Is this crazy housing market slowing? Let’s talk about that today. On one hand stats are basically at all-time highs, but when we look deeper we’re starting to see some subtle signs of slowing. What are you seeing out there?
QUICK SUMMARY: The market is still bananas, but we’re seeing some slight slowing. Stats could change in coming weeks and months, but for now the best available information suggests a slightly slower trend. And I’m not saying the market is dull, so save your hate mail. It’s more like housing was driving 135 mph and now it’s driving 127 mph.
Some subtle examples of slowing:
1) It’s taking slightly longer to sell: It May it took only six days to sell (median) in the Sacramento region while pendings over the past four weeks took seven days to get into contract (median).
2) Fewer multiple offers: In May we saw the number of multiple offers slough by 6% as seen in the graph below. We are still basically at all-time high levels, but the percentage of multiple offers is slightly lower than it was.
3) Buyers paid slightly less above asking: In May buyers paid an average of $20,975 above asking price while in April they paid $22,247. This is a very minor difference that I’m honestly hesitant to talk about because we’ll have to revise May stats in a few weeks once more sales get added into MLS. So it’s possible this stat in May could change. Though right now the best available market stats show buyers paid slightly less above contract price in May compared to April.
4) Lower sales to original list price ratio: In May buyers paid an average of 103.3% above the original list price compared to 103.8% in April. Okay, this is even closer than the example in number three, so again, I’m reluctant to post this – especially since we’ll need to refresh this number when more May sales are counted. But for now it’s something to watch. Keep in mind the number in April at nearly 104% was literally the highest amount ever above the original list price, so 103.3% is telling of an incredibly competitive market.
5) Word on the street: I’m hearing from real estate agents that they’re seeing slightly fewer offers and having slightly fewer showings. This is mostly anecdotal and of course subjective to whatever sliver of the market an agent is working, but it’s something to consider.
CLOSING ADVICE:
a) Know the seasonal market: Each year around this time in a normal year we start to see the real estate market slow and this image shows some of the things we can watch. Remember, prices could keep going up in coming time, but prices reflect pending contracts from the past, so being on the cutting edge of the trend in a market has more to do with watching other stuff before the trend eventually catches up to prices.
UPDATE: I just wanted to say I fully expect prices to increase in June and who knows how much longer. We are definitely still in an increasing market to say the least. I know it seems ludicrous to be talking about slowing in the midst of such insane competition. But this is exactly the conversation to have because let’s watch all the little things instead of getting overly distracted by the bling of sexy price stats. Know what I’m saying?
b) Don’t misread this post: The market is still 100% on steroids, so I’m hoping people don’t walk away thinking, “Ryan said the market was dull.” Nope. Also, the market is not crashing, so be cautious about painting what looks like normal seasonal slowing with a doom and gloom brush. Buyers, you’re still going to have to make aggressive offers. But sellers, stay in touch because even though you have an incredible amount of power, you did lose just a little recently.
c) The x-factor of mortgage rates: If mortgage rates dip below 3% again it could easily change the speed and trajectory of the market.
d) Be careful of rose-colored lenses: It’s easy in real estate to only speak in ultra positive terms about the housing market. But markets change temperature all the time and we have to be real about the trends because buyers and sellers need good advice for the market that actually exists. My advice? Let the stats form your perspective and narrative. Don’t get trapped into thinking you need to speak in hyper-positive language either to be successful in real estate.
e) Say something different if the temperature changes: If the market speeds up in coming months and we don’t end up seeing seasonal slowing, then that’s what we need to say. The best we can do at any given moment is interpret the stats in front of us and let that shape what we say. So for now it looks like we’re seeing some slowing. What does the future hold? We’ll see.
MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.
APRIL TO MAY: How has the market changed recently? Take a look at the April to May visuals below.
Prices in Placer tend to bounce around month to month because there aren’t that many sales. Take these with a grain of salt.
NOTE ON PRICE GROWTH: Last year the market was dull at the beginning of the pandemic and there was a slump in sales and even prices – which tends to inflate the numbers this year. My advice? Take the percentages with a grain of salt. I think it’s likely better to focus on price metrics generally being up about 20-23% or so rather than fixating on pandemic percentages at 25-30%.
Thanks for being here.
SHARING POLICY: You can share my stats and visuals above, but please attribute the source. Here are 6 ways to share my content (not copy verbatim).
Questions: Are you seeing any slowing at all? What is the market like in the trenches right now? I’d love to hear your take.
