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The housing market is a mixed bag

March 21, 2023 By Ryan Lundquist 13 Comments

The housing market is a mixed bag. It’s not always easy to understand what the market is doing right now. Today I have some thoughts about prices, Zestimates, and cash buyers. Scroll by topic or digest slowly.

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UPCOMING (PUBLIC) SPEAKING GIGS:
3/24/23 How to Think Like an Appraiser (at SAR)
3/28/23 Downtown Regional MLS meeting
4/1/23 NAA Conference in Sacramento
4/13/23 Realtist Meeting
5/4/23 Event with UWL TBA
5/10/23 Empire Home Loans event TBA
5/22/23 Yolo YPN event TBA

THIS MARKET IS A MIXED BAG

This isn’t scientific research, but I did a poll on my Instagram stories two days ago, and there were mixed results when asking what home prices are doing right now (the bulk of these votes are from the real estate community). Moreover, I speak somewhere usually once a week, and I’m finding this same sentiment when talking to groups. I’m hearing everything from, “Prices are dropping” to “Prices are going up.” In short, it’s no longer early 2022 when the trend was so clear. Keep in mind the market could be different all across the country too (not to mention different by price range locally).

Instagram poll about home prices that I did on my stories. This shows the results with 17% saying prices are going down, 27% saying they're flat, 14% going up, and 42% mixed results.

THE ZESTIMATE MATCHING THE LIST PRICE

Speaking of prices, this house is being sold through an auction website, but it’s listed on MLS. This list price is likely designed to create a bidding war since other neighborhood sales closed significantly higher. But backing up, check out how the Zestimate was $644,000 before listing, but then it changed to the EXACT list price at $349,000 right after the property went live. I think sometimes sellers and buyers put incredible weight on the Zestimate without realizing the games that are happening behind the scenes. My advice? Look to the comps. Don’t get hung up on the Zestimate.

Screenshot of Zestimate for a property in Roseville at 201 Pinecrest Ct. This shows the Zestimate was over $600K, but it dropped immediately when the property listed at $349K (Zestimate basically matched the list price exactly).

By the way, the top bid so far is $507,000. We’ll see where it ends.

WHAT DO THE STATS SHOW PRICES ARE DOING?

Here’s a look at the weekly median price for closed sales in the Sacramento region. It’s been a bit flat in recent weeks (black line). However, when looking at pendings since March in the entire region, Sacramento County, and Placer County, they’re getting into contract at higher levels in recent weeks (please note the trend could vary by neighborhood). The truth is we never know exactly where pendings will close, but today’s pendings are next month’s closed sales, so they’re important to watch. In short, based on pending prices, it looks possible April stats could show a modest uptick. Only time will tell.

An image to show the weekly median price by year in the Sacramento region. There are six years present, and the trend is seen from left to right (January to December).

FINDING OUT WHERE THE MARKET IS AT

In light of the housing market being a mixed bag, sometimes value looks one way on paper, but you have to list a property and experiment a bit with the price to find where the market will bite. I think this meme is the perfect fit for comp selection in 2023. If you’re not familiar with this visual, here’s a video if you want to “find out.” By the way, I’m teaching a class on Friday about comps and adjustments. Live streaming is available too (3 hours).

Swearing: This meme uses a swear word, and it’s based on this video. I could have blurred out the word, but this is a blog for adults, so I’m okay with it. Someone unsubscribed today and said this was inappropriate content, so clearly this doesn’t tickle everyone’s funny bone. I get it.

The "find out, fuck around" meme with a caption that says, "Pulling comps in 2023."

PENDINGS VS SALES

The goal with real estate value is to understand what’s happening with the current market (pendings and listings) compared to the past (sales). Here are two graphs from recent appraisals to help scrape the surface of what’s happening with pendings in terms of price and volume. Remember, the trendline is based on closed sales, so if we see upward movement ahead, that won’t be reflected until pendings actually close. I find in some neighborhoods right now the trendline is starting to flatten out instead of showing a hardcore decline like we saw in the summer and fall of 2022.

BIG POINT: Ultimately, it takes time for the market trend to show up on graphs, so if we wait for the graphs to tell us what is happening, we’re going to be behind the trend.

A scatter graph to show 95757 ZIP Code sales in blue compared to pendings in black. Pendings are basically at a similar level right now. Sales from 2021 onward.

A scatter graph to show 95758 ZIP Code sales in blue compared to pendings in black. Pendings are basically at a similar level right now. Sales from 2021 onward.

A HISTORY OF CASH IN THE SACRAMENTO MARKET

“Bro, 80% of the market is cash and Blackrock is buying everything” Not true. Here’s a look at the percentage of cash sales since 2010 in the Sacramento region. There’s been a slight uptick in 2023, but the year is just getting started. Keep in mind if total volume drops more than the volume of cash buyers too, that will naturally boost cash percentage levels.

UPDATE on Blackrock: A reader sent me a kind email to explain the difference between Blackstone and Blackrock. I was actually intentional here with my use of Blackrock because there has been a fake narrative about Blackrock buying everything on Twitter. I really appreciate the concern though. Truly. Here’s something I wrote in 2021 about this false narrative.

A bar graph to show the percentage of cash sales in the Sacramento region from 2010 onward. Cash basically peaked in 2012, and right now it's been 18% of the market (2023).

HOPE FOR BUYERS:

The vast bulk of the market is financed in the Sacramento region, which means conventional, FHA, and VA transactions are the overwhelming majority of the market. Buyers, this means it’s highly possible to get a financed offer accepted because it’s happening ALL. THE. TIME. It’s really competitive right now for units that check all the boxes though, so bring an offer that makes sense for the market. My advice? If you are willing to buy right now, get as much as the market will give you, and also be realistic about what it’s going to take today.

50% CASH IN THIS NEIGHBORHOOD

In the Sun City Lincoln Hills neighborhood, it’s normal to see about HALF THE NEIGHBORHOOD as cash transactions. This is REALLY uncommon in other neighborhoods, and I haven’t seen percentages like this elsewhere. Sun City Lincoln is a 55+ community though, and some of these buyers are Bay Area transplants, but it’s also retiring Boomers deploying equity and wealth. By the way, take 2023 with a grain of salt since the year is just getting started.

A bar graph to show the percentage of cash sales in the Sun City Lincoln Hills neighborhood in Placer County since 2010. This neighborhood regularly has 45-50% cash transactions.

I hope this was helpful.

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

Questions: What are you seeing happen with prices? Up, down, flat? I’d love to hear your take.

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

Real estate price cycles & getting bid up

March 14, 2023 By Ryan Lundquist 9 Comments

I’ve got two things on my mind today. Price cycles and getting bid up during the first week. Well, and banks failing. And my 23rd wedding anniversary this week. And getting in shape. Anyway, let’s look at the first two things.

HELLO, I’M A BANK FAILURE EXPERT

I had no idea there were so many bank failure experts, but they’ve been all over social media this week. Haha. Seriously though, this is something to watch, and we need time to see if other banks will follow Silicon Valley Bank.

NEW PRICE CYCLE GRAPHS

It’s been a number of months since I’ve updated this visual, so I wanted to share a new version. Here’s price change in Sacramento since the days of shag carpet in 1975. This is based on the Freddie Mac Price Index, and I adjusted it for inflation since that helps show more pronounced change.

Here’s what the nominal price data looks like (not adjusted for inflation):

A FEW THINGS ABOUT PRICE CYCLES

1) Up and down: Markets go up and down. Bottom line. A simplistic explanation of real estate is that it’s about supply and demand, but what happens behind the scenes with the Fed and financial policy is a massive factor in shaping the housing market (including supply and demand).

2) Seasonal price bumps: The graphs above don’t show it, but a spring seasonal uptick can happen during a declining cycle. For instance, the spring in 2007 and 2008 saw a seasonal increase in both volume and prices. We’ll see what happens in coming months now that rates are higher, but in early 2023 there has been a seasonal price bump so far. I find in many neighborhoods there was a huge price decline from May 2022, but now prices are flat or slightly higher in light of growing spring demand. In short, the sharp decline from last year has seemed to flatten over the past few months.

By the way, appraisers, what box are you checking right now?

3) Cycle length of five to six years: Prices in Sacramento tend to drop for five to six years when there is a declining trend, and we should be in tune with that. But it would be a mistake to say we’re locked into a predetermined period of time for this cycle ahead. Ultimately, the market feels so uncertain right now with high inflation, the Fed trying to break something, and the volatility of mortgage rates, so we need to see what happens (while being in touch with the normal trend). Also, it’s worth noting we have such a weird dynamic of sellers sitting out of the market right now, and we’ve only scraped the surface of understanding what this will mean for the next few years.

STARTING TO SELL QUICKLY

The market has been heating up for the spring, and properties are starting to sell quickly again. This is nothing at all like early 2022 in the stats, but half of pendings since March spent 15 days or less on the market, and that’s lightning speed compared to the ice bath fall season.

GETTING BID UP DURING THE FIRST WEEK

Yes, some properties are getting bid up today, but it’s nothing like early 2022 levels. If bidding up happens, it typically occurs during the first week or so. When properties get bid up, it’s usually 5% or less above the original price. And the longer homes are on the market, the lower they tend to sell from their original price (duh, thanks). Right now, we’re seeing about a quarter of sales close above the original price, which is a little lower than normal for the time of year, and profoundly lower than the last two years.

GOING BELOW DURING THE FIRST WEEK

There are also lots of properties that sold BELOW the original price in the first week. Kudos to sellers for listening to buyers and responding quickly.

SOME FRESH VISUALS

A few people asked me for more visuals like this, so here goes. These graphs show the relationship between days on market and how properties sold compared to their original list price. By the way, it’s easy to only see the glowing portion of these visuals, but don’t ignore the rest. Oh, and the original list price obviously makes a huge difference here. I find when properties get bid way up today, it’s often a reflection of being priced way too low.

LASTLY, THANK YOU

I’ve had so many speaking gigs lately, and I’m having an absolute blast. I wanted to say thank you everyone for showing up. I’m deeply honored. And thank you to event organizers for having me out. Photos from Carlos.

I hope this was helpful.

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

Questions: Are you seeing a spring bump when pulling comps? Or are prices still down? What do you think of the new visuals? I’d love to hear your take.

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

A spring bump in the housing market

March 9, 2023 By Ryan Lundquist 26 Comments

It’s a bump. Do you feel it? The housing market has been waking up in 2023, and we’re starting to see an uptick in lots of different stats. Let’s talk about it. This post is designed to skim quickly or digest slowly.

background with wooden table and grunge blue wall. A white banner in the middle of the image says, "A spring bump in the housing market."

UPCOMING (PUBLIC) SPEAKING GIGS:
3/10/23 PCAR Market Update Lunch & Learn
3/24/23 How to Think Like an Appraiser (at SAR)
3/28/23 Downtown Regional MLS meeting
4/1/23 NAA Conference in Sacramento
4/13/23 Realtist Meeting
5/4/23 Event with UWL TBA

A SPRING BUMP IS UPON US

It’s normal to see more attention on the housing market in the spring – even during a downward year. I have lots of price recap images to share below, but check out these two (weekly and monthly). Not every local county looks like this, but the region did show a price bump from January to February.

BUT NOW RATES ARE 7%

Lots of stats from February reflect properties that got into contract in January when rates were 6%. Thus, the real tell for the spring trend will be stats ahead over the next two months that show what 7% rates do to the market.

DOOM VS ROSY

These days many people embrace either a housing doom narrative or a rosy one, but let’s try to let the stats form our understanding instead of imposing one big idea on the market. Ultimately, housing stats are like life. Not everything fits into one neat little box or ideology. Moreover, markets are often a mixture of lots of different trends, so not everything is going to be totally dark or glowing.

