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seasonal market

How would you know if the market was starting to tank?

August 14, 2018 By Ryan Lundquist 29 Comments

Is the market starting to tank? Or is it just a seasonal slowing? I’m getting asked this question all the time, so I wanted to share some thoughts. Then I have a big local market update for anyone interested.

How would you know if the market was sliding? I wish this was a 10-second answer, but it’s a big conversation, so let’s unpack some thoughts. 

1) Change in inventory: It’s normal for housing inventory to increase as a market begins to cool for the season, but when a market starts to make a big turn we’d likely notice new listings aren’t being absorbed and the number of listings keeps growing beyond a normal pace.

2) Change in sales volume: Sales volume usually slows down as the market cools, but during a big shift we’d expect to see a more substantial change in sales volume over time. I’m talking about a market where buyers put on the brakes and properties stop selling. Currently in many areas throughout the country we’re seeing some smaller changes in sales volume. Could it be the start of something? Sure. But in my mind we need more time to see if this is a consistent pattern or just a slower end of the year.

3) Word on the street: What are people saying? How does the market feel in the trenches? We can learn so much when talking with informed local buyers, sellers, agents, appraisers, and other real estate professionals. Ask things like, “What are you seeing out there?”, or “What’s the market doing?” This is important because before we see a change in stats we’ll hear of change in the trenches. As an FYI, here’s a Twitter poll from a few days ago.

4) Less pendings: When a market starts to slide we can expect to see less pending sales, which is a big sign of waning demand. Let’s just remember though around this time of year we usually see fewer pendings as the market cools. This means we have to be cautious about saying the market is crashing just because pendings soften. My advice? Look for abnormal changes beyond a regular seasonal dip in pending sales.

5) Price changes aren’t the big issue: When a market shifts directions we often look to prices to tell us if things are changing, but it takes time for prices to catch up with the trend. For example, in Sacramento in 2005 we saw housing inventory triple and sales volume drop 43% in one year. Yikes! Those are insane stats, but price changes weren’t all that dramatic during this time period.

6) Other metrics: Lots of experts say to watch the number of new homes built as an indicator of the market changing. That’s huge. Others say it’s the GDP or economy, easy credit, housing affordability index, or flux capacitor sales (kidding on that one). There are definitely important indicators out there, and we should tune in, but for a local market I might suggest paying the most attention to inventory, sales volume, and the word on the street. If new construction is booming in your market though, definitely watch that too.

7) A closing dating analogy: Just like a dating relationship needs time to figure out what it’s going to be become, the same thing happens in real estate. Right now in many areas of the country we’re seeing inventory increase and sales volume starting to slump. At the least these are signs of a slowing market for the season, but it also makes us wonder if it’s something more. What does it really mean? Where will things go? The truth is we don’t fully know yet because the future hasn’t happened and we need more time to see how things unfold. I realize that’s frustrating to hear, but it’s honest.

CLOSING TIPS:

1) Crystal balls: If you don’t have a crystal ball that works, be careful about making very specific real estate predictions.

2) Watch local data closely: More than ever it’s critical to watch local data. Lots of articles are talking about “national” trends, but what’s happening locally?

3) Don’t just regurgitate headlines: It’s easy to read headlines and let the titles become our talking points. Be careful of that since headlines are designed to get clicks and they may or may not reflect the market.

4) Know the season: It’s not always easy to understand what a market is doing at this time of year when things usually slow down. My advice? Understand normal seasonal trends by studying past years. What does the market normally do at this time of year? This will help us spot normal vs abnormal trends. 

I hope that was helpful.

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

The market has been slowing for the past few months in Sacramento. We’re seeing what we’d expect to see at this time of the year like softer prices, more price reductions, a lower sales-to-list price ratio, and it’s taking longer to sell. We’ve had a hefty uptick in housing inventory though, and that’s something to watch – especially if it continues over time (that would be a problem). But for context, housing inventory is actually still historically low, so it’s not like we have a crazy high level right now. Some have wondered if the market is a bit stalled right now, but sales volume is still looking pretty strong and so are pendings. But I’d say there is some shock in the market because of the rise in inventory. Keep in mind one of the problems is so many sellers are overpricing, and that only makes inventory increase because these properties end up sitting instead of selling. On the other hand homes that are priced well are moving quickly, and 48% of all sales in the region last month had more than one offer. So despite a slowing narrative, the market isn’t painfully dull either.

