Surprised. That’s how many people seem to feel about the housing market since it’s way more competitive than we thought it would be for a pandemic. In fact, some buyers think they’re about to score the deal of a century until they start shopping and realize we don’t have that sort of market right now.
Look, I’m not wearing rose-colored lenses. I’m not saying the housing market is perfectly healthy or there aren’t glaring red flags on the horizon. I’m just saying there is a sense of shock right now that the market has felt as strong as it has for these past two months.
Two quick things:
1) Imposing headlines: There are lots of sensational headlines, but we need to be cautious about imposing them on the market. What I mean it’s easy to read a headline about the housing market being doomed because of XYZ, and then we expect to see certain trends in the local market. My advice? Look to local data instead and let the numbers form your perception and narrative of the market.
2) Be objective: Every week there’s a new viral idea about the future, but we have to wait and see what happens. I know it drives some people crazy when I say that, but it’s true. There are obviously red flags about the future in light of forbearance and unemployment in particular, but we still don’t know how both issues are going to play out exactly. This is why I recommend knowing the numbers and being objective about the future instead of tossed around by every new sensational idea.
NEW MARKET VIDEO: We’re two months into the pandemic now and it’s been five weeks since the market bottomed out. We’ve seen a shift up in new listings and pending contracts, and this tells us both buyers and sellers have been getting used to this market. This is 14 minutes. Check it out below (or here).
BRAND NEW VISUALS:
I’ve been in my Excel workshop cutting up some brand new graphs. Are there any keepers?
Unemployment: We’re seeing some huge changes in unemployment, so I plan to update these visuals monthly.
Inventory by price range: Here is a crazy-looking visual to show inventory by price range. I know this is a hot mess, but I share specific price ranges below. The point is inventory is not the same in every price range or neighborhood.
Days on market: Did you know homes spent 29% less time on the market this April compared to last April? Here’s a look at how long it took to sell by price range. In short, the market was more aggressive at lower prices (not a surprise). Also, don’t read too much into million dollar stats because there are fewer sales in this segment.
2-4 Units: I’ll be watching the multi-unit market to gauge change and whether we see a bigger drop in volume than the single family market. Of course we also have to consider rent control as an added layer that can affect the trends this year too.
Volume at the top: I’m watching the market above $600K to gauge if there is more change at the top than the bottom. In this visual I’m asking how the percentage of “jumbo” prices so to speak changes over time. This isn’t the perfect visual to tell us everything, but if we see this percentage decrease it might be a clue that less deals are happening at higher price points. Also, I know I need to change the graph to say “15%” instead of “0.15%”. For the life of me I couldn’t get that to work.
Volume change by price range: It’s important to study what the market is doing at various price points. I’ve been asked countless times about the upper end of the market lately. Frankly, we need more time. We only have two months of data. But here is a visual that I’ll be adding to over time. This visual basically gauges the change in the number of sales between April 2019 and April 2020 by price range.
Keep in mind the BOTTOM IS NOT CRASHING. The lowest prices saw a huge dip in volume close to 60%, but that’s because these price ranges had such a huge rate of appreciation over the past year. There are simply fewer sales under $300K this year, so the numbers at the bottom look really sensational on this graph. In short, this is where we have to know how to think through the numbers. Please don’t say the bottom is crashing (it’s not).
WEEKLY STATS: I’m updating this one every week.
BIG MONTHLY UPDATE:
This is long on purpose. Skim or digest slowly. Your call.
Let’s dive into Sacramento, Placer, and El Dorado County (and the region).
DOWNLOAD 100+ visuals: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).
I don’t have market commentary this month because I’ve been giving so much commentary in my weekly video (and on Zoom calls). It’s just too much to write more here.
SACRAMENTO REGION (more graphs here):
SACRAMENTO COUNTY (more graphs here):
PLACER COUNTY (more graphs here):
EL DORADO COUNTY (more graphs here):
DOWNLOAD 100+ visuals: 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 stands out to you about the market right now? What are you seeing out there? I’d love to hear your take.
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Thanks Ryan for your graphs and analysis, I appreciate the facts. I think the market is still strong because the inventory year over year for April is very similar, both the # of buyers buying & sellers listing has decreased but the ratio isn’t that different. Inventory is still low. And I agree regarding the low end of the market, sales under $300k have decreased dramatically because they’re becoming unicorns. Regarding the percentage of sales over $600k, they may be higher because folks in higher prices ranges are more likely to have the financial resources to buy with cash if they’re laid off, and/or be more comfortable making a new/bigger financial commitment in spite of the unknowns in our future.
