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pandemic housing market

Real estate trends to watch in 2021

January 4, 2021 By Ryan Lundquist 22 Comments

What’s the real estate market going to do in 2021? Let’s talk about some of the emerging trends. Scroll quickly or digest slowly. Anything to add?

Market update at SAR: I’m doing a big market update at SAR on January 21st from 10-11:00am. Sign up here.

TRENDS TO WATCH IN 2021:

Continuation of aggressive market: My crystal ball is broken, but right now demand is truly excessive and inventory is about as low as it’s been, so for the spring season at least we seem poised to see the continuation of the competitive market we’ve had these past two quarters. Let’s remember one of x-factors why the market has been “on fire” though is rates below three percent.

Low inventory & vaccines: Housing supply is about half of what it should be locally and that’s the story in many areas around the country. There are many reasons why inventory is low, but the pandemic is a huge culprit. Frankly unless something happens to motivate owners to list their homes it’s hard to imagine normal inventory levels until we have a vaccine reach the masses and sellers feel more comfortable with buyers coming inside.

Thanks Sandra Schraeder for letting me use this photo.

Working from home: It was a game-changer for migration last year to see so many companies allow employees to work from home forever and this year we’re poised to see this trend continue. But let’s remember opportunities are uneven as the poor and low-wage earners are not likely to have increased mobility.

Buyer preferences: The pandemic has shaped buyer wants and needs and I suspect buyers will still target homes with larger backyards, built-in pools, larger homes, space for an office, and it wouldn’t be surprising to see condos be less appealing again this year.

The color of the year: This year Pantone has a twofer for their color of the year with both shades of gray and yellow. Gray has been prominent for years already. Do you think we’ll see more yellow?

Divorce: I was talking with a divorce attorney client the other day and he says his colleagues are all incredibly busy. While I don’t have statistics, I suspect the pandemic has caused life reflection and many couples have decided to call it quits. Of course having years of equity may propel this decision for some too.

Bubble concerns: Today I had two different people ask me what prices are going to do in the future (I didn’t give a specific answer). While we don’t have bubble hysteria, many prospective buyers are still wondering about future prices. Here are three truths to consider: 1) We’re now entering our tenth year of price growth; 2) It’s normal for markets to go up and down; and 3) What happened in 2005 isn’t the new template for every future market correction. For more thoughts see my open letter to buyers concerned about another housing bubble.

Uncertainty on the horizon: Housing headlines have been glowing lately, but let’s not get lost in the glory and forget we’re still in the thick of the pandemic and we’ve only scraped the surface of understanding the effect of the pandemic on the economy, job market, local businesses, foreclosures, and evictions. We need time see how all these things pan out.

Elimination of single family zoning: There’s a movement to do away with single family zoning to help create more housing and even undo some of the damage caused by past discriminatory practices such as redlining. In 2019 we saw Minneapolis do this by allowing up to three units to be built on a single family lot, and the City of Sacramento right now is talking about updating their general plan and moving away from unit-based density restrictions. This means instead of typically being able to build just one unit you could build a fourplex instead. For instance, read page 12 of this Sacramento City Council report (pdf). 

Racism in real estate: I expect we will see many more headlines about racism in real estate. Much of the conversation has focused on appraisers, but it will likely spread to other professions within real estate too. My advice? Listen, be a part of the conversation, and change as needed. If you are local and want to understand some of the history of redlining and restrictive racial covenants, check out this UC Davis talk by Dr. Jesus Hernandez.

Proposition 19: This California proposition just passed and it allows homeowners over 55 to transfer their primary tax base to a replacement residence. This is a big deal as it can free up mobility for a segment of the population. But the other side of Prop 19 is it’s now not so easy for heirs to retain the tax base of the previous owner. On my end working with heirs I’m hearing lots of talk about selling instead of holding. Though before predicting an avalanche of listings I suspect we’re going to see some creative ways heirs can still retain properties without residing in them. Let’s keep watching.

Affordability: Low rates have helped buyers afford the market more this year, but prices have also risen. At some point the benefit of crazy low rates is going to be diminished by lofty prices and we’re going to see the narrative shift to the struggle of affordability.

iBuyers may have a better year: This year wasn’t pretty for the iBuyer model because companies liked Opendoor and Zillow basically paused their operations during the beginning of the pandemic. Right now in the Sacramento region Zillow owns 32 homes and Opendoor owns 19 homes according to Tax Records. A couple years ago Opendoor regularly owned nearly 100 homes locally for reference. Ultimately the iBuyer model took a step back this year, but expect them to gain a little more share this next year. Let’s keep it all in context though because these companies have only a tiny sliver of the market despite getting tremendous press. 

1031 Exchanges: My analysis of local stats shows there are more 1031 Exchanges in an up market than a down market, so expect more of them this year. I’ve seen quite a few Bay Area investors park their money in Sacramento and I’ve seen some Sacramento investors move their money to lower-priced states. Of course lots of big companies such as Tesla have moved out of California recently. While that is a different thing, it’s something to watch because wealthy individuals and corporations are clearly weighing their options for where to park their money and businesses.

Goodbye California: Rising prices since 2012, the ability to work from home, and Boomers on the cusp of retirement will likely fuel more migration this year. Of course other groups will leave for other reasons too. I shared some migration stats last month from the American Community Survey and I’ll share more this year from other sources too. Stay tuned.

Other: What did I miss? What’s on your mind for the year?

