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?
If you liked this post, subscribe by email (or RSS). Thanks for being here.
Great Blog, Ryan, thanks for making me remember that I am still scratching my head over all that is going on down here in my semi suburban / rural area. Okay so I took the Stetson off first to do that. Our numbers are similar depending upon the city and price ranges to your volume drops. What is unique with all that is going on we are still seeing steady pricing with multiple offers on some properties. Now I presume this is due to the drop in listings (between 32 and 50%) so we went from a shortage of inventory to “well” almost no inventory. So for buyers out in this market, less to choose from, more documents to sign just to get into a property and then it is the question and answer with your agent, how you feel today. I wish I had a crystal ball for two reasons, 1) I could figure out by the end of July if we are in a recession with prices crashing or the grass is green and the sky is blue, 2) I would like to get the right six numbers for the lottery. For right now I will have to stick with watching listing and pending and their volume changes. Thanks Ryan whew isn’t this fun.
Great commentary Brad. Thank you so much.
I think much of what you said describes my market perfectly. It is pretty competitive out there and it’s been heating up over the past month also. I imagine some will read this post and say, “Why didn’t you say that?” We do have a unique situation with few listings to begin with pre-pandemic, less new listings over the past 8 weeks, about 1,400 properties taken off the market in two months, and a growing pool of buyers over the past month. Let’s keep watching week by week.
And if you do win the lottery, don’t forget about the little people… 🙂
I was recently asked (paid) to do a similar market analysis. I looked at several indicators and prepared a summary document. Check it out on this forum. https://groups.io/g/NationalAppraisersForum/message/4318
Very cool Mike. Thank you for sharing. I will definitely check it out (since I belong to that forum). Please feel free to share anything you do. I’m intrigued by colleagues across the country who are slicing up their market and figuring out how to tell the story of value.
Ryan, that is a 33% decrease in sales volume, which is in line with the 30%-40% range that I am seeing across all the areas where I have access to the MLS.
I look at the $/SF price more than the Sales Price to track which way the trend is. It is too early to tell, maybe in 2-3 more months we will have a good trend.
However, unless things turn around economically, within 6-months there could be a -6% decline, and if it goes on for 12 months, a market collapse.
It depends on location and property attributes. The best locations and properties will decline the least and visa versa.
It is difficult for the appraiser to put a solid thumb on things right now. The best we can do is include cautionary language for the reader of the report to understand the dynamics of this market, one that is on the cusp of decline, if not already declining.
Thank you Steve. I ended up saying “about 30%” since we still need a number of days for more sales to be entered into MLS. I think the final number will be right around 30% or maybe slightly less.
I like your methodology on price per sq ft. I also find price per sq ft to be incredibly valuable as it is a more refined price metric that is less prone to be swayed (for onlookers, I’m not talking about using price per sq ft to value properties though (that’s way different)). Though I’m a huge fan of the median price too. I’m definitely not a fan of the average sales price.
I agree about uncertainty. We don’t know what the future holds and we’ll know more soon. I think we need to keep watching the market to see how strong the buyer pool really is. It’s one thing to see pending contracts tick up lately, but are there enough buyers to get back up to normal levels? We’ll see.
Thanks for the great charts Ryan. I’ve shared stats with my client base and some want to immediately attack the numbers — others don’t seem immediately concernedq. I know for me, it’s digesting the numbers over time that will give me clarity. One question – can you explain why you prefer Median Price over Average Price as an indicator? Thanks Again.
Thanks Michael. That’s interesting to hear about your clients. It’s always fascinating how people can have a different response. It just underscores that not everyone sees the market the same way or needs the same level of data either.
That’s a great question. I like the median because it’s a reflection of whatever the middle of the market is. Thus when we see the median in Sacramento County right now, it’s $400,000. This means half the sales sold above this price level and half sold below. There is no such thing as a perfect metric because there are limitations to every one, but I like the median because it’s less susceptible to huge sways based on what has sold. For example, imagine we had a $5M sale next month and we then throw that one sale into the mix when calculating the average sales price. This one lone-ranger outlier can change the average sales price in the entire market because we’re taking the average of all prices when calculating the metric. Thus the average sales price can sometimes be swayed by outliers. As a practical example, when pulling price stats I always pull stats from $1M to about $10M because at times agents mistakenly enter a sale for $450K as $450M. And when this happens it dramatically changes the average sales price. Thus I weed out these mistakes by capping my search at $10M for our market. I learned this the hard way years ago when I couldn’t figure out why the average sales price was about $30-40K higher than it looked like it should have been….. I even called a friend and talked about this weird trend. It took me an hour to figure out what was going on.
For what it’s worth I actually pull avg price pr sq ft, avg price, and median price every month. I pay attention to everything and report on these metrics for most counties. I just give less weight to the average price – especially in markets where there are fewer sales (which means stats can be all over the place depending on what has sold that month).
I hope that helps. Does that make sense?
Valuable information Ryan. We will keep watching the headlines and look for the underlying data as we move forward.
Thanks Gary. Yep, let’s keep watching.
Ryan, great, awesome data and analysis. Is it true that the $1M+ segment has come to a stand still because jumbo loans have substantially disappeared? Or are buyers just just to make that kind of investment in this environment?
Hi Juan. Thanks for the kind words. I think we need a little more time to understand the jumbo market definitively. I’ll admit I’ve only dabbled in it for now as I haven’t had time to look exhaustively. It’s really been slightly less than 8 weeks since this began though, so we don’t have too much data. It does look like sales volume above $1M was down almost 40% in April compared to last year whereas the entire region saw sales volume down at every price range at just about 30-33%. Thus one thing I’ll be watching over time is whether the rate of change at higher price points differs from other ranges. This year housing supply is a little higher in this niche too, but it’s maybe still a little too early to say much because inventory can be all over the place month to month at higher price points. I realize jumbo loans are below $1M too. Anyway, there is time ahead to interpret all of this. For any onlookers with insight or stories from the trenches of escrow, speak up…