Thank you Deniece. Well said. I like how you called the sub-300K market “unicorns” too. Very true. It’s going to be interesting to see what happens over the next 3-6 months. We’ll know more as time unfolds. Please keep me posted with any insight you have. I always appreciate your take. Thanks again.
I love the months supply by price range graph. That’s cool to look at. Also all the other analysis. I thought the market would be tanking now, but I’m happy it’s not.
Thanks Gary. I appreciate it. I have so many ideas for visuals these days. Now I just need more time…. Hope you’re well.
One thought I had when the pandemic started: anecdotally, it seemed to me that after the stock market crash of 2000, a lot of capital went looking for a different type of investment, and it went into real estate (helping to fuel the mid-2000s bubble). This might be the case again this time. Real estate prices may go down during this recession or they may go up if investors are afraid of stocks and start piling money into this asset class. The next six months should offer hints as to which is happening. This is admittedly an anecdote-based theory, so I wonder what you think of it?
Thanks Steve. That’s an interesting thought. It seems like investment funds are not increasing in the market, but if they did, that could change things. I do imagine some individual investors could try to put more money in real estate, but it would have to be a huge shift to change the market. I’ll have to think on your idea a bit.
I will say the biggest factor right now is unemployment and the local economy. I suspect the unemployment rate in California is going to be incredibly high when it’s announced in 8 days from now. I heard today the state is going to begin to furlough workers too (that’s so 2008). So what happens with local jobs will probably be the main factor in coming time.
Ryan, I always enjoy your charts and thanks for your hard work you provide to many for FREE.
The real estate market would have crashed had it not been for $2 Trillion in stimulus.
Nine (9) of the 29 major California markets EXITED their Wealth Phase last year, well before COVID-19 came along. Many more were likely to follow, even without a pandemic.
Currently, 184 markets (45% of all U.S. real estate) experienced ‘real’ (inflation adjusted) declines in property values compared to the prior Quarter. I am not so confident SAC will remain positive much longer. We are in the early innings of The RONA trainwreck on the economy. Many jobs lost will never come back for years.
Also, real estate prices do not drop overnight. It has only been 2 months since The RONA shocked the world with shutdowns. Real estate is a slow moving train compared to the stock market. Plus SAC was a good market before The RONA.
I am confident housing prices will eventually drop in SAC even with all the stimulus because of the scale of the crisis. This is a way worse crisis than 2008. The severity of the price drops really depends on the banks and how they lend in the future and survive. Commercial real estate is a clusterf&*k and many banks hold those loans on their books. They are already shrinking the pool of residential borrowers by tightening lending standards and requiring higher credit scores. Add in very high unemployment and a wave of bankruptcies and it is not a good recipe for home appreciation.
We also have to be cognizant of the following which are not represented in your charts.
* Interest rates. Bond market volatility to the upside would hurt sales and force price drops.
* Short sales/REOs. They are coming due to high unemployment but will take time to effect prices.
* Stimulus and unemployment will eventually run out. When it does those without incomes will be forced to sell or foreclose and inventory increases while demand probably decreases.
* How many people will be able to leave Sacramento when their jobs goes remote? I am out of Cali if my wife can go full time remote like me so I can avoid the high taxes, the sanctuary city and homelessness problem.
* CA is run by a bunch of politicos who have no brain power to control spending. They give $500 to illegals, build billion dollar trains to nowhere and are buying Motel 6s for the homeless while they stick their hand out for Federal bailout money. They will increase taxes and more rich people and jobs will leave this state.
None of these bode well for future real estate prices imo unless lots of the Bay area people move here to keep prices from going negative.
I witnessed this same scenario in 2006 when many Realtors were running around saying, “It’s a great time to buy” and then BOOM two years later it crashed.
Thank you Brad. I appreciate your take and I’m grateful for your extended commentary.
This post went somewhat viral yesterday. It was shared quite a bit. I think the title to some was taken to mean, “Everything is all good.” But that’s certainly not what I wrote with a close or even casual reading. The market right now has simply been more aggressive than people would have thought. My intention is not to say everything is fine.
Yes, there are red flags on the horizon. It’s wild to start hearing talk about furloughed state workers. I think in coming weeks and months we’re going to get a taste of just how much the job market is going to affect the housing market. We don’t have any data yet, but we will.
Anyway, there is so much more we could talk about, but I’m certainly watching. I definitely concur we are at the beginning of this thing too and there will be lots to talk about in the market ahead.
For any onlookers, here is a two-minute clip of a talk I gave fifteen months ago about spotting market change. I used the example of the real estate “bubble” in 2005. In short, it’s never about the prices. Look at the listings, pendings, and sales volume. Eventually a changing trend catches up to prices. https://youtu.be/4iFR7rLnGaY