The housing market is slowing and today I want to share seven quick ways I’m seeing that. But here’s the thing. This market is still driving at warp speed. In short, the market is slowing, but it’s not slow.
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This post is designed to skim or digest slowly.
7 WAYS THE MARKET IS SLOWING:
The housing market is still so competitive, but there are subtle ways I’m seeing slowing. This is so important for sellers to understand – not to mention real estate professionals who are talking with clients and the public. If you’re not local, what are you seeing in your area?
1) Taking longer to sell: Last month on average it took 12 days to sell a home and 6 median days. Since June pendings have taken two extra days to get into contract. This is still lightning fast, but it’s slower than it was.
2) More homes are selling below the list price: There are slightly more homes selling at or below the list price right now. Here’s a visual to show what buyers are paying compared to the asking price. As you can see most categories slowed slightly last month, but not every category.
3) Fewer multiple offers: For two months in a row we’ve seen fewer multiple offers in the Sacramento region. Keep in mind the percentage of offers is still about as high as it’s ever been.
4) More listings are hitting the market: We still don’t have enough listings to satisfy demand, but there are now literally multiple hundreds of extra listings on any given day in the Sacramento region compared to a few months ago.
5) Slightly higher monthly inventory: We are seeing a slight uptick in monthly housing inventory. Very slight. It’s wild to say this when we basically still have half-a-month of homes for sale, but supply is up just a little in most counties from a few months ago. Of course now we are seeing mortgage rates at their lowest point in months, so we’ll see what happens to supply in coming time.
6) We hit the big home peak: The dark blue line represents the average home size in Sacramento and it goes up and down like clockwork each year. Do you see how size typically hits a seasonal peak during May or June (besides last year)? Anyway, the average size slumped in June, which is what we’d expect to see in a normal year. This goes to show we’re seeing some normal seasonality.
7) Word on the street: I’m hearing from lots of real estate agents, loan officers, and appraisers that they’ve seen a slightly slower vibe. I haven’t heard anyone say the market is slow, but there is lots of chatter about slowing. At the same time I’m hearing things like, “My listing had 23 offers” or “We got outbid again,” which speaks to how competitive it is right now.
8) Other: What is number eight?
Any thoughts?
3 WAