Positive real estate news is sexy. It gets clicks. It makes us feel good. And we love sharing it. But what happens when the market cools? Well, it’s not always easy to digest. In fact, lots of people freak out and think the market is starting to tank when it’s actually just doing its normal thing of slowing. Today let’s talk about the danger of embracing the collapsing market myth, and then take a deep look at the slowing Sacramento market. Any thoughts?
The myth of the collapsing market: The market tends to slow down around this time of year. Just as the weather changes, so does the real estate market. The kids go back to school, sales volume usually starts to slide, inventory goes up, and prices soften. Yet despite this happening nearly every single year, we hear things like, “The market is beginning to take a big turn” or “The ‘bubble’ has finally popped.” Case-in-point, I watched a video a few weeks back from a national show that said new construction home prices in Texas were beginning to take a turn, and that the Texas market was six months ahead of everyone else. Maybe this show is correct, but my problem is the host made a huge sweeping market statement based on a VERY minor dip in prices from June to July. I suppose I could do the same in Sacramento since the median price dipped 1% last month. The truth is we’ll see many more articles like this in coming months because we tend to confuse a seasonal softening with a big market turn. It’s like we forget the market is cyclical at this time of year.
My advice? Cut through the hype and know the seasonal market wherever you are located in the United States. What does the market normally do at this time of year? What normally happens to prices, sales volume, and inventory? Understanding what a slowing season tends to look like can help us give advice to friends and clients, and we can avoid saying the market is tanking just because prices dipped last month. Of course at some point the market really could collapse, but unless we are seeing symptoms beyond a normal seasonal slowing, it’s probably okay to be cautious of a doom & gloom housing message.
I hope that was helpful or interesting. Any thoughts?
–——-——- Big monthly market update (it’s long on purpose) ———–——-
The stats have been glowing for months in Sacramento County, but last month we finally saw a dip in prices. In short, the glowing stats are now showing a slowing. But that’s not really a surprise because we all felt this slowing in the market for the past 30-60 days. It’s just we didn’t see it show up in the sales stats until now. After all, it takes a month or two to see slower pendings close escrow. Anyway, the median price dipped by about 1%, inventory increased, and most importantly it took 3 days longer to sell last month than the previous month. I know, there are still multiple offers and there is still upward pressure in some areas and price ranges. I get that. Remember, the market is slowing, but that does not mean it is dull or slow. Ultimately when looking at price metrics, the market is up anywhere from 7-9% from last year, and sales volume is about the same as last year too, which shows the market is trying to normalize. Housing inventory in the region is about 10% lower than it was last year at the same time, which reminds us that the market is still more aggressive compared to last year. Lastly, if the market was collapsing, I’d suspect we would be seeing a big change in the psyche of buyers, a big change in inventory, and a big change in sales volume. Not that the market has to tank the same way all the time, but if values were turning we’d likely expect to see something much more out-of-the-ordinary beyond all the normal seasonal stuff we’re seeing right now.
DOWNLOAD 66 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).
SACRAMENTO COUNTY (more graphs & stats here):
SACRAMENTO COUNTY STATS:
- The median price is currently $348,000 and dipped 1% last month.
- The median price is 7.6% higher than the same time last year.
- Sales volume in August was 4.7% lower this year than 2016. There were 1668 single family detached sales last month.
- It took an average of 24 days to sell a home last month (one year ago it was taking 2 days longer).
- The median days on market last month was 12 days, which means properties are selling quickly.
- It took 3 more days to sell in August compared to July (median days).
- FHA sales were 22.6% of all sales last month in the county.
- Only 0.8% of sales last month were bank-owned & 1.5% were short sales.
- The avg price per sq ft was about $223, which is slightly higher than last month (8.7% higher than last year).
- The avg sales price decreased about 1.5% last month and is currently $378,885. This is 6.8% higher than last year.
- Cash sales were 12.5% of all sales last month.
SACRAMENTO REGION (more graphs & stats here):
SACRAMENTO REGION STATS:
- The median price is $389,900 and declined slightly last month.
- The median price is 9% higher than the same time last year.
- Sales volume in August was 0.2% higher this year than 2016. There were 2771 single family detached sales last month.
- It took an average of 28 days to sell a home last month (one year ago it was taking 3 days longer).
- The median days on market last month was 13 days, which means properties are selling really quickly.
- The median days on market increased by 2 days last month, which helps shows a slowing in the market.
- FHA sales were 18.1% of all sales last month.
- Only 0.8% of sales last month were bank-owned & 1.48% were short sales.
- The avg price per sq ft was about $227, which is the same as last month (7.9% higher than last year).
- The avg sales price declined slightly last month and is currently $430,101. This is 8.6% higher than last year.
- Cash sales were 14% of all sales last month.
PLACER COUNTY (more graphs & stats here):
PLACER COUNTY STATS:
- The median price is currently $462,000 and increased about 2% last month (but still down from a couple months ago).
- The median price is 7.4% higher than the same time last year.
- Sales volume in August was 14% higher this year than 2016. There were 637 single family detached sales.
- It took an average of 30 days to sell a home last month (one year ago it was taking 10 days longer).
- The median days on market last month was 15 days, which means properties are selling really quickly.
- The median days on market increased by 3 days last month, which helps shows a slowing in the market.
- FHA sales were 12.5% of all sales.
- There were only 2 bank-owned sales last month and only 9 short sales.
- The avg price per sq ft was $229, which is slightly higher than last month (7.4% higher than last year).
- The avg sales price increased about 0.5% last month and is currently $508.686. This is 7.7% higher than last year.
- Cash sales were 14.4% of all sales last month.
DOWNLOAD 66 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).
Questions: What are you seeing out there? What signs of slowing have you noticed? Did I miss anything? I’d love to hear your take.
If you liked this post, subscribe by email (or RSS). Thanks for being here.
Glowing and slowing. That’s a good way to sum up the market. The stats are generally glowing, but we’re starting to see subtle signs of a seasonal slowing. Price stats in Sacramento County increased by about 1% last month and they’re up 8-10% from last year (that doesn’t mean actual values are up that much in every neighborhood and price range). Though if we look closely, especially in the region as a whole, prices dipped by 1% last month, inventory is up slightly, and sales volume sloughed off last month (which isn’t a surprise). Properties have been selling very quickly still in only 9 median days in Sacramento County and 11 in the region. For perspective, on average it was taking about a week longer to sell a home last year. The market actually tends to normally show a slowness in days on market between June and July, but we didn’t see that this year, which is a reminder the market feels a bit more aggressive right now compared to last year. Overall housing inventory increased last month, but the bigger story is it’s down about 14% in the region from last year. Despite all the glorious stats, the market is still price sensitive, which means buyers aren’t willing to pull the trigger at any price (did you hear that sellers?). Oh, and by the way, the median price in Sacramento County is now 10% from the peak in 2005. I could go on and on with words, but let me share some graphs to show the market visually.
If you didn’t know, sales volume last month was the strongest May we’ve seen over the past 4 years. But don’t get too excited because sales volume for the entire year is about the same as last year. No matter how we look at it, price metrics are up 7-9% from 2016 and they increased by 2-4% last month. One of the themes that won’t go away is we have a shortage of housing. In fact, housing supply is 22% lower right now compared to last year, and it’s been putting pressure on values to increase – particularly at entry-level price ranges. The tricky part lately is many contracts are getting bid up due to multiple offers (even beyond a reasonable appraised value). This can favor sellers accepting offers from buyers who have more cash to make up the difference between the appraised value and the contract price, though FHA sales stats show first-time buyers are still finding ways to close deals. In higher price ranges the market feels much softer, though we are still seeing multiple offers when properties are priced correctly. This is a good reminder that it’s possible for the market to feel more aggressive than actual value increases. In other words, having multiple offers doesn’t mean values are increasing rapidly or at all. Lastly, we are starting to hear more about lenders rolling out 100% financing to help buyers artificially afford higher prices (sounds healthy, right?). I could go on and on with words, but let me share some graphs to show the market visually.
