sales volume

Lot size mistakes & pent-up demand

June 24, 2020 By Ryan Lundquist 54 Comments

Two things. Let’s talk about a very easy mistake to make with lot sizes and then let’s look at pent-up demand right now.

LOT SIZE MISTAKES: I’ve seen it happen twice lately where Tax Records lists the lot size, but it’s actually incorrect. In one instance Realist showed the lot was five acres when in fact it was only two acres. In another example it said two acres when it was less than one. Yikes.

My advice? Thankfully most of the time we can trust the lot size in Tax Records, but it’s still a good idea to quickly double-check just to be sure. After all, listing the wrong lot size in MLS or an appraisal could lead to litigation, right? What we can do is view the plat map to see if there is anything abnormal as well as try to piece together the lot size (easy to do if it’s a rectangle). Also, when viewing a property in MLS we can click on “See Map” and then “Layers” to view the lot size. All I’m saying is taking an extra minute to do these steps is a good habit that can be a safeguard. How would you handle it though if the lot size was different in Tax Records, MLS, and the plat map? Which one are you going with? I’d love to hear your take in the comments.

NOTE: A land surveyor is going to be the definitive source. I’m just saying my advice above helps give us clues into when something is not right with a lot size.

Moving on to trends…

WEEKLY VIDEO: I’m really excited for this week’s video. On one hand it looks like the seasonal market has begun to crest, BUT it’s as if real estate has sped up a little after slowing down. Watch below (or here).

PENT-UP DEMAND: Check out these visuals to show some serious pent-up demand being expressed. For eleven weeks now the market has been rebounding after an initial dip when the pandemic began. And for five weeks in a row we’ve literally had MORE pending contracts than new listings in Sacramento.

VOLUME NO LONGER DOING THE LIMBO: A big trend we’ve been seeing is sales volume is starting to come back. In fact, this past week is only down about 10% from the same time last year. This is huge because a couple months ago we were consistently down 30-40%. The x-factor is having more pending contracts from 4-6 weeks ago finally starting to close.

LET’S WATCH THE COVID-19 NUMBERS: Unfortunately we’re starting to see COVID-19 cases tick up again in quite a few states. As it relates to real estate it’s going to be important to stay in touch with the psyche of buyers and sellers since a trend of more cases can shape whether people engage or sit out of the market. Moreover, it’s a wonder if different areas and states will have some form of lockdown again too.

ONE MORE THING: If you need some background noise, here’s a 30-minute Q&A I did with Rachel Adams Lee to talk about the Sacramento market. And yes, I mentioned my love for Breaking Bad and that I don’t like Downton Abbey (sorry). Enjoy if you wish.

Thanks for being here.

Questions: Have you ever seen that lot size mistake in Tax Records? What are you seeing in the market right now? I’d love to hear your take.

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Seven hundred missing sales

May 6, 2020 By Ryan Lundquist 12 Comments

We’re obsessed with prices. OBSESSED. But real estate is about way more. In fact, if we want to understand a market we need to move beyond a laser focus on prices. On that note, let’s talk about sales volume.

1) Seven hundred missing sales: There were about 700 fewer sales this April compared to last year in the Sacramento region. In other words, sales volume was down about 30% last month from April 2019.

2) Volume reflects pendings from the past: In mid-March the housing market started to react to the coronavirus and in three weeks pending contracts dropped 45%. Well, pending contracts from back then started to close in April, and that’s the reason why we saw a big drop in monthly volume.

3) Sensational: It’s easy to get sensational with stats like this and say the housing market is crashing, but we’ve been in a pandemic and these types of numbers at 30% are what we’d expect. Moreover, we’re seeing figures like this in many markets across the country. Keep in mind pending contracts have been on the rise for the past month, which means we can expect sales volume figures to grow in a month or two when these new ones close.

4) It’s about more than prices: The reason I’m so interested in sales volume is because it’s possible for prices to remain stable even though the number of actual sales has changed dramatically. So while it’s easy to say, “Hey, prices are okay,” I think the bigger headline has to do with what is happening behind the scene with sales volume. I talked about this in a webinar this week here.

Now let’s get visual.

FRESH VISUALS TO SHOW SALES VOLUME:

OTHER VISUALS TO SHOW WEEKLY / DAILY CHANGES:

RESOURCES:

New market video: Here’s my weekly market update. It’s 15 minutes and I talk through some big stats this week that show buyers and sellers are coming back to the market. Check it out below (or here).