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Hey Ryan, good information. You might want to emphasize the April-May price changes and activity changes instead of the year-over-year changes because of the “unusual” circumstances last year. I think the March 2021-April 2021-May 2021 trends are much more revealing than the April 2020-April 2021 and May 2020-May 2021 trends.
Thanks Joe. Yeah, I thought about doing that instead. I’ll certainly have some other price visuals coming out to show that, but not in the format I used below. For now I’ve just been saying there is an asterisk next to the stats that we must account for. That needs to be said also. But fair point for certain. I may need to switch things slightly. If I only had infinite time to do everything…
Okay Joe. I added some visuals. Thanks again. You were so right. I should’ve thought about this – especially for my post today. Duh. 🙂
Ryan, in your first regional graph under number of sales, the difference is 12 homes but the percentage is 54.1%, I am not a math guy, so could you explain? Thanks as usual for the insight, as I am still hearing only unicorn sales from buyers and agents.
BobMcK
I’m so glad you caught that. It was a clerical error. Thanks Bob. I need to adjust my template because there is an error in this one field with the calculation and I didn’t manually catch it. Yeah, unicorns are alive out there. It is a wildly competitive market still. There are these subtle signs. Usually we start to see multiple offers slough and that starts a descent through the fall season. We’ll see of course what happens. The market is just not normal these days…
May 2021 – Composite Average Appetite:
[# New] listings was 47, DOWN 6.0% MoM and DOWN 2.1% YoY. [# Pended] listings was 46, UP 7.0% MoM and UP 12.2% YoY. Appetite is at 98% favoring BUYERS. Last month’s Appetite was 86%.
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May 2021 – Composite Average Turnover:
[# Active] listings was 23, UP 15.0% MoM and DOWN 65.2% YoY. [# Sold] listings was 41, DOWN 2.4% MoM and UP 24.2% YoY. Turnover is at 178%, favoring SELLERS. Last month’s Turnover was 210%.
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May 2021: Avg Momentum was 16.63, UP 15.3% from last month and UP 226.9% from last year.
[Maximum Momentum] was 33.38 in Loomis 95650. [Minimum Momentum] was 6.42 in Arden 95825. Momentum depicts a 12-month moving average.[NET SWING INDICATOR] was 44, UP 25.7% from last month and UP 375.0% from last year. This is the result of subtracting [# of Momenta Down Swings] from [# of Momenta Up Swings] and depicts swings in market behavior.
So Jay, in a sentence or two, what is your interpretation of what you just shared in layman’s terms?
Do prospects and sellers do this level of neighborhood analysis ??
Buyers are often more in touch with the market than sellers. That’s my experience.
Einstein said it best. Insanity is doing the same thing over and over again and expecting different results. Dont expect the market to slow until sanity replaces irrational exuberance on the part of buyers, and/or rates rise and inventory increases. If rates and inventory remain low, I would wager the insanity and increasing prices will continue.
I fully expect prices to increase ahead. June sales are already up and it would be abnormal for prices not to rise for a couple of months really. It’s just we are starting to taste a little bit of normalcy with vacations and kids getting back to school. This should help a little bit. The problem of course is nothing else about housing is normal at all. But no matter what, for now we are seeing some very slight slowing and that’s worth talking about in the midst of the madness. We’ll see if it keeps up…
How could it be doing anything else ?
Thanks Truett. We are in such an ultra hot environment these days (even still now), but it’s okay to back up and note when the temperature looks like it has changed slightly. I find the knee-jerk response is often to minimize or explain away somehow, but I say let’s embrace the stats and of course keep watching them. We definitely need a little more time. We are just at the very beginning of seeing a few metrics show some change. We’ll see where it goes…
Very interesting insight! This hit my inbox right after receiving a very aggressive counter offer on a home that did not have multiple offers. Granted, my clients were not making the strongest offer, the home has been sitting for over two weeks (which is like a lifetime in this market it seems). My buyers were disenchanted by the response and walked away. I think this market may be going to some seller’s heads. Thank you as always for contributing such awesome information!
Thanks for sharing your experience. I really appreciate hearing stories like this. Yeah, it’s still ultra competitive out there. I hope buyers read the fine print of this post where I told them they still need to make aggressive offers. I think a post like this could frankly be a disaster for those who only read the headline. But that’s out of my control. 🙂
It’s just a subtle slowing we’re seeing. This is normal for the year in the midst of a highly abnormal market, so I think we still need some time to see how it goes. I’m very anxious to crunch June numbers as we get them. I do expect prices to keep rising, but it’s more the stuff in the background that I’m watching to really gauge the temperature. We’ll see.
Please keep me posted with any stories from the trenches. Thanks Adriana.
