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.
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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I am wondering if the typical metrics apply in this place we have never been. I am thinking of the market as more of a partial hiatus for many and that the market is more or less “sideways”. I also wonder how the “fear factor” weighs in as well. Financing is also changing (like Chase Bank). Returning to the traditional 20% down of years past. Thus credit market will need to sort out, etc. Recession is strong possibility according to some. Thus, I like your probing; certain a mystery for a bit. I forgot the issue of public policy and what impacts are yet to come…. All is seemingly yet to be revealed when emerging from the fog of Corona, eh? Thanks for your insightful work.
Thanks Mark. I think you have lots of great points and things to consider. We are going to have to navigate this market and figure out how to interpret it over time. This is a whole new world for sure.
I find some people try to compare today with 9/11 or The Great Recession, but those so far don’t seem to cut the mustard. But the bigger truth is we won’t really know what makes for a good comparison until this thing starts to unfold so we can see what we’re dealing with exactly. We’re at the very beginning of all of this and nobody knows exactly how this is going to pan out. There are some very sensational ideas and I think many hope reality comes nowhere close to that. Let’s stay tuned.
Yes, I am in a county nearly the size of Massachusetts, we have 70 cases since starting and one death, would not want to evaluate urban picture which is vastly different. The list of variables is long and finding the “feasible region” will be elusive. One key variable is the effect of warmer weather? We are in for some tough sledding in our chosen occupation in terms of analysis moving forward. As always we will work through it the best we can. Thanks again.
Wow, that’s a large county. Be safe out there Mark.
Always spot on Ryan. I want to make graphs like you! hint, hint 😉
Thanks for the prod Pia. I do intend to get to a tutorial at some point. Keep reminding me. 🙂
Love all the information. I wish you lived in my market so that we wouldn’t have to compile this data ourselves 😉
Thanks Gary. I’ve been loving what is coming out of your office. I’ve seen some cutting-edge stuff from Abdur on Twitter.
Thank you Ryan! Absolutely informative, helpful and insightful…truly appreciate your graphs…so incredibly useful I took your information and compared it to a smaller zip code-and it proved to be exact. Love the weeklies!
Thank you sincerely Kristin. Good for you also to take these ideas to the zip code or neighborhood level. I’ll be watching all these things in each neighborhood where I appraise. I cannot impose county or regional trends on each neighborhood or price range because these trends may or may not reflect what is happening on the micro-level.
This is where it starts to feel tricky because the market can be different everywhere. But when we back up, this isn’t anything abnormal because the market is always like that. We’re just more aware of the reality now.
You are welcome! So… I have my own predictions for April 22-24….LOVE and appreciate the red and gray 2019 2020 listings graph. Thank you! Keep those graphs coming!
Thanks Kristin. Will do. I’m experimenting with lots of visuals these days and making plans for the future as we have more data. If you have any ideas, I’m open ears. I’ve been getting so many questions about days on market lately, for instance. So I’ll have something to track weekly DOM (technically CDOM because that’s the more accurate stat). Coming soon as we have more data…
As usual a very nice job with both the graphs and the thoughts for discussion. Thanks for taking the time to share!
Hope all is well. Are appraisers still working?
Thanks Ed. I appreciate it. Yes, appraisers are working. Though many aren’t doing full interior inspections (though quite a few are still). The irony is the FDIC just announced they’re deferring appraisals for up to 120 days. I’m not sure how that is going to play out, but it seems to go against many appraisers being available to work during this time.
I love your data driven approach in dissecting all of this. Thank you for your great blog! For someone that is in contract (got into contract in Feb) for a new build in Natomas, I am struggling to decide whether i should go through with it or cancel it all together (giving up earnest) and wait for Covid to play out for the rest of the year. Is there a good approach that I should go about making this decision?
Hi Jenny. Thanks for the kind words. This is a difficult situation and I’ve been asked by others buying new homes about this. The issue here is any real answer would be contingent on knowing the future, and that’s the one element we don’t know right now. I think you have to balance how you feel about the mortgage payment, your job, and how confident you are in the housing market. Of course you have to consider lifestyle too. What I mean is if your lifestyle mandates a move, then that’s just how it is. I wish I had a perfect answer for you. On a side note I imagine many buyers are feeling this way. Could there be a little room for you to try to negotiate on price, upgrades, landscaping, etc… with the builder? Just thinking out loud. Ultimately there is no one-size-fits-all answer here. Some buyers are going to walk and some buyers are going to pull the trigger. No matter what though, mostly everyone is asking the questions you are.
