Sacramento Region

The booming FLAT market & rate addiction

April 11, 2019 By Ryan Lundquist 9 Comments

The market is getting hotter, but it’s also pretty flat. Let’s talk about this as well as low rate addiction. Then for those interested I have a huge local market update.

Two things:

1) Competitive but flat market: The spring market is definitely competitive. Real estate agents are saying it’s “hot” and they’re right because buyers are hungry, sales volume is up, and it’s taking less time to sell. BUT prices also seem a little flat. I know, that sounds crazy since there’s so much competition, but it’s what the stats are showing. Let’s remember it’s possible to have a market with lots of competition while prices are more subdued or sideways. In other words, just because it’s competitive doesn’t mean prices are going nuts.

2) Rate addiction: Lower rates in 2019 have brought buyers back into the market after a big slump in 2018. It just goes to show how sensitive our market is to rate changes. In other words, it seems the market is struggling to move forward in glory without low rates. Sounds healthy, right?

Any thoughts?

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

Spring is feeling fairly normal so far and March was actually a strong month. Let’s talk about this.

THE SHORT VERSION:

Price growth is definitely slowing
Sales volume has slumped for 10 months
Volume was strong in March though
Choose comps wisely
I’m now publishing El Dorado County stats
Most metrics are doing what we’d expect 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.

Slow or flat price growth: The median price in Sacramento last month is actually the same as it was one year ago. It’s been a very long time since we’ve seen that happen. Otherwise most other price metrics in the region are up slightly between 2-3% over the year. This is a very modest change over twelve months and it reminds us price momentum is slowing. In many areas it seems prices are hovering around or lower than they were during the height of summer. But keep in mind this isn’t totally abnormal for the spring either because sometimes the new year immediately picks up right where it left off during the height of summer and other times the stats don’t get back to where they were until about May or so. Thus in some senses we’re still waiting to see how this spring market is going to unfold.

A more normal-ish spring: Overall most metrics look normal for the time of year. Prices ticked up again from the fall lull, it took eight less days to get into contract from last month, and there just isn’t that much on the market right now. Part of having an anemic number of listings is normal because the market doesn’t tend to hit its stride until April, but we’re also seeing the byproduct of buyers devouring listings because of low rates.

Choosing comps today: When a market is showing slower price growth it’s important to be realistic about comps. Sellers often want to get super aggressive, but I have some quick advice. Don’t. Give strong weight to similar properties that are getting into contract, and don’t price like it’s the rapidly increasing market from yesteryear. It’s not. Remember, in some areas you might pull comps and not see much price difference at all from the summer of 2018 or even from the spring of last year. Sellers, please remember you are not guaranteed price growth, so don’t price like you’re entitled to it.

Improving volume, sort of: Sales volume definitely made a rebound last month from the profound dullness we saw these past two quarters, yet it was still down 5.7% in the region from last March. And it’s down 7.2% over the past twelve months. Think about it this way. Being down seven percent doesn’t sound like much, but it means there’s been more than two thousand less sales this year in the Sacramento region compared to last year. It sounds bigger when we think of it that way, right? While volume improved this past month, we’ve still had ten months in a row of lower volume, and that’s the bigger story. Moreover, the first quarter was down 10% in the region compared to last year.

Pendings show us the market: Sales from March tell us more about what the market used to be like in January and February when these homes got into contract. So we have to look to the listings and pendings right now to understand where the current market is really at. As of now pendings look pretty strong, which suggests we’ll have another month of stronger volume in April.

Less offers (but actually more): Multiple offers are down about 12% in the region this year compared to last year, but the number of multiple offers actually increased from February to March. This is exactly what we’d expect to see happen in the spring, so don’t write home over it. But it’s still interesting to see.

Price sensitivity: One out of every two homes are getting multiple offers in Sacramento County, and it’s a reminder buyers need to bring strong offers. But sellers ought to price correctly too. Buyers are not desperate and willing to pay unrealistic prices, so I advise aiming for the market instead of that one mythical buyer who will overpay for some reason.