Great info Ryan. Thanks as always and I will be sharing!
Thanks Nan. I appreciate you.
Thanks Ryan! I think May tends to be slow every year. Like you said though, we’ll see what June looks like.
Preach. Thanks DeeDee. Yeah, we do tend to hit our peak in volume around May and things start to change around now. We just don’t often see a change in price stats for a couple of months in a normal year. I would be shocked if we saw otherwise this year. We are still frankly in a profoundly competitive market. It’s just at the same time we are starting to see some symptoms of slowing. We’ll see where it heads. I do think what happens with rates is a huge deal. All bets are off if we sink into a sub-3% rate environment again… 🙂
Hey Ryan, great post. Just anecdotally, working with some East Sac-to-Land Park clients, I feel like I see some signs of sanity returning. What I mean is that in April I saw plenty of listings saying offers wouldn’t be considered without an appraisal waiver or other contingency waivers. I’m not seeing that now. Also seeing some of my team’s listings going for “only” $50k over list instead of a $100k! 🙂 And more closed listings (I’ve used as comps) that don’t have multiple offers. I’m hopeful!
Thank you Steve. I really appreciate hearing your commentary. Keep me posted with what you are seeing.
Looking forward to see what the summer months look like. I think some modest slowing would be healthy for the market.
Can’t argue with that. Thanks Gary.
Great work Ryan. I wish more appraisers took the time to truly understand market conditions like you do and perform the analysis to lock down a complete understanding of what is driving the markets, what to watch for when markets are shifting, and more importantly how to value those markets on the move. As always, nice work!
Thank you for the kind words Chris. I really appreciate it. For me the most fascinating part of the appraisal process is figuring out the market. There is always something new to understand and say.
Thank you for your educated and substantiated posts. I’ve been following this blog for almost a year and really enjoy your content. Cheers!
Thank you James. I really appreciate it.
Ryan. I just found your blog thru another Realtor. Good info here. Thanks for sharing.
Thanks so much Brian. I appreciate you checking in. I post once a week and you can chime in any time with thoughts. Now that you have an approved comment your comments will post automatically too in case you do comment again (no pressure). Reach out any time. Glad to be connected now.
I was once a professional copy editor, Ryan. What is up with your spelling of “slow?”
Last I checked, “slough” is not a word in any way associated with dimunition, to use a Latin word (I don’t like Latin words). Best,
Ken Habeeb
Hi Ken. This was meant as it was spelled. It is not meant to be the word “slow” but it is meant to communicate slowness to an extent. Though when I looked it up now I may be incorrect as I likely ought to be saying “slough off.” The root phrase comes from snakes shedding their skin and the idea of change. I’ll think on this as I could very well be incorrect. I’ve learned through the years that language is complicated and at least for me I am constantly adding words and weeding some out. I’ll think on this one. Thanks. https://www.merriam-webster.com/dictionary/slough
But getting back to the matter at hand, Ryan, I started out making time adjustments here on the Peninsula from contract dates at the less-than-scientific, but satisfying .75% per month, but I have since come to the conclusion that I should only adjust for the past six months or so, as the market was not previously advancing at that rate. In fact, it looked stable over the previous 24 mos at least, albeit in what I call a sawtooth pattern: up,down,up,down, pretty much seasonally. I knew something was up when prices did not ease this past winter.
Thanks Ken. Hey, I’m glad we can talk grammar and trends… 🙂 Each market is different. That’s for sure. I recall a local submarket that looked very stable but it’s since taken off these past couple of quarters. It’s incredible to see the graphs back it up too (talking about the 2-4 unit market in Midtown for any onlookers). Please pitch in your two cents any time. Thanks again.
And I just want to say it’s been unbelievable to watch the numbers. I am continually floored and fascinated to see how things have unfolded.
Ryan — Metrics are only part of the answer… We appraisers talk to realtors all the time about their listings, etc. It’s a good idea to ask them to give you their take on the market they are most knowledgeable about. Agents are usually happy to oblige, and we tend to hear mostly rose-colored opinions, but if they give you what sounds like a frank and reliable answer, write down their name so that you will know who to go to the next time you’re trying to figure out whether to make time adjustments one way or the other – or not at all.
Thanks Ken. Yeah, the word on the street matters. I sincerely value what the real estate community has to say and that’s hands-down part of the package. One of the advantages I have in posting content on multiple social channels every day is hearing from real estate agents constantly. Fresh perspective can matter and I’m getting a pulse on a continual basis from that. I agree with you too that we have to sift perspective (including from appraisers). It’s just how it is.