Well did a presentation yesterday via the world of Zoom. Showed some charts of new listings on a year over year basis, pending sales and total active listings for several communities I work within. Most if not all the participants were from this market area. Made the comment that although some agents / brokers are telling me the sky is blue and the grass is green and I truly want to believe them that we have to be cautious and observant from the March 15, 2020, line in the sand. Only data that was listed after this date, in escrow and then closed are the true data points to indicate where there is or isn’t an issue with pricing from Covid-19. Thought I handled it well, although I had one very knowledgeable and professional agent indicate that I was being negative. There is a shortage of inventory and DOM are low based on the agents analysis. I agreed with all the agents points, but was still greeted with a negative review. Hmmmm not sure how else to go about this than continuing to tell the agents, that will listen to watch any and all data after 3/15 as that will be a good indicator as to whether there is any impact from the virus on your particular market. I guess I shouldn’t have shown any charts that showed 30% drop in new listings, listings and pending on a year over year comparison. Not sure how best to push the commentary on the market, but maybe in my sleep one night I will come up with a brilliant idea on how to state the obvious. By the way woke up this morning to the FDIC issuing a rule and comment sheet at the same time on a 120 day waiver of appraisals. Still haven’t figured out how you put out a rule prior to seeking comments. Guess I would have been okay if they just said this is it, like or leave it. But instead they indicated they want the public comment. Seems like if you open the corral gate and chase all the horses out, then there is no reason to close the gate unless you think some will come back in to the paddock. I am getting more confused not scared by the minute. Hope everyone is safe and healthy. Take Good Care and as always great job Ryan.
Brad, it sounds like you did a great job. I share your experience with a few people saying I’ve been negative. But it’s not being negative when we are looking at facts. In Sacramento last week sales, pendings, and new listings were all basically down by 40%. I had someone look at these stats and call them normal though this week. And that’s fine of course if someone wants to look at it that way, but there is a difference between having a positive mindset in life and being realistic about market conditions. The temptation in real estate is to filter out anything that sounds remotely negative. Yet this type of filtering strongly favors sellers and it ignores buyers. The reality is people want the truth and they have more access to data than ever before, so positive spin is simply not a great strategy in my humble opinion. Facts are empowering and they help us make real estate decisions. Fiction doesn’t help anyone. Bottom line.
Ryan, these 7 things to keep an eye on are great for everyone to look at, including agents. It’s important to know what is going on even if it is not good. How can we plan for the future if we ignore the present? Keep up the great work. Agents in your area are lucky to have you keeping them informed.
Thank you Tom. Well said. Let’s embrace the present and let the facts inform us, shape our narrative, and empower us to give helpful advice to clients.
Ryan, This is really helpful, especially for one like me who only started appraising in earnest in 2015. I started some analysis for a small segment of my own coverage area (West Ventura county, much smaller dataset), but results were surprisingly the opposite, showing listings over the same time periods you used are generally are much stronger than a year ago, and not seeing any drop off yet (although, I would expect to start seeing some Covid affects in the other area I cover…S Santa Barbara County as its a larger dataset). After some mulling on it, I’m thinking it’s probably a function of our shortage of housing/restrictive growth laws and some latent affects of the Thomas Fire. Bottom line, your work was inspiring to this relative newbie to dig deeply, and I thank you for that!
Good for you in pulling data Bob. The market can have different dynamics depending on price range and location. This is where each of us gets to be a local expert, so I’d certainly defer to you on your area. Keep me posted if you see anything different over time. I’d be curious. And thanks for the kind words. a
As a side note, I’m watching both new listings hitting the market as well as the total number of listings. Those are definitely two different things. I think if we focus too heavily on the fact that pendings and new listings have been traveling in the same direction, we’re forgetting there are already other properties on the market that haven’t been selling. But as you said, we’ve had a housing shortage, so that explains in part why the total number isn’t at an inanely high level right now. I am seeing the same thing in my market. Sellers haven’t listed in mass. The interesting part is we now have over 1,000 holds and canceled listings, so at some point we ask how many of these will hit the market and when. What will demand be like when they do? So many questions and things to watch.
Thanks again. By the way, you have an approved comment now, so you won’t be moderated here any longer, so pitch in your two cents any time you’d like.
I agree that word on the street is one of the best ways to find out what’s coming.
However, does anyone know anything these days? Can we even trust the statistics? Trust in the sense that they will show us the state of the market.
Great job, as usual, Ryan!
Hi Jana. I think we have to pick and choose what we trust. Stories from escrows are not hard facts, but they are clues, so we have to take them as such. I do think we can gauge the perception of buyers and sellers by the stories we hear as well as the stats. In my mind the stories complement the stats, though sometimes they precede them.
I do think we can trust the stats, but we need to keep learning how to see the market and use stats. I have found through the years it takes skill and practice to be able to sift numbers and think critically about them. There are limitations to stats of course, but we have to keep upping our game by finding new ways to see the market, think about it, and explain it. One of the things I find myself saying in my videos is we need to look at the numbers and the pretty graphs AND be able to explain why the numbers are the way they are.
The good thing about real estate, it never goes up or down in a straight line. I think we’ll get plenty of warning.