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

DOWNLOAD 64 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).

JULY 2017 vs JULY 2018: So how did this past month do? One of the ways we find the answer is to compare last month with the same month in 2017. 

JUNE 2018 vs JULY 2018 (NEW CHARTS): The problem is if we only look at July this year versus July last year, we’ll miss what the market is doing right now. So that’s why I have new charts to show the previous month vs the most recent month. But there’s still an issue because if we only look at this chart and don’t understand that the market normally softens around this time of year, we might walk away with the idea that the market is utterly tanking when it’s normal to see inventory increase, sales volume decline, etc… Look at graphs below to help see seasonal changes (or check out this older YouTube video where I talk about seeing the seasonal market).

SALES VOLUME: One of the things we need to watch is sales volume because if we start to see a trend of slumping sales, it could be a sign the market is in trouble. The truth is we’ve technically had a couple of months in a row of lower sales volume in the region. But volume was only off by 4% in June and it was barely off at all this past month (which is why I said “technically”). When you really look at it, sales volume this year in 2018 so far has been stronger than last year. But when we look at the past 12 months as a whole it’s clear volume is down (still only slightly though). Ultimately volume is not crashing right now based on the stats, so let’s be careful about saying it is.

NOTE on Trendgraphix: I have some thoughts on the way Trendgraphix is pulling stats. This month their stats show sales volume in Sacramento County is down by 6%, but that’s not accurate. I can explain why if anyone wants to know. And I love Trendgraphix. What an incredible resource. I just find when we’re looking at the market carefully in a time like this, it’s critical to know how the numbers work.

2005 vs CURRENT: In case you wanted to compare current price metrics with 2005, here you go. A couple of months ago I talked about peak prices because some metrics were showing 2005 levels. But with the market softening right now we’ll expect over the fall season to see current prices grow further apart from the “top” so to speak.

SACRAMENTO COUNTY (more graphs here):

SACRAMENTO REGION (more graphs here):

PLACER COUNTY (more graphs here):

I hope that was helpful.

DOWNLOAD 64 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 would you look for to know the market was turning? What are you seeing out there right now? I’d love to hear your take.

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Filed Under: Market Trends Tagged With: appraisal blogs in sacramento, Housing Bubble, increase of listings in sacramento, Placer County, real estate trends, rising inventory, Sacramento Appraisal Blog, sacramento housing blog, sacramento region housing market, sales volume, seasonal market, softening prices, trend graphs

Is the market so “hot” that we won’t have a slow fall this year?

August 16, 2017 By Ryan Lundquist 5 Comments

Values are going to keep going up. The market is so “hot” we’re not going to have a fall slowdown this year. I’ve heard this sentiment quite a bit lately and I’ve even thought it myself. Yet today let’s remember five things about the fall season. Then for those interested we’ll dive deeply into the latest Sacramento trends.

5 things to remember about the fall market:

1) A general truth: Unless we have reason to believe there won’t be a slower fall season, let’s believe there will be one because it’s normal for real estate to have seasons.

2) The typical signs are happening: When the market starts to slow we usually see certain symptoms, and we’re seeing those right now. Inventory has increased slightly, sales volume is starting to slough, and prices in the region dipped a bit last month. Yet Sacramento County stats are nothing but glowing, which makes it hard to believe a slowing could happen.

3) Slow vs. slowing: The market is NOT slow, but we’re seeing slowing. That’s a big distinction for many markets in the country right now. In reality it almost sounds offensive to say the market is slowing when we have multiple offers and bidding wars, but things right now don’t feel quite as aggressive as they did in April and May. We’re seeing slightly more price reductions, slightly less offers, and buyers more frequently not accepting counter offers like they did a few months ago. I know, this isn’t true in every transaction. All I’m saying is we are generally seeing more symptoms of a slowing market (but it’s NOT slow).

4) Not always dull: Sometimes the fall months can be really dull, but other times not so much. Thus even though the stats sag at the end of the year, it doesn’t always feel like the market is dragging. My guess is the fall softening this year will not feel as dull because of how low inventory is right now.

5) Rare: It’s rare to not have a seasonal market. The only time I can think of us not having a fall slowdown in recent years was in 2012 when investment funds and flippers were gutting the market. Values simply kept going up, and investors basically trumped the seasonal market that year.

I hope that was helpful or interesting. Any thoughts?

–——-——- Big monthly market update (it’s long on purpose) ———–——-

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.

DOWNLOAD 65 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 graphs this month (more graphs & stats here):

Sacramento Regional graphs this month (more graphs & stats here):

Placer County graphs this month (more graphs & stats here):

DOWNLOAD 65 graphs (and stats) 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 signs of glowing or slowing are you seeing? Do you think we’ll have a fall market? Did I miss anything? I’d love to hear your take.

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Filed Under: Market Trends Tagged With: appraisals, appraisers, Home Appraiser, House Appraiser, housing inventory, Median Price, Placer County Real Estate Market, real estate stats, Sacramento County real estate market, sacramento regional housing market, seasonal market, softening market, trend graphs

The market is definitely maybe going to do that one thing in the future

August 29, 2016 By Ryan Lundquist 17 Comments

The market is doing great. It’s about to crash. Values are fine but they’re slowing. Actually, the “bubble” popped two months ago. Right now there are some strong opinions about real estate trends. It feels a bit manic to be honest as some say the market is tame while others say it’s beginning a downward slide. In light of this, I hoped to kick around some ideas together. What do you think?

36852833 - businessman holding a glass ball,foretelling the future.

A few things to consider when the market begins to slow:

  1. Don’t let headlines become your talking points: It seems like sensational headlines and stories can become our talking points if we’re not careful. It’s easy to let this happen in our personal lives, so two weeks ago we were offended by Ryan Lochte, this week it’s Colin Kaepernick, and next week it’s going to be some other person or situation. I’m not saying these things don’t matter, but only that it’s easy to get swept up in the latest headlines. The same thing happens with real estate articles and opinions. It’s easy to hear something and swiftly conclude “the market is doing this or that,” without really fact checking our local market. My advice would be to let local data inform our market statements.
  2. Be careful about predicting value: It’s really not the job of real estate professionals to predict what values will do in the future. If I asked you to predict exactly what Apple stock will be worth in one year, could you be precise? Or tell me how consumers will feel about Netflix in 5 years from now. Or let’s keep it simple. Who is going to be President in two months? You get the point. Everyone is asking where the real estate market is heading, but the most honest thing we can say is, “I don’t know what the market is going to do. My crystal ball is broken. But I can tell you in depth what the market is doing right now and what it seems poised to do in the immediate future.”
  3. Know the seasonal trend: Almost every single year in the later summer the real estate market slows down and the real estate community tends to freak out. What is happening? Has the “bubble” popped? Is the market starting to turn? It’s as if we are disconnected from seasonal trends and thus treat any slowing like it’s something totally unexpected. Like I said two weeks ago, weighing a slowing market is like stepping on a scale at the right time of day. Frankly, we have to be able to answer questions like this: What does the market normally do at this time of year or during this month? Does it take longer to sell? What happens with sales volume? Does monthly inventory usually go up or down? Do prices usually soften or increase? Answers to these questions can show us how the seasonal market usually behaves and then help us interpret whether a current slowing is something normal or not. Here’s a good rule of thumb: Unless we see something that indicates this is more than a seasonal slowing, it’s probably an okay idea to consider this a seasonal slowing.
  4. Preaching the market is going to change: For those preaching a coming change in the market, here are a few questions: What is going to cause the market to change? When is it going to happen? And by how much will values decline? In reality it’s a given that at some point in the future the market is going to change. Why? Because that’s what markets do. They go up and they go down. While I’m not a huge fan of predicting real estate, I guess if someone has a platform of change, I’d rather hear some specifics because otherwise preaching change seems like prophesying something inevitable. Know what I’m saying?

I hope this was helpful and relevant.

Video Market Screencast: In the following video I talk about seeing the seasonal market and what the market was like in 2005 when values began to decline. I hope this will be helpful and maybe even a game-changer for some. Watch below (or here). Yeah, it’s not short, but maybe watch it in the background while working.

Questions: What is point #5? Did I miss anything? Which point resonated with you the most? Do you think what’s happening now is a seasonal trend or is it something else? I’d love to hear your take.

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Filed Under: Market Trends Tagged With: changing market, doom & gloom, real estate market 2016, real estate predictions, real estate trends, Sacramento Real Estate Market, seasonal market

Six temptations to avoid when the market slows down

September 1, 2015 By Ryan Lundquist 6 Comments

At this time of year the weather begins to change, the kids are finally back in school, AND pumpkin spice lattes come back on the menu at Starbucks. Oh, and it’s normal for the real estate market to slow down.

sacramento real estate market- image purchased from 123rf and used with permission by sacramento appraisal blog

The Truth: Real estate is usually very seasonal, meaning the market heats up in the spring and begins to slow down later in the year. This is normal, and we know this intellectually, yet it’s still easy to freak out when properties start taking longer to sell or demand changes. This is why I hope this post will be relevant.

NOTE: There is a difference between a market being slow and showing signs of a seasonal slowing. 

Six temptations to avoid when the market slows down

  1. Freaking out: Just as we expect the weather to change during the fall, let’s expect real estate to change too. The public likes hearing positive news (“values are increasing”), so reporting a market slowing seems negative or anti-climatic, but it’s actually normal almost every single year (see this post and look at the fall graphs compared to the spring). On the positive side, a slower seasonal market might provide space for a vacation, relaxation, and most significantly an opportunity for the real estate community to communicate seasonal dynamics to clients. Of course when a market slows it’s not always easy to be self-employed since paychecks also slow. Yet when we start realizing the market slows during the end of the year, it helps us adjust our expectations and make plans for life and business. There has to be more to the last quarter of the year than being stressed until the market picks up again in the spring.  🙂
  2. Projecting the aggressive spring on summer: It’s easy to look back in time to a more aggressive market and want to price according to sales from the hot spring. But when the market has changed, be careful to look at values for what they are right now instead of projecting hotter seasonal trends of the recent past onto a fading summer or cool fall. This is just the same as not dressing for summer if it is winter (I do wear flip flops year round though). We have to do what makes sense for the current time.
  3. Putting too much weight on sales: Sales tell us what the market used to be like when the sales went into contract several months ago, but listings and pendings tell us what the current market is like right now. When values begin to soften during the fall, this makes it all the more important to look at listings / pendings instead of only sales. If the listings are priced at a similar level to recent sales, but not selling, this tells us the market has changed, and we might need to adjust our expectations (and prices). The same is true with the stock market. We wouldn’t use stock prices from three months ago as our gauge for today’s prices, but instead look at what stocks are actually selling for right now.
  4. Targeting that one magical buyer: We all want to attract the highest price ever, so it’s easy to hold out for that one cash buyer from outside the market who is going to pay more than anyone has ever paid. Yet we have to consider what the rest of the local market is willing to pay (this is what the appraiser is going to be considering too). If you lined up 100 buyers who are interested in the neighborhood, what is the most probable price most buyers would be willing to pay? That’s a good picture of what market value looks like.
  5. Refusing to reduce the list price: It can sting to reduce the list price, but if the price isn’t right, it’s time to change that, right? If you had something for sale on Craigslist and it wasn’t selling, would you keep the price the same? No, you’d change it if you really wanted to sell. How do you know if the price is wrong? If there aren’t any offers, you’re not “in the market”, but only “on the market” (Jay Papasan). An honest question: If the market is telling you to reduce the price, but you aren’t willing to do so, do you really want to sell?
  6. Not listening to your real estate agent: If you are an owner and your real estate agent keeps encouraging you to do something to the property or change the list price, but you’re not listening, ask yourself why you are not listening.

I hope this was helpful.

Social Media Podcast: By the way, a few weeks back I did a podcast with The Appraiser Coach on using social media. Here it is in case you want to give it a listen in the background. It’s geared toward appraisers, but there are probably relevant nuggets in there for anyone in the real estate community. Listen here or below.

Questions: What’s temptation #7? 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.

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Filed Under: Resources Tagged With: appraiser in Sacramento, Fall Market, lower current listings, magical buyer, overpricing, price reductions, Real estate agents, Realtors, sacramento market, Sacramento real estate trends, sales vs listings, seasonal market, slowing market, softer market, Spring market, temptations in real estate

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