HOT POCKET VIBES

Sales volume is ticking up right now for the spring, but it’s also subdued from a normal level. This is why I’m describing the market as heating up for the spring, but still frozen (like a hot pocket taken out of the microwave too early).

MISSING 40% OF BUYERS STILL

Over the past 90 days, there were about 2,200 fewer sales compared to last year and even the pre-pandemic normal. The truth is we’ve seen some of the worst volume on record lately. It’s no joke. Let’s not forget over 3,300 sales closed though. I think sometimes the part of the market that is happening gets lost or ignored in the midst of sensational stats.

GET READY FOR SUPER SENSATIONAL STATS

Some of the stats look bonkers right now. Days on market was freakishly low last year, and now it’s basically a bit above the normal trend, which ends up creating a sensational comparison. I can picture it now, “Dude, the median days on market grew by 428%.” Okay, technically true, but very sensational.

IT’S GETTING TIGHT (ESPECIALLY AT THE BOTTOM HALF)

In January and February there were about 2,000 fewer new listings compared to last year (and 2,500 from the pre-pandemic normal). In short, the market is starting to feel tight because we’ve seen sellers sitting out to a greater extent these past few months. Here’s a look at listings and sales to give some clues into what competition feels like at various price ranges. It’s true that we don’t need a huge amount of supply to see the market decline, but having anemic new listings certainly makes things more competitive. Imagine what the market would feel like right now with 2,000 more active listings…

MULTIPLE OFFERS ARE GROWING

It’s not a shocker to see more multiple offers in both recent sales and current pendings. It’s still nowhere close to the same level of competition in early 2022 though. Do you see that uptick lately? That’s what early spring should look like. Remember, it’s normal to see multiple offers, but not normal to see the freakish levels from 2021 and 2022.

BUYERS ARE GETTING CONCESSIONS:

49% of transactions in Sacramento County last month had some form of a concession to the buyer (credit for repairs, credit for closing costs, rate buydowns, etc…). Placer County was more like 43%. This is good news for buyers, and it also speaks to sellers doing a better job listening.

DON’T GET CARRIED AWAY WITH A HOT NARRATIVE:

There are many metrics that show the market is heating up for the spring, but the trend right now is nothing like 2021 or 2022. In short, whenever someone says, “It’s 2021 all over again,” a puppy dies. Okay, that’s probably not true, but all I’m saying is statistically speaking it’s not 2021.

BUT SERIOUSLY, PROPERTIES ARE STARTING TO GO QUICKLY:

Half the pendings over the past two weeks went in fifteen days or fewer. These stats will eventually show up in closed sales in March and April.

IT’S ALL ABOUT THE FIRST WEEK

Properties that sold above their original list price tended to get bid up during the first week. Not a huge shocker. Of course, some properties are being priced too low to generate interest, so don’t think of this as buyers paying 10% over market value. Nope. But if you price 10% too low, you’ll likely get bid up. By the way, whenever I hear about properties with 15 offers, the price is almost always somewhere around $450,000 (and likely priced low).

BRO, REDUCE THE PRICE ALREADY

The market isn’t so overpriced like it was during the fall, but there is still a need for price reductions. Here’s a look at price drops among recent pending contracts. This is proof price reductions work. The real takeaway is to see a good chunk of price drops below $500,000. While this is an incredibly hot price range, it’s also proof buyers won’t pay any amount.

Okay, I’ve said enough. Probably too much. A few last recap images for anyone interested.

MARKET RECAP VISUALS

Year-over-year stats don’t tell the full story of the market right now. Someone might say, “No biggie, we’re down 8% from last year.” That’s technically true, but it fails to recognize that eight percent from one year ago is NOT the same thing as eight percent from the height of spring in 2022.

YEAR-OVER-YEAR

MONTH-TO-MONTH

OTHER VISUALS:

I hope this was helpful.

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

Questions: What are you seeing right now in the trenches of escrow? I’d love to hear your take.