Waiting: We’re waiting and needing a few more months of data to see how this year is going to unfold. It’ll be most interesting to see if we get a little more price growth too (beyond just rebounding from the dull fall). The verdict is not in yet for this year, and there is still an element of uncertainty because we have a market that feels heavily driven by low rates for the time being.

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

BIG ISSUES TO WATCH:

1) SPRING GETTING HOT TECHNICALLY: The market is heating up for 2019. We’re seeing price changes, lower inventory, and increased sales volume. So prices are up from the dull fall, but they’re also flat as you can see under #4.

The median price is actually down in Placer County, but I’d suggest waiting a few months before making a big deal out of that since Placer County doesn’t have many sales each month, so data can be a little more volatile Yet this hasn’t happened in a long time either.

2) SLOWING MOMENTUM: Despite the heating, 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.

3) SALES VOLUME SLUMP for 10 months: 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:

March volume down 4.9%
Volume is down 6.2% over the past 12 months

SACRAMENTO REGION:

Key Stats:

March volume down 5.7%
Volume is down 7.2% over the past 12 months

PLACER COUNTY:

Key Stats:

March volume down 5.5%
Volume is down 7.7% over the past 12 months

EL DORADO COUNTY:

Key Stats:

March volume down 8.9%
Volume is down 9.0% over the past 12 months

4) LAST YEAR VS THIS YEAR: It’s been a LONG time since we’ve seen some metrics almost identical to what they were last year. Can you see why I’m saying prices seem flat lately? This may not be true in every single price range or neighborhood of course, but this shows us price momentum is slowing. With that being said, it’s still okay to say the market is “hot”. It is. But I’d say competition is hotter than price appreciation.

Quick note on how NOT to use my content: Please don’t copy my post verbatim or alter the images in any way. I will always show respect for your original work and give you full credit, so I ask for that same courtesy. Here are 5 ways to share my content.

Now here are a bunch of images. Please enjoy.

SACRAMENTO COUNTY (more graphs here):

SACRAMENTO REGION (more graphs here):

PLACER COUNTY (more graphs here):

EL DORADO COUNTY (more graphs here):

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).

Questions: What are you seeing out there? What do you think prices are doing? What are you hearing from buyers and sellers lately?

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Is the market good or bad right now?

March 13, 2019 By Ryan Lundquist 33 Comments

People ask all the time. Is the market good or bad? I have some quick thoughts and then a huge market update for those interested.

The truth: The market isn’t always good or always bad. What I mean is it’s either good or bad depending on whether you can move, sell, buy, or invest. At times we get so focused on what prices are going to do that we forget to think this way. Remember, no matter what prices do in the future, the market will still be bad or good for various people.

College Admissions Analogy: Real estate is sort of like getting into college. It’s good if you have the grades and financing, but bad without a high GPA (or rich parents who can bribe school officials). Too soon? 🙂

The big point: I don’t say this to gloss over prices seeming to be closer to the top of a real estate cycle. I’m just saying sometimes we label a market good or bad without digging deeper. Who is it good or bad for? Who are the players in the market? Who will become the players if the market changes?

Any thoughts?

—–——– 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 fairly normal for February
Sales volume has slumped for 9 months
We’re starting to see prices tick up
I’m now publishing El Dorado County stats
Most metrics are doing what we’d expect 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.

That weird place of spring: We’re in a place in the market where a hotter seasonal trend is happening, but we don’t quite see it in the sales stats yet. Let’s remember sales from February tell us more about what the market used to be like in December and early January when these homes got into contract. So we have to look to the listings and pendings right now to understand the market.

It feels kinda normal-ish: It’s felt like a somewhat normal spring lately. We’ve seen prices tick up, multiple offers on many listings (if they’re priced well), it’s taking less time to get into contract, inventory is going down, etc… We’ve basically been seeing all the stuff we’d expect to see in the spring. Of course the real test is whether sales volume will be normal in March, April, and May, but we just don’t know that yet.