A pandemic webinar: On Monday I did a 90-minute webinar with the Sacramento Association of Realtors. This is almost an hour and I trimmed the first ten minutes because it was a recap of my weekly video. Watch below (or here).

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

4/30/2020 Conversation with Steve LaMothe
5/01/2020 Conversation with Anthony Alfano & Others

WEBINAR NEXT WEEK: I’m doing a one-hour webinar next week for Safe Credit Union on May 13th. It’s free. Sign up here if you wish.

Appraiser John Carlson GoFundMe: John is an appraiser in Southern California and 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: What are you noticing happening with the market these days? Anything to add? What did I miss?

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Seven things to watch in real estate during a pandemic

April 14, 2020 By Ryan Lundquist 25 Comments

What’s the market doing? What can we watch right now to get a better sense of housing trends during the pandemic? Here are seven things I’m keeping my eyeballs on these days. Anything to add?

SEVEN THINGS I’M WATCHING DURING THE PANDEMIC

1) Listings: We often think about listings increasing as a way to see the market changing, but right now many markets across the country are seeing fewer new listings. So at times change is best seen with less of something rather than more. It’s not a surprise to see fewer new properties during a pandemic, right?

2) Pendings: When the number of pending contracts declines it’s likely a sign that buyers have begun to back off the market. Like many areas across the country, pendings are down 40% right now in the Sacramento region. There are simply fewer buyers willing to engage with the current market. Also, one of the things we want to watch is the gap between all listings and current pendings. If this gap widens it will soften prices and give buyers more power.

3) Sales volume: When fewer sales start to happen, it’s a sign the market has changed for some reason. This image below shows we are at the beginning stages of seeing sales volume dip due to the pandemic. In other words, the second week of April clearly saw FAR fewer sales compared to last year at the same time. From here on out it’s likely we’re going to see bigger changes in sales volume since many homes beginning to close got into contract over the past month during the pandemic.

4) Canceled / Hold: A market isn’t just about what is listed, but what used to be listed. There have been over 1,000 listings taken off the market in the Sacramento region over the past four weeks. The removal of these listings has helped the market feel much more balanced than had these listings still been active. Key questions: How many of these listings will come back? When will they hit the market? Will there be enough pent-up demand to meet the supply?

5) Word on the street: What are buyers, sellers, and real estate professionals saying? The stories of today become the stats of tomorrow, so paying attention to what people are saying is huge.

6) Other metrics: There isn’t one end-all metric to tell us everything we need to know about the market, so it’s important to pay attention to lots of little things such as days on market, changes in financing, the average list price, the sales to original list price ratio, price reductions, the number of multiple offers, changes in various price ranges, concessions offered by sellers, etc… Let’s remember the market isn’t going to be the same for every property type or in every price range or neighborhood.

7) Prices: In real estate we are so obsessed with prices, but that’s really the last place to look to see the market. What I mean is change happens first in the areas above before showing up in sales stats a couple months down the road. In short, for now the slower pandemic trend hasn’t infiltrated sales price figures as of yet in Sacramento. This doesn’t mean the market is stable in every price range and location. All I’m saying is regional and county stats don’t show price declines right now. Normally I pull monthly price data, but I’ve switched to weekly in order to see the trend sooner rather than later.

I hope that was helpful. And yeah, that was long. But hopefully it was worth digesting whether you’re local or not.

Okay, moving on.

A FEW RESOURCES:

New market video: Here is a fresh market update video. This is 30 minutes and perfect for the background while quarantining. Check it out below or here.

Q&A video: Here is a video I did recently with Doug Reynolds to talk about the market and appraisal stuff. I have many of these lined up and I’m glad to share them in the future. As a side note, I’m not an advocate for any brokerage and I’ll never take sides. I’ll do interviews with just about anyone as long as there is mutual respect and I have time to do so. I’ll share videos here only if the end-product is worth sharing.

Zoom with Grounded: I mentioned a Zoom meeting last week hosted by Grounded and some of you were able to join live (thank you). I have about four to five Zoom sessions per week these days, though most aren’t public. I look forward to doing these with many brokerages. Watch below or here.

BIG MARKET UPDATE (ON HOLD): I normally write a huge market update around this time of the month, but my entire life and social media feed has been one big market update lately. So I’m putting my typical format on pause so I can spend time on more pressing visuals.

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

Questions: What are you watching in today’s market? Did I miss anything?

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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):