RECAP NEXT WEEK: Stay tuned for a big market recap post with brand new visuals. Check out my social media this week for some previews (links on sidebar).

I hope this was helpful or interesting.

Questions: What else do you think will be important in 2021? Did I miss something? I’d love to hear your take.

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

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Filed Under: Market Trends Tagged With: aggressive price growth, Bay Area, COVID-19, Divorce, future housing market, housing market 2021, pandemic housing market, Pantone color of year, Prop 19, real estate bubble, Real Estate Market, sacramento housing trends, working from home

Don’t hold your breath for a Covid discount

June 17, 2020 By Ryan Lundquist 9 Comments

“Why is there not a pandemic discount? I don’t get it. The market has been going down.” Someone was angry with me recently after an estate appraisal didn’t come in low enough in his mind. The thought was prices should be dipping because we’re in a pandemic, but that hasn’t been happening.

The Truth: Lots of people expect the market to be weak right now.

The Takeaway: Let’s be careful not to impose ideas on the market about what we think should be happening. Instead, let’s look to the numbers to form our understanding. Likewise, it’s critical to be objective about the present and keep an eye on glaring uncertainties regarding the future. But let’s do this without viewing stats through a rose-colored lens or painting every conversation with a doom and gloom brush.

Anyway, that’s what’s on my mind…

———————— big monthly update below ————————

BIG MONTHLY UPDATE:

This is long on purpose. Skim or digest slowly. Your call. 

FREE MARKET UPDATE: On Monday June 22nd at 10am PST I’m giving a one-hour free market update via Zoom through the Sacramento Association of Realtors. Please sign up here.

WEEKLY VIDEO: Here’s my weekly video update to talk through the latest trends (shorter this week too). Watch below (or here).

Now some big topics…

FLAT PRICES: When we look at the latest price trends, it’s pretty flat. As you can see, the stats show modest price gains since last year. Granted, this month was more subdued than last month, so before writing home about this trend we need a few more months of data to fully understand the market. Remember, this doesn’t mean the market is dull because it’s actually quite competitive. It doesn’t mean every price range and neighborhood are flat either. But it does remind us prices haven’t been going insane despite the market feeling ultra-competitive. 

CRESTING FOR THE SEASON: Based on the next three images, it looks like the spring season has started to crest. We’re seeing a dip in prices and we’re having less multiple offers.

NEXT MONTH THOUGH: When sharing about flat prices, I’ve been tending to get reactions saying price metrics in a couple months may show an uptick again because mortgage rates have gone down lately. Look, that’s possible and we can adapt our narrative if that happens. To be fair, there’s nothing normal about life and real estate lately, so anything is possible for the future and we’re certainly experiencing some abnormal pent-up demand right now.

SALES VOLUME DOING THE LIMBO: Here’s a brand new visual to show most counties in May were down 30% or more in volume from 2019. Do you like this one? Should I keep making it?

LEARN TO MAKE A GRAPH: In case you didn’t see this on my YouTube channel, I put out a new tutorial for how to make a graph with three price metrics. This can be made for a zip code, city, county, etc… My advice? Set aside an hour in your schedule to make learning this happen. Becoming more visual changed the way I see the market and it frankly changed my career.

LOW RIDING: We had the second lowest month of sales volume for May in Sacramento County over the past twenty years.

BUT VOLUME IS ACTUALLY INCREASING: When we look at sales volume by the week instead of the month, we’re starting to see more sales close. In fact, for four weeks now we’ve seen an uptick. This change reflects pending contracts from about 4-6 weeks ago finally starting to close. I suspect in coming months we’ll keep seeing volume increase since pendings have been on fire lately.

MORE PENDINGS THAN NEW LISTINGS: For the fourth week in a row we literally had more pending contracts than new listings hit the market in the Sacramento Region. This shows buyers have been coming back to the market more quickly than sellers. Let’s remember buyers have strong incentive to get into contract quickly to lock in a historically low mortgage rate, but sellers just don’t have that same sense of urgency.

CHANGE BY THE RANGE: Here’s a look at what’s happening with different price ranges. These two images compare the change in April and May from 2019 to 2020. I don’t know that there’s anything revolutionary here, but what we want to watch over time is whether different price segments are slowing or speeding up. I think with a few more months of data we might have more to consider.

INVENTORY AT DIFFERENT PRICE POINTS: What’s happening with inventory in different price segments? Well, it’s actually pretty tight, but let’s watch above one million closely because it’s trending a little higher. Granted, it’s pretty normal to have 8-10 months of housing supply at the highest prices, but still we’ve seen more of an uptick lately.

2,651 FEWER LISTINGS SINCE THE PANDEMIC: Over the past three months there have been over 2,500 fewer listings compared to the same time last year. No wonder why it feels so competitive…

Now here are more visuals. As if this post wasn’t long enough already…. See my sharing policy for 5 ways to share my content (please don’t copy my posts verbatim).

SACRAMENTO REGION:

SACRAMENTO COUNTY:

PLACER COUNTY:

EL DORADO COUNTY:

Okay, let’s wrap this thing up.

Questions: What stands out to you about the market right now? What are buyers and sellers saying? I’d love to hear your take.

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

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Filed Under: Market Trends Tagged With: flat prices, housing trends in sacramento, listings, low mortgage rates, pandemic housing market, pandemic real estate trends, pending contracts, pendings, sacramento housing market, sacramento regional appraisal blog, seaonal real estate market

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