Dude, call the market already: Some people want to know definitively what the market is going to do in 2019, but we don’t have enough information yet. Besides, interest rates went down, and that’s like injecting a steroid into the market. So in some senses we have to wait until this steroid wears off.

Flattening rents: We’ve seen rents flatten lately. They’re still up, but the rate of increase is not as aggressive as it used to be.

The market isn’t slow, but it’s slowing: I get a little pushback when I say the market is slowing because the spring has felt more competitive. Here’s the thing. We’re having a hotter spring, but in the bigger picture of the market it’s just not as aggressive as it used to be. I think Barry Habib’s analogy says it perfectly. It’s like the market was driving 80 mph and now it’s driving 30 mph. In other words, we’re still seeing forward price progress, but it’s not 2013 anymore. If the stats over these next few months say differently of course, then I’ll change my tune based on new information.

Less offers (but actually more): Multiple offers are down about 13% in the region this year compared to last year, but the number of multiple offers actually increased from January to February. But that’s normal for spring, so I wouldn’t write home over it. The takeaway? Buyers, you need to bring a strong offer. Don’t think you are running the show. You’ve gained power from last year, but you’re not in charge.

Nine months of slump: Sales volume has slumped for the past nine months in the region. This means the number of sales was lower compared to the same exact month the previous year. In short, if this doesn’t change over time and get back on track, then we could be talking about the market starting to embark on a different trend. This past month volume was down about 7% in the region, which is much better than over 20% in December.

Normal pendings & steroids: Last month pending sales looked fairly normal, which suggests the market is trying to flirt with normalcy for the spring compared to the slump of volume we had over the past 9 months. What’s making the change? It’s most likely due to interest rates declining. Low rates are like a steroid for the market. Remember, if pendings were fairly normal in January and February, that could lead to fairly normal sales volume in March & April. But let’s see how it shakes out. We don’t have those stats yet.

Not many listings yet: There’s not much on the market yet, but that’s fairly normal for the time of year. Historically listings hit their stride between April and the end of summer, so we can expect lots more in coming time. For now inventory is declining, and that’s normal for the time of year.

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 two months 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) SPRING GETTING HOT: The market is heating up for 2019 and here’s proof. We’re seeing price changes, lower inventory, and increased sales volume.

3) 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:

February volume down 10.5%
Volume is down 5.2% over the past 12 months

SACRAMENTO REGION:

Key Stats:

February volume down 6.7%
Volume is down 6.6% over the past 12 months

PLACER COUNTY:

Key Stats:

February volume was up 13.3%
Volume is down 6.8% over the past 12 months

EL DORADO COUNTY:

Key Stats:

February volume was up 23%
Volume is down 7% over the past 12 months

NOTE: El Dorado County monthly stats vary significantly. I wouldn’t put much weight on volume being down 23%.

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

Quick note on how NOT to use my content: Please use these images in blog posts or on social media, but don’t copy my post verbatim or alter the images in any way. I recently saw someone remove my blog link on an image. Look, I will always show respect for your original work and give you full credit, so I ask for that same courtesy. Here are 5 ways to share my content.

Now here are a bunch of images. Please enjoy.

SACRAMENTO COUNTY (more graphs here):

SACRAMENTO REGION (more graphs here):

PLACER COUNTY (more graphs here):

EL DORADO COUNTY (more graphs here):

NOTE: This is the beginning of sharing more for El Dorado County (as long as people want it). What type of graphs would you like to see?

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).

Questions: What are you seeing out there? Which metrics above stand out to you the most? What are you hearing from buyers and sellers lately?

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Seven years of price increases & my blue kitchen island

December 3, 2018 By Ryan Lundquist 16 Comments

Let me get straight to it. I’m excited to share some new visuals. I’m geeking out because these new images help tell a compelling story of seven years of price increases. Whether you’re local or not, I hope you can dig these.

