seasonal slowing

Buyers have a bit more power in today’s housing market

September 21, 2021 By Ryan Lundquist 17 Comments

Are buyers finally gaining more power? Yes. The truth is the market is still ultra-competitive, but there is a slightly better chance buyers can get into contract these days and maybe not pay as much above the asking price (maybe).

Big (Free) market update: On September 23rd from 11am-12pm I’m giving a market update for CornerStone Title Company. This is for the real estate community only. Sign up here.

Teaching my favorite class: On September 28th from 9am-12pm I’m teaching my favorite class at SAR called How to Think Like an Appraiser. It’s three hours, which sounds painful, but I love this one because we have space to dig deep into comp selection and adjustments. Sign up here.

BRAND NEW VISUAL:

I’m excited about this visual because it focuses on a dollar amount. I could be wrong, but I don’t think anyone has published this in my area.

FOUR TAKEAWAYS:

1) Freakishly high: Over the past few years buyers on average were NOT paying above the original list price, but that changed this year. In fact, in June buyers paid $25,000+ over the original list price in the region. I know that almost seems low because we’ve been hearing stories about properties selling $200K over asking, but this is the average and it represents over 2,800 sales.

2) An average of $11,211: Last month buyers on average paid $11,211 above the original asking price in the Sacramento region.

3) Fall prediction: In a normal year buyers pay less during the fall and it looks like that’s what we’re heading toward since two months in a row we’ve seen a softening from the height of the seasonal market in June. Ultimately unless something unexpected happens to reverse the seasonal slowing we’re experiencing, we should continue to see buyers on average pay less above the asking price over the next few months. This doesn’t mean it’s not competitive though (see #4).

4) Still not normal: The good news for buyers is the market is slowing for the season, but the harsh news is the trend is still more aggressive than it should be for the time of year. So it’s like the car was going 130 mph and now it’s going 90 mph. It’s still speeding. For instance, buyers paid above the original list price in August even though that’s not common (see above). As I keep saying, the market is showing seasonal slowing, but that doesn’t mean the market is slow. In short, buyers ought to enjoy having just a little more power in today’s marketplace, but it’s important to realize the market is still tilted toward sellers.

MORE VISUALS:

I hope this was helpful. Thanks for being here.

Questions: What are you seeing out there with buyers and sellers? What advice would you give for pricing a property right now?

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Vacations & normalcy in the housing market

June 17, 2021 By Ryan Lundquist 11 Comments

Are you taking a vacation this year? It seems like half my Instagram feed is in Hawaii right now. I’m not doing anything that big, but I did get back yesterday from a few days in Santa Cruz and it was just what I needed. Here’s a video of me longboarding…

I guess I’m about a year late and I don’t have cranberry juice. Last day of vacay. Coming home refreshed. pic.twitter.com/ey4VQrSatY

— Ryan Lundquist (@SacAppraiser) June 16, 2021

Big market update: On June 24th 10-11am I’m doing a big market update with SAR to talk through the latest trends. I cannot wait. Sign up here.

Anyway, let’s talk about normalcy.

THE BIG POINT: It’s a good thing for people to find a normal rhythm in life with taking vacations and the kids getting fully back to school. Not only does it feel good to have a more regular rhythm after a pandemic year, but this is a step in the right direction for the housing market also to hopefully feel a bit more normal eventually. The real hope is for sellers to be more comfortable listing their homes, but that could take a while (especially since some would-be sellers are now wondering if there is even something available for them to purchase). Look, the market is still moving at warp speed and we are not close to a normal market. I’m just saying having more normality in life is exactly what we want to see because it’s a step in the right direction.

NORMALCY & SALES VOLUME:

1) A normal year looks like this: In a normal year we typically see the highest number of sales in June, though May and June trade places for top month status each year. This year I wonder if May will be our regional peak, but we’ll see. By the way, here is a free tutorial for how to make this type of graph.

2) It’s been a *normal year of volume so far: It’s been a pretty normal year so far in terms of the number of sales happening. Check out the red line (2021) compared to the green line (an average of seven years). Of course the black line represents 2020 and that was a wild year in so many ways.

* To be fair if we had more listings we’d actually be seeing bigger numbers, so there is an asterisk with saying volume is normal.

