sale.

5) Increased migration: Some markets are seeing more buyers from outside the area flocking to the neighborhood. Lots of Californians of course are leaving the state and heading to Idaho, Nevada, Texas, and all the usual suspects, but who is coming to the market? There isn’t one definitive easy source to track migration unfortunately, but Bay Area buyers have seemed to have an increased focus on the region. In fact, LinkedIn recently published stats showing a 7.6% increase in net arrivals in Sacramento.

6) Nowhere to go: Some owners would list but they feel there’s nowhere to go because homes are too expensive or inventory is too thin.

7) Shift in home size: We’ve been building larger homes for decades now, which could eliminate the need for some folks to buy something else because they are satisfied and able to stay put. During the pandemic of course we’ve seen buyers target larger homes.

8) Other: Blackstone and investment funds purchase thousands of homes that have not resold on the open market. I wouldn’t say this is the reason inventory is thin, but it’s worth mentioning. We’ve also had wildfires in portions of California where homes have not been rebuilt.

9) Not a distressed market: We used to have more listings because of all the distressed sales, but we just don’t have that sort of market any longer. Bank-owned sales (REO) represent about 1% of all sales in Sacramento County as well as the region, and short sales are even rarer.

10) What else? Did I miss something? Please comment below.

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

Questions: What point stands out to you the most? Why is inventory so low right now? I’d love to hear your take.

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My health went crazy & so did the market

September 2, 2020 By Ryan Lundquist 43 Comments

Long time no blog. I don’t know if you noticed, but I haven’t been around these past two months. Today I want to talk about why, say thank you, and then share some cool visuals I’ve been making these past couple weeks.

What happened: In late June I began to have an ulcerative colitis flare and it got really bad to the point I had to be hospitalized for six nights. Fourteen years ago I was diagnosed with UC and this is frankly the worst it’s ever been. Thankfully my flare is subsiding and I’ve since been slowly regaining energy.

I’m blown away at your support: This has been a difficult season for my family. It’s hard to not feel well and it was scary being in the hospital. But in the midst of this it’s been incredible having an army of support rise up. The cards, flowers, meals, text messages, advice, gifts in the mail, DoorDash, emails, prayers… It all meant so much.

An army of support: While I was in the hospital a GoFundMe was started by my friends Erin Stumpf and Joe Lynch. I’m honestly a guy who hates accepting help. I would never in a million years have asked for something like this because I always want to be the giver. So it was humbling to see my face online and to have my colon become internet famous (haha). I received a text message basically saying, “We’re going to do this and your peeps are going to take care of you.” And that’s what happened. Everyone, I cannot put into words how grateful I am for you carrying my family during this time. As the hospital bills start rolling in and I haven’t had income for over two months, your generosity has been a tremendous blessing. It’s frankly taken off some pressure and given me space to adequately heal. I still have lots of individual thank yous to say and I will get to those over time, so please be patient. But for now I want to publicly thank everyone for your support. I have no words to express how deeply grateful I am.

NOT ASKING FOR MONEY: I wanted to clarify that I am NOT asking for anything. I did not link to the GoFundMe on purpose. We have received plenty and I think we are good in terms of finances.

I’ll be back: I was hoping to be back to work the day after Labor Day, but these past couple of days I’ve been exhausted, so we’ll see. In the meantime I’m posting some visuals on Facebook, Twitter, and LinkedIn.

Okay, enough about me and my colon….

THE MARKET WENT CRAZY

While I was gone the market went absolutely nuts. In short, competition has been fierce and we’ve begun to see one of the most competitive markets we’ve had.

WAY TOO MANY VISUALS FOR YOU:

Multiple offers: They were up 25% this August compared to last year at the same time. As you can see, the percentage of multiple offers is at its highest point in recent years too since the metric began to be included in MLS. We started to see the market soften during the beginning of the pandemic, but then it sped up to create a V shape as mortgage rates went down.

Here is a new visual. What do you think?

Price reductions: This is another brand new visual. About 9% of the market had a price reduction last week. This isn’t much, but it reminds us the price has to be right – even in the midst of such low inventory.

Sales volume: We’ve seen a recovery in volume lately after a slump during the beginning of the pandemic. Usually volume tops out around July or August each year too and it looks like that may be starting to happen. This topping is normal for the season and we’ll know more in the next few weeks how the market is moving. Stay tuned.

Prices: Prices have been ticking up and preliminary stats for August so far show another increase from July. For a while the market was subdued and we were seeing year over year growth anywhere from 2-4%, but it’s been more like 8% and higher lately from last year.

Listings: It’s as if listings have been cut in half from last year. When I pulled stats at the beginning of September last year there were over 4,700 listings on the market in the region, but yesterday there were just over 2,200. Isn’t that crazy?