A FEW QUICK THINGS THIS WEEK:

1) Loan Limits: You probably heard conforming loan limits were raised for the third year in a row. This basically helps buyers continue to afford higher prices. I’m not saying that’s bad, but it would be nice if wage growth more than anything was helping people afford the market.

2) Sign the Petition for Appraisers: Last week I wrote about a move to start getting rid of appraisers. This is a big deal with huge implications for the housing market and future escrows. I co-wrote a petition through change.org and I want to ask you to please sign it. SIGN HERE.

3) Cool Graphing Link: On a lighter note, Freddie Mac launched a new graphing tool where you can make quick visuals and even compare different markets throughout the United States. Not every city is listed, but it’s worth checking out and getting lost for a few minutes.

4) My Blue Kitchen: I talked about blue being the rage in kitchens, and I guess my post inspired me. During Thanksgiving break I built a new kitchen island and we painted it blue. Woodworking is definitely a passion and it’s something I do to help keep my sanity. Anyway, this was a fun project and I wanted to share.

SEVEN YEARS ON ONE GRAPH (NEW VISUALS):

Here’s some images for four counties (Sacramento, Placer, Yolo, & El Dorado). What I like is we see price trends for seven years on one graph. It may take a moment to figure out how to digest these images, but look for changes in price and volume over time. So far people who have seen these have noted rising prices and definitely vanishing affordability. Keep in mind they don’t include most of December for 2018, and that could change the look slightly by next month.

What do you see?

SACRAMENTO COUNTY:

SACRAMENTO REGION:

PLACER COUNTY:

EL DORADO COUNTY:

YOLO COUNTY:

SHARE THESE IMAGES: You are welcome to share any of these images in your newsletter, on social media, or on your blog, etc… See my sharing policy for details and 5 ways to share (please don’t copy my post verbatim).

I hope that was interesting or helpful.

Questions: What do think of these images? Which ones do you like best? Any suggestions for improvement? I’d love to hear your take.

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

Slumping volume & rising inventory

October 11, 2018 By Ryan Lundquist 12 Comments

Volume is down and inventory is up. Is that a problem? It sounds like a question for a high school Economics class, but here we are talking. Today I want to kick around two quick thoughts and then dive deeply into trends. I hope this helps – whether you’re local or not. Anything to add?

Here are the two big ideas to talk through right now.

This could be a problem: If sales volume continues to slump and inventory rises without buyers absorbing new listings, it could be a sign the market is changing in a big way. No matter how we look at it sales volume has been down lately in Sacramento. This was the weakest September since 2007 as volume was 14% lower than last year, and quarterly volume was down about 6% too. But keep in mind overall the year as a whole has actually seen strong volume, so it’s not like sales have fallen off the face of the earth (but it’s a concern we’re seeing the numbers change over the past few months). Housing inventory is also up and we haven’t seen it this high since 2014.

This could also be a dull fall: Despite the numbers seeming gloomy right now, they’re actually really consistent with what the market showed in 2014 when we had an extremely dull fall season. In fact, quarterly volume that year was down 6% and September volume was weak too. Does that sound familiar? Also, we have a nearly identical level of inventory right now compared to then too. I don’t say this to sugar coat any red flags in the market, but only to give pause and say what we’re seeing right now could simply be a very dull fall season.

We need more time: The truth is we need time to see how the market will pan out. For now we live in the tension of not knowing the future and interpreting trends for the present. My advice? Watch closely, be careful of hyped headlines, and be sure to take a wider view of the market too (let’s not forget 2014).

I hope that was helpful.

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

Prices actually went up last month. What the? Yes, the market is softening, but prices saw an uptick from August to September. That might seem confusing since we’re talking about the market cooling, but it highlights exactly what I’ve been talking about lately in that you don’t often see a market changing by looking at prices. You see change first in the listings and sales volume – and then prices eventually. This is exactly what’s happening right now.

