What are prices doing? That’s the question I’m getting asked the most. Here are some thoughts about how to look at prices during the pandemic. I also have two brand new price visuals.
FIVE THINGS TO KEEP IN MIND ABOUT PRICES:
1) Eggs in one basket: I recommend watching multiple price metrics instead of putting all our eggs in one basket. So in addition to the median price we can watch the average sales price and average price per square foot.
2) Pure pandemic data: When May stats come out we’re likely going to see 80-90%+ of those sales having gotten into contract after mid-March when the pandemic began to affect us. Thus May sales will be a stronger indicator of pandemic trends than April sales.
3) Seasonal rhythm: It’s key to understand the seasonal rhythm of the market because it helps us spot what is normal and not. For example, the median price usually increases from March to April, but this year we saw the median price dip instead. What does this mean? We need time to understand it. For now we’re recognizing something has happened that is less common. It’s worth noting we often see the median price climax around May or so, which means if we see prices soften in coming months we’re going to have to ask whether it’s a seasonal thing, pandemic thing, or something else.
4) Prices are the last thing to change: We often obsess over prices and look to them first to understand a real estate market, but prices are usually the last thing to change. In other words, we experience a difference first in the listings and the number of sales happening before the trend eventually catches up to prices.
5) Weekly & monthly: I recommend looking at the market in monthly chunks, but it’s also worth watching prices by the week. The huge downfall of weekly prices is they shift dramatically depending on what sold that week. This is why it’s best to look to monthly data (but still get clues from weekly data).
MONTHLY PRICES:
WEEKLY PRICES:
CONCLUSION: Right now it looks like most price metrics have held fairly steady or even increased slightly, but the median price in the region dipped 1% recently. Some weekly price metrics have seemed to soften lately, but we’ll see what the stats show us in a couple weeks when reporting May data. Ultimately my sense is many neighborhoods feel flat and others at lower price points are still having upward pressure. The reality is we have a market with tight inventory and lots of competition. The temptation is to think home prices would be tanking during a pandemic, but that’s not what we’ve seen. For reference, this past week there were more pending contracts than before the pandemic began (I talk about this in my video). By the way, are any areas declining? Let me know what you’re seeing in the trenches.
RESOURCES:
New market video: Here’s my weekly video where I talk about climbing back to pre-pandemic levels. This is about 15 minutes. Check it out here (or below).
I hope this was interesting or helpful. Thanks for being here.
Questions: What are you paying attention to right now to gauge price movement? What did I miss? Anything to add?
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I agree with your first point. I disagree with your second, because it disagrees with your first point. Your second point focuses on various measures of closed sales.This, to me, is one metric measured different ways. In my opinion it is far too soon for closed sale measurements to be meaningful. To better understand effects Covid (if any) may have had – or is having on the market look at the rate and volume of other easily measured metrics like active listing volume, year-over-year withdrawn and expired listings etc.. For example: In many market active listing volume has dropped dramatically while withdrawn listings have increased. My guess is that sellers are hesitant to test the market and are willing to wait. The result, at least for the short term, is that contrary to popular belief, it is not a buyer’s market. Those looking for a “good deal” may have to wait quite a while for higher rates of unemployment to take their toll.
Thanks Michael. I appreciate your take and commentary as always. I don’t think my points conflict at all. I just think you’re talking about a different layer to consider, which is volume. That’s a huge factor that I didn’t discuss here explicitly, but we cannot ignore the number of sales happening.
My second point is key though. In April only 56% of sales in my market got into contract after mid-March. Thus when we interpret numbers we have to recognize what the numbers actually represent. That’s what I’m saying. Is this the only thing to consider about the pandemic though? No way. But is it something to consider? Absolutely yes. I actually address lots of different considerations in my weekly video such as pendings, listings, volume, prices, etc… I was sharing these weekly graphs on my blog, but I think I’m going to focus on the videos for that as I grow tired of sharing similar images each week.
I agree with you too. It has been a sellers’ market.
Great job Ryan, very helpful info on the Sacramento market.
Thanks Tim. I appreciate it.
Great information. We are seeing a very similar picture up north.