Quick note on slowing: At times it’s a struggle for some to talk about the housing market slowing down each year, but the market isn’t the same every month and the green life is definitive proof. And keep in mind volume slowing doesn’t automatically mean prices stop rising.

3) Volume is elevated in two counties: Since the pandemic volume has been up in El Dorado and Placer County. What’s going on? Well, buyers seem to be attracted to larger homes, newer homes, highly-rated schools, and a location a bit further from Downtown (but not too far for a commute).

4) Bonus colorful visuals: Here are some colorful visuals to show what’s been happening between January and May. As you can see sales volume this year looks mostly normal for the entire region and Sacramento County while it’s ahead in Placer and El Dorado. As I alluded to above, it’s remarkable to see a “normal” level with such anemic housing supply.

Thanks for being here.

SHARING POLICY: You can share my stats and visuals above, but please attribute the source. Here are 6 ways to share my content (not copy verbatim).

Questions: Are you taking any trips this summer? I’d love to hear. What is the market like in the trenches right now?

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Is the housing market starting to slow?

June 8, 2021 By Ryan Lundquist 36 Comments

Is this crazy housing market slowing? Let’s talk about that today. On one hand stats are basically at all-time highs, but when we look deeper we’re starting to see some subtle signs of slowing. What are you seeing out there?

QUICK SUMMARY: The market is still bananas, but we’re seeing some slight slowing. Stats could change in coming weeks and months, but for now the best available information suggests a slightly slower trend. And I’m not saying the market is dull, so save your hate mail. It’s more like housing was driving 135 mph and now it’s driving 127 mph.

Some subtle examples of slowing:

1) It’s taking slightly longer to sell: It May it took only six days to sell (median) in the Sacramento region while pendings over the past four weeks took seven days to get into contract (median).

2) Fewer multiple offers: In May we saw the number of multiple offers slough by 6% as seen in the graph below. We are still basically at all-time high levels, but the percentage of multiple offers is slightly lower than it was.

3) Buyers paid slightly less above asking: In May buyers paid an average of $20,975 above asking price while in April they paid $22,247. This is a very minor difference that I’m honestly hesitant to talk about because we’ll have to revise May stats in a few weeks once more sales get added into MLS. So it’s possible this stat in May could change. Though right now the best available market stats show buyers paid slightly less above contract price in May compared to April.

4) Lower sales to original list price ratio: In May buyers paid an average of 103.3% above the original list price compared to 103.8% in April. Okay, this is even closer than the example in number three, so again, I’m reluctant to post this – especially since we’ll need to refresh this number when more May sales are counted. But for now it’s something to watch. Keep in mind the number in April at nearly 104% was literally the highest amount ever above the original list price, so 103.3% is telling of an incredibly competitive market.

5) Word on the street: I’m hearing from real estate agents that they’re seeing slightly fewer offers and having slightly fewer showings. This is mostly anecdotal and of course subjective to whatever sliver of the market an agent is working, but it’s something to consider.

CLOSING ADVICE:

a) Know the seasonal market: Each year around this time in a normal year we start to see the real estate market slow and this image shows some of the things we can watch. Remember, prices could keep going up in coming time, but prices reflect pending contracts from the past, so being on the cutting edge of the trend in a market has more to do with watching other stuff before the trend eventually catches up to prices.

UPDATE: I just wanted to say I fully expect prices to increase in June and who knows how much longer. We are definitely still in an increasing market to say the least. I know it seems ludicrous to be talking about slowing in the midst of such insane competition. But this is exactly the conversation to have because let’s watch all the little things instead of getting overly distracted by the bling of sexy price stats. Know what I’m saying?

b) Don’t misread this post: The market is still 100% on steroids, so I’m hoping people don’t walk away thinking, “Ryan said the market was dull.” Nope. Also, the market is not crashing, so be cautious about painting what looks like normal seasonal slowing with a doom and gloom brush. Buyers, you’re still going to have to make aggressive offers. But sellers, stay in touch because even though you have an incredible amount of power, you did lose just a little recently.

c) The x-factor of mortgage rates: If mortgage rates dip below 3% again it could easily change the speed and trajectory of the market.

d) Be careful of rose-colored lenses: It’s easy in real estate to only speak in ultra positive terms about the housing market. But markets change temperature all the time and we have to be real about the trends because buyers and sellers need good advice for the market that actually exists. My advice? Let the stats form your perspective and narrative. Don’t get trapped into thinking you need to speak in hyper-positive language either to be successful in real estate.

e) Say something different if the temperature changes: If the market speeds up in coming months and we don’t end up seeing seasonal slowing, then that’s what we need to say. The best we can do at any given moment is interpret the stats in front of us and let that shape what we say. So for now it looks like we’re seeing some slowing. What does the future hold? We’ll see.