Six years of listings: Here’s another way to look at the number of listings. These are listings from 2015 through 2020 pulled on the first day of September each respective year.

Inventory doing the limbo: Inventory has been shrinking as I mentioned above. Here is a look at a few local counties.

Distressed sales have bottomed out: We are not seeing more distressed sales hit the market. There is talk about a new wave of foreclosures coming, but if that ends up happening it would take a while before anything actually shows up on MLS. Moreover, many owners are in distressed situations, but they are sitting on equity and could sell instead of give the house back to the bank. Let’s keep watching.

Unemployment: Let’s keep watching the job market and economy.

Other visuals: I have lots of other graphs. Check out my social media in coming days and weeks. I am posting daily stuff. I may or may not put up a weekly blog for now, but I probably will since I have so much to share.

Thanks for being here.

Questions: What are you seeing out there in the market right now? I’d love to hear your take.

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

The blazing hot market & uncertainty

March 13, 2020 By Ryan Lundquist 4 Comments

The market has been white hot, but there is also lots of uncertainty right now too. Let’s talk about this and take a deep dive into the latest stats for those interested. I’d love to hear your take in the comments.

A few things I want to mention:

1) Layers: There are many layers that make the housing market move and sometimes unexpected things happen. Who would have thought we’d be talking about rates at 3% or a virus?

2) Dumpster fire: Social media is like a raging dumpster fire right now in light of coronavirus posts. It’s been unreal, so I’ve had to distance myself from scrolling too much. Can you relate?

3) Keeping my blog name: This won’t become the COVID-19 Appraisal Blog, but we’ll talk about the virus as needed as it relates to housing. No fear. No hype. Objective thoughts and analysis. Ultimately it’s important to have honest housing conversations and consider things that could affect the future.

4) Be at peace: I’m profoundly aware of the need to remain calm and have a sense of peace, but I’m also aware that probably won’t happen by accident. This might seem odd to mention, but I want to encourage everyone to find ways to cultivate peace right now in uncertain times. If you need ideas too, reach out. This is way more important than anything else I talk about, which is why I’m mentioning it.

Anyway, that’s what’s on my mind. Now for those interested let’s take a deep dive into local housing trends.

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

This post is designed to skim or digest slowly.

THE SHORT VERSION:

Prices are back to summer
Has coronavirus affected the market?
Watching for a coronavirus effect
Lack of confidence
More competitive at lower prices
More multiple offers
The market is accelerating
Mortgage rates & Debbie Downer
You still have to price it right
Sales volume is lackluster
Back to the nominal peak
More visuals for surrounding counties

DOWNLOAD 90 visuals: 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:

Back to summer: The median price in Sacramento County jumped $20,000 from January to February. I know that sounds sensational to see a $5.3% increase, but keep in mind the median price was $385,000 at the height of summer last year, so the bigger story is we basically got back to where summer was plus a few percent. It’s pretty common by March or so to see the median price back to where it was during summer, but in a more aggressive year this can happen in February. On paper the market is glowing, but the big elephant in the room is the coronavirus, so let’s talk about it.

Has coronavirus affected the market? Someone called me yesterday and asked if coronavirus has affected the housing market. I wrote about this last week and I basically told the guy we don’t have any real data yet. So far in Sacramento this year the market has felt competitive and any threat of an outbreak has seemed to be hampered by the sexiness of low mortgage rates. However, we haven’t really had many COVID-19 cases manifest locally and people haven’t been too concerned. Though this week social media began to panic and it seems like we’ve reached an inflection point as events get cancelled, people are practicing social distancing, and familiar faces like Tom Hanks have the virus. In short, it seems like many people have shifted to take this more seriously and in terms of real estate that’s something that could easily affect buyer and seller behavior in coming time. I realize a focus on real estate right now seems trivial when talking about a pandemic, but that’s what my blog does. In short, let’s pay closer attention to the stats in coming weeks especially.

Watching for a coronavirus effect: If we’re looking at recent sales, it likely won’t show us an effect of the coronavirus because sales tell us what the market used to be like when properties got into contract 30 to 60 days ago. If we begin to see an impact it’s going to start with what buyers and sellers are thinking right now, which will translate into what they do. Thus it’s important to listen for seller and buyer sentiment and to watch whether sellers are listing their homes and whether buyers step aside with a “wait and see” stance. More specifically, I recommend watching the number of new listings hitting the market, expired listings, price reductions, the number of sales happening, days on market, the number of pendings, number of multiple offers, credits being offered, etc… It’s tempting to look at prices as a gauge for any COVID-19 effect, but prices are the last place a trend shows up.