Thanks Gary. I appreciate hearing that. I hope to see some fresh visuals from Abdur in your office soon. 🙂
Love all your data Ryan it really helps to get your opinion on the market from an appraiser point of view. I was wondering about the relationship between interest rates and pending sales? I have had buyers asking about the foreclosure market and the effects of lender forbearances, the number of defaults? To me finding the right house, is the most important factor so if the market should drop you will still love owning the house. Interest rates and market price can not be trimmed. Once a property is sold, it maybe years before it comes back on the market and the condition at the next time it goes on sale maybe different too.
Thanks as always for your kind words and I appreciate the question. I’ve never graphed pending contracts vs mortgage rates. That could be interesting. But there is definitely a relationship between what rates do and what is getting into contract. Our market feels extremely sensitive to mortgage rate changes. So as rates hover closer to 3% it makes the market crazy. But if we inch up closer to 4% and above, the market feels extremely soft. In fact, this is exactly what happened in 2018 when rates shot up. The market simply changed and it felt very gloomy for the past half of the year… until rates went down again in early 2019.
One thing to watch to get clues into the market is the number of mortgage loan applications. This is sort of a leading indicator and shows us demand. Len Kiefer on Twitter shares visuals every once in a while to show us this data. https://twitter.com/lenkiefer/status/1265630834930913280
Right now it’s unknown territory in terms of how forbearance will play out. We are in a waiting period where about 10% of all loans in the country are said to be in forbearance. These loans theoretically won’t be paid through about June or July. So we’re going to have to wait and see how it pans out then.
For now it does not look like foreclosure activity is picking up though. If anything that would take a while to trickle down to the market. It’s a very slow process in many cases. Moreover, if people are struggling and need to sell, they might have equity and therefore they can theoretically avoid foreclosure. We’ll see. What a time.
Suppose to say Can’t Time the market. Oh and Love your video!!! Super!!
Thanks. I’m loving getting to make videos once a week and I hope they catch on more and more. If you ever have ideas for topics, let me know. 🙂
Live the fact you are always responding! Thanks so much!!??????
Yes, only time will tell AND this, too, will pass.
In April, 9 local zip codes and the Sac Metro Average Median prices hit new highs. This was based on Timing, Psychology, Supply, Demand, and Location of the market leading up to these changes.
Zip Code 22-year High Date of High
Fair Oaks 95628 $555,000 Apr 2020
Folsom 95630 $615,000 Apr 2020
North Hilnds 95660 $300,000 Apr 2020
Orangevale 95662 $478,000 Apr 2020
Roseville 95678 $474,000 Apr 2020
Arden 95815 $308,000 Apr 2020
Arden 95825 $450,000 Apr 2020
College Greens 95826 $384,000 Apr 2020
Rosemont 95827 $376,000 Apr 2020
Citrus Hts 95610 $411,000 Mar 2020
Elk Grove 95757 $539,000 Mar 2020
Sacramento Cnty $400,000 Mar 2020
Carmichael 95608 $483,000 Feb 2020
Citrus Hts 95621 $362,000 Feb 2020
Elk Grove 95624 $475,000 Feb 2020
East Sac 95819 $736,000 Feb 2020
Rocklin 95677 $556,000 Jan 2020
Elk Grove 95758 $437,000 Jan 2020
Love it Jay. Thank you for sharing. Interesting to see. I’ll have to give that a closer look. I wonder if you’re talking about the median price. I’m guessing you are.
It sounds like you could be writing about the Inland SoCal market. Thanks for the good data and interpretation.
Thank you Dan. I appreciate the kind words. Please keep me posted with anything you’re seeing in your market. While real estate is local, we do have lots of markets experiencing similar dynamics right now. It’s fascinating to watch.
Thanks fr the valuable information and I love that you’re experimenting with different graphs/visuals. I do like the line graph over the bar graph. I would love to be in the drawing for the Oregon or bust sign!
Thank you Karen. I appreciate it. It’s funny because it’s very hit and miss whether people like a bar graph or line graph. I think I like both. 🙂
The sign is yours. 🙂
Great update, Ryan. In the end, I believe that this will just be a bump in the road as I think the market will recover because it was doing so well when we went into the pandemic. It makes you wonder what would have happened if the pandemic would have hit after the 2007-2008 recession.
Thanks Tom. We shall see. Those were tough days. I can’t imagine throwing a pandemic into the mix too.