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

Prices went up & worst volume ever

February 27, 2023 By Ryan Lundquist 29 Comments

Did prices really go up in February? What’s happening in this market? Today I have a few things on my mind (including a Hot Pockets analogy). Scroll quickly or digest slowly. I hope this helps – whether you’re local or not.

UPCOMING (PUBLIC) SPEAKING GIGS:
3/06/23 Matt the Mortgage Guy YouTube Live 3pm PST
3/09/23 Matt Gouge Event (sign up here)
3/10/23 PCAR Market Update Lunch & Learn
3/24/23 How to Think Like an Appraiser (at SAR)
3/28/23 Downtown Regional MLS meeting
4/1/23 NAA Conference in Sacramento
4/13/23 Realtist Meeting
5/4/23 Event with UWL TBA

1) DID THE MEDIAN PRICE REALLY GO UP IN FEBRUARY?

Yes, the median price so far is up in February in the Sacramento region. The dark bars below are February each year, and it’s normal to see an uptick from January to February. This doesn’t mean every neighborhood went up in value though because the median price doesn’t translate rigidly to every location and price range. My advice? Look to the comps to understand the trend.

2) DOES THIS MEAN THE MARKET IS RECOVERING?

Any hint of positive price news tends to stoke housing optimism, but let’s talk about this. The bar chart below shows median price change from January to February over twenty years, and there’s been an increase EVERY. SINGLE. YEAR. Even in 2007 when the market was tanking. Ultimately, it would be a mistake to say, “Prices went up last month. It’s a sign of recovery.” I’m not trying to be a killjoy, but this is a sign of seasonal normalcy. In other words, an uptick from January to February in the region is what should be happening, so let’s be careful about confusing normalcy with recovery. Keep in mind rates rose in February, and that could damper the price trend ahead.

NOTE: The regional median is up, but NOT every local county is up. The month isn’t over yet, but it looks like the median will hold (I could be wrong).

3) WORST VOLUME EVER

Okay, now for a glaring stat. Monthly sales volume has been below 2007 levels for four months in a row in the region. This isn’t about not having enough listings. This is the byproduct of buyers stepping away. As I keep saying, the way to get more buyers back is to see affordability improve.

ADVICE: For real estate friends, my advice is to focus on the part of the market that IS happening rather than the part that isn’t. Find buyers and sellers who have incentive to participate in today’s market (see #5 too). Oh, and graphs like this are EXACTLY what sellers need to see to understand there is a smaller pool of buyers in the game today.

By the way, who is watching The Last of Us? If you’re not, you won’t get the meme (sorry). My wife and I are glued to this show.

4) SPRING IS HEATING UP (LIKE A HOT POCKET)

Do you see that orange line? Those are monthly sales in 2023, and we’re starting to see an increase in closed sales. This is normal for the time of year, but hey, any hint of normalcy right now feels pretty nice to lots of people. A good way to describe the housing market at the moment is heating up for the spring, but also still frozen. In other words, the housing market is like a Hot Pocket taken out of the microwave too early. It’s somewhat hot, but it’s sort of frozen too.

5) PAY ATTENTION TO RATES & FHA LOANS:

RATES: Mortgage rates have risen this month, and that’s taken some heat and affordability out of the market. In January, it seemed like lots of people were predicting mortgage rates to go down, but now I’m hearing many thinking they’ll go up. This just goes to show very few people get it right. What happens with rates ahead will make a huge difference (duh, thanks).

FHA: Last week it was announced FHA will lower its mortgage insurance, which will help buyers save a modest amount each month. Look, I don’t expect this to transform the housing market since FHA is only a small sliver of volume in Sacramento. However, loan officers have been reporting conventional loans are getting more expensive lately, so FHA becoming slightly cheaper can be meaningful for buyers. The new FHA savings really won’t kick in until March 20th, but so far FHA loans have already been up in 2023.

I hope this was helpful.

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

Questions: What do you think is going to happen to rates? What are you hearing from buyers and sellers right now? 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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