Lack of confidence: The big deal happening right now is consumers are losing confidence. On one hand the stock market doesn’t technically mean much for most buyers trying to qualify for a mortgage because their income isn’t based on Wall Street. But losing money in a 401K over time can certainly lead to less confidence about making other big financial decisions. So far the housing market has felt hyper-competitive this year locally because of low rates, but that can change quickly depending on how consumers feel about the economy, job market, and of course health. I know, housing is a need, so it’s different than choosing whether to eat out right now or not. But it’s also true buyers and sellers don’t always feel the need at every moment to pursue buying and selling. Like I said last week, markets don’t like uncertainty, so infusing more uncertainty into the economy and housing market is a big deal for how the market feels and what the market does. In all of this we’d be wise to avoid hype and sensational ideas. Let’s look to data to inform our perception of what is actually happening.

Okay, back to some stats.

More competitive at lower prices: Buyers know this. It’s been hard to get into contract lately – especially at lower prices where the market is more aggressive. Let me show you this with a bunch of yellow dots representing the sales price to original list price ratio. If you’re not familiar with this metric, when a property sells at 100% it means it sold at exactly the price it was listed. Likewise when the ratio is 103% it’s a sign a home sold three percent higher than the list price. Anyway, when looking at all February sales there are more properties selling above 100% at lower prices. This tells us homes are getting bid up more at lower prices. Duh, thanks Captain Obvious. I know this isn’t a surprise, but it’s fascinating to see visually. Here’s a big takeaway though. NOT everything is selling for more than the list price – even at lower prices. I know it doesn’t seem that way in the trenches of escrows, but there is no denying this reality when looking at the stats.

More multiple offers this year: This has been the most aggressive beginning of the year in several years. Technically the market saw 27% more multiple offers this year compared to last year at the same time.

The market is accelerating: For a long while I’ve been talking about how the market is slowing because that’s what the stats were showing, but I’m changing my tune because the market is accelerating again. Here are two images to consider. When we look at the median price in the region based on the previous twelve months, price growth has clearly tapered. It’s like you’re driving on the freeway and you take your foot off the gas pedal. You’re still moving forward, but you’re not going as fast. But when we look at the past 90 days in each respective year it’s obvious the market is starting to accelerate again.

SLOWING TREND:

SPEEDING UP LATELY:

Mortgage rates & Debbie Downer: This year the market has felt dramatically different than last year and the culprit is low mortgage rates. Having rates between 3 to 3.5% has been like injecting a steroid into the housing market because it’s made things super competitive. For some it’s helped create more affordability or at least incentive to get into the game, but this also artificially inflates prices and it’s not sustainable. I know I sound like Debbie Downer, but such low rates are a bit like injecting Cortisone into a bad hip. It feels good for a while until it wears off.

You still have to price it right: It’s tempting to think the market is so aggressive that you can price however you want. Nope. It’s still a price-sensitive sellers’ market. Even though it feels crazy right now due to low rates, buyers are still in tune with prices and not willing to offer any price out of desperation. Case-in-point: Here is what just about every neighborhood looks like. The longer a home is on the market, the further it tends to sell from its original price. It seems in most areas bidding wars happen in the first seven days and if the market is not biting at your price you better give serious consideration to doing a price reduction. If the market is speaking, it’s time to listen.

Sales volume is lackluster: Prices have been glowing and we’re seeing multiple offers, but sales volume is lackluster. On in more positive terms we could say the number of sales is pretty normal – but definitely on the lower side of normal. In the region we seem to have a new rhythm these past two years of 26,000 sales, but that’s clearly down from 28,000 in previous years (see image). Some say more new homes is the reason, but new construction hasn’t been that robust. Moreover, sales volume started to suffer as soon as mortgage rates shot up in 2018, so to me lower volume has more to do with buyers backing off (and affordability). With that said, we’ve been seeing fewer listings this year especially, so over time this can lead to fewer sales too.

Back to the nominal peak: The median price is officially back to where it was at the peak of the market in 2005. This honestly doesn’t mean anything because there isn’t any formula for the market where a “pop” or change happens when reaching a certain price level. But as a guy watching data closely for so many years, the numbers geek in me has been waiting a long time to see this happen. But again, it doesn’t mean anything. Technically when comparing value today with a date in the past it’s important to factor in how the value of the dollar has changed over time. If we use an inflation calculator the value of the dollar in 2005 at $395,000 would actually be worth $520,000 today. This is seriously anal and most people could care less about this technical conversation, but I wanted to mention it because it’s worth knowing. Also, I’ll hopefully avoid persecution on Twitter from the economics community. For me there is a practical takeaway here though because you’ll not hear me say stuff like, “Values are back to 2005”. Nope. Technically they’re not. But the nominal price is back to 2005, so that’s why I say things like, “Prices metrics are back to where they used to be.”

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

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Please enjoy more images now.

SACRAMENTO REGION (more graphs here):