Normal fall stuff: Last month it took longer to sell, the number of listings increased, and we saw a dip in sales volume. This is what we’d expect to see at this time of year, though the dip in volume was definitely sharp, which is something we’ll watch over time to see if it’s a byproduct of a dull fall or the start of a bigger trend. Beyond volume being down 6% this quarter, all the metrics look fairly normal for the fall. Well, they look normal for a dull fall season, that is.

Momentum slowing: Beyond a seasonal slowing we’re also seeing momentum slowing. I explain it here in a presentation I gave yesterday.

Interest rates rising: One of the reasons why we’re seeing volume slough could be due to interest rates rising. Earlier in the year it seemed buyers ran to the market in light of news of rising rates, but right now it doesn’t seem like buyers have their running shoes on any longer.

Buyers have more power, but not all power: The market is shifting to favor buyers, though sellers still have lots of power. Some buyers hear about a softening market and think they can make lowball offers, but that’s just not realistic. For instance, last month 40% of all sales had multiple offers in the region. That tells us the market isn’t dead despite softening. Buyers, did you hear that? Enjoy your newfound power, but you still have to bring strong reasonable offers.

Listings may have peaked: Overall housing inventory is up as I mentioned above, but it looks like the number of listings is starting to crest for the year. I’ve been watching listings closely over the past few weeks and it seems like they maybe peaked. We’ll know for sure in a month or so. This is exactly what we’d expect to see happen around this time of year, but it maybe seems like more welcome news right now. Let’s keep watching to know for sure.

Being technical about weak volume and inventory: Here’s the thing, we saw a very weak sales volume in September, and it ended up really impacting inventory levels. In fact, when looking at graphs the trend line shot up dramatically last month (see below). But technically what happened was the sales that normally would’ve sold were basically piled on to the number of listings instead, and that’s making the housing supply figure look much more dramatic. Ultimately the number of listings isn’t all that abnormal for the time of year, though if sales continue to dry up over time, then it becomes a much bigger deal to have even this number of “normal” listings.

Pricing lower this fall: Right now at the least it looks like we’re poised to have a dull fall like we had in 2014. These past couple of fall seasons the market simply felt a little more flat, but this year I expect we’ll see a more pronounced price difference between sales in the spring and the fall. Remember, if listings aren’t attracting offers, it’s because the market is no longer biting at that level. What is similar and getting into contract? That’s the big question, and when a fall season is more dull it’s important to be realistic about the need to potentially price lower. In other words, it’s probably not going to be enough to price a property 1% below the height of spring and expect a flood of buyers. Remember, it doesn’t matter what other listings are priced at if they’re not selling. The only thing that matters is what is actually getting into contract. That’s where we see the market.

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

DOWNLOAD 63 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).

BIG QUESTIONS:

1) How did the market change from last year?

2) How did the market change from August to September?

3) What’s happening with inventory?

4) What’s happening with sales volume?

SACRAMENTO COUNTY VOLUME:

Key Stats:

September volume down 14%
2018 volume down 1% (January to September)
Annual volume down 2% (past 12 months)
Volume has been strong this year, but it’s definitely down lately.

SACRAMENTO REGION VOLUME:

Key Stats:

September volume down 16%
2018 volume down 1.4% (January to September)
Annual volume down 1.8% (past 12 months)
Volume has been strong this year, but it’s definitely down lately.

PLACER COUNTY VOLUME:

Key Stats:

September volume down 19%
2018 volume down 3% (January to September)
Annual volume down 3% (past 12 months)
Volume has been strong this year, but it’s definitely down lately.

SACRAMENTO COUNTY (more graphs here):

SACRAMENTO REGION (more graphs here):

PLACER COUNTY (more graphs here):

I hope that was helpful.

DOWNLOAD 63 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: What do you see happening with volume and inventory right now? What are you hearing from buyers and sellers? 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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