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

APRIL TO MAY: How has the market changed recently? Take a look at the April to May visuals below.

Prices in Placer tend to bounce around month to month because there aren’t that many sales. Take these with a grain of salt.

NOTE ON PRICE GROWTH: Last year the market was dull at the beginning of the pandemic and there was a slump in sales and even prices – which tends to inflate the numbers this year. My advice? Take the percentages with a grain of salt. I think it’s likely better to focus on price metrics generally being up about 20-23% or so rather than fixating on pandemic percentages at 25-30%.

Thanks for being here.

SHARING POLICY: You can share my stats and visuals above, but please attribute the source. Here are 6 ways to share my content (not copy verbatim).

Questions: Are you seeing any slowing at all? What is the market like in the trenches right now? I’d love to hear your take.

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Peaking prices & rosy real estate narratives

September 13, 2019 By Ryan Lundquist 10 Comments

People tend to freak out when prices slow down. What’s going on? Is the market crashing? But every year around this time we start to see the market soften. Let’s talk about this, and then for those interested I have a big market update.

1) Slowing is normal: Prices have likely crested for the season in many areas of the country. What I mean there’s a good chance we’ve more or less seen the highest prices we’re going to see for 2019 as the market is starting to show its descent from the high-altitude spring season. This happens EVERY. SINGLE. YEAR. It doesn’t mean it’s not competitive either. It just means it starts to take longer to sell, the number of sales begins to shrink, and prices tend to taper.

2) The rosy real estate narrative: It can be a struggle for many people when hearing the market is slowing. It’s like we are only allowed to talk about real estate in glowing terms and our talking points must fit into a rosy narrative. So when there’s any hint of news that sounds even slightly negative, it feels like something is wrong. What do you mean prices aren’t going up? Wait, they’re softening? Does that mean the market is about to turn? Remember, just as it’s not always sunny outside, real estate isn’t always burning hot either.

3) The mistake of misinterpreting slowness: On the other side of the coin we tend to see lots of doom and gloom conversations around this time of year as the market softens. My advice? Know what is normal for the fall season so you can assess whether it’s a normal seasonal slowing or something more. In other words, let the stats speak to you and inform your real estate narrative. Otherwise you may be swayed by sensational headlines or get sucked into a real estate culture that sometimes struggles when things aren’t ultra-positive.

Any thoughts?

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

Now for those interested, let’s talk about Sacramento trends. If I had to sum up the market I’d say things have felt a little more normal lately. Granted, low mortgage rates are like a steroid helping the market feel normal, but nonetheless stats have been about what we’d expect for this time of year – which is unlike the dark season we experienced last year at the same time.

DOWNLOAD 80+ 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 SHORT VERSION:

Stats feel mostly normal
California will now have rent control
Year-over-year price growth is stronger
Don’t be like Michael Jordan
Volume was down slightly in August
Listings are seriously anemic
Pendings are strong right now
Sales volume is down 9% this year
The market is slowing for the season

THE LONGER VERSION:

Here are some of the bigger topics right now:

Normal and cresting prices: We’re seeing about what we’d expect to see right now with prices starting to soften. I’d say prices have likely crested for the season. It’s possible we could see some price metrics bounce up slightly due to low mortgage rates, but that usually doesn’t happen beyond August much. Besides, any sales from September really reflect older pendings from July and August anyway.

Rent control: Statewide rent control in California was just passed by the legislature. There is going to be a learning curve for the real estate community on how to deal with this from a value perspective too. We may need years to really understand the effect on the housing market. Keep in mind this only applies to 2-unit+ properties built prior to 1995 (it does not apply to single family homes). Also, this doesn’t mean rents won’t increase either because landlords can legally raise rents 5% plus inflation each year.

14th bubble anniversary: The real estate “bubble” popped fourteen years ago in Sacramento in August 2005. In other parts of the country the market started to turn in 2007, but we started to tank in 2005. So happy anniversary, I guess.

Michael Jordan’s house: In 2012 Michael Jordan’s house was put on the market for $29 million and after seven years it still hasn’t sold. It’s now listed for about $15M. This just goes to show buyers aren’t willing to pay any price – even if the owner is famous. This is a great object lesson for sellers today who are prone to think they can command whatever price they want since inventory is low. Nope. Buyers are extremely sensitive to paying the right price and they’re more informed than ever. If you want to sell you need to price it right. Bottom line.

Slowing doesn’t mean it’s cold: The market isn’t slow, but it’s starting to show signs of slowing for the season as it’s taking longer to sell, most price metrics declined from July to August, and sales volume looks to be starting to slough for the year as it normally does. This doesn’t mean the market is cold though. Not at all. It’s just not as hot as it was during the spring. Over the next month I’d expect the market to heat up a bit though since kids are back in school and vacations are done. There is usually a last run on the market before the holidays arrive.

Almost 8 years of price increases: In the current real estate price cycle we’ve had about eight years of price growth so far. When I say eight, some people correct me with seven, but that’s not accurate if you count every year since 2012. I also have a chart like this for Placer, Yolo, & El Dorado County in my monthly download.

Stronger price growth: Prices are up about 4-5% from last year, which is a change from a more subtle 2-3% we’ve been seeing for most of the year. What’s going on? Part of the growth could stem from low mortgage rates fueling buyers to play the game, but let’s remember too last year was a dull time in the market, which means it’s going to be easier on paper this year to see glowing stats (more on that below). Let’s not make too much of one month of data.

Really sparse listings lately: The number of listings has been noticeably down. I mean, we’re seeing multiple hundreds fewer per month these days. Technically housing inventory as a metric is on the lower side of normal these days, but there have been fewer listings hitting the market (remember, inventory as a metric measures the relationship between listings and sales rather than the number of actual listings). I’ve been thinking about what’s going on here for a number of months and I’ll admit I don’t have it all figured out. Part of it of course is pendings have been stronger, which naturally means there’s fewer available listings. And maybe some would-be sellers refinanced into a lower rate rather than selling. I don’t think this is the byproduct of the iBuyer model with so many listings selling privately instead of coming to the market, but some properties certainly sold this way. Mostly I would guess this is related to sellers feeling uncertain about the market. Just as buyers had their moment last year where they backed off the market a bit, maybe sellers are feeling it’s their turn? There could be other reasons. This is something I’ll keep watching to understand over time. I’d love to hear your take here.

Warning about glowing stats ahead: Hey stat nerds, this is important. Over the next few months if we have fairly normal numbers they could end up looking glorious since last year the market was in a slump. If you remember, when mortgage rates shot up in 2018 buyers began to put their foot on the brakes and it felt like there was a dark cloud looming for about six months. Anyway, when you’re pulling stats over these next two quarters, just remember the numbers might technically look glowing this year compared with last year. My advice? Take stats with a grain of salt and compare multiple years of data rather than give laser focus to last year.

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

FOUR ISSUES TO WATCH:

1) SLOWER GROWTH: The market continues to show price growth, but the rate of change is slowing. This sounds offensive to some because the narrative in real estate is often that the market is always blazing hot. But let’s remember “slow” is not a dirty word in real estate.

2) A QUICK RECAP: All year prices have shown a modest uptick at about 1-3%, but this past month the stats look a bit sexier. Part of this could be due to lower mortgage rates, but some of it could be due to the market showing weakness last year (which helps pad today’s stats).

3) VOLUME SLUMP: Volume was lower last month compared to August 2018, but not by much. The bigger story though is volume is down in the region by 9% over the past year. Moreover, volume has been down in the region for 14 out of the last 15 months. Overall despite a lower year of volume, it’s still not outside of a normal low range (see 2014 and 2015).

4) PRICES SOFTENED IN AUGUST: The market generally slowed in August in terms of price growth. This is why I’m saying prices feel a bit flat (even though they’re up from last year). This is fairly normal for the time of year, and sometimes we see prices bounce up and down as summer comes to a close. Stay tuned. Let’s keep watching.

NOTE: Take El Dorado County data with a grain of salt. Stats change significantly month by month.

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SACRAMENTO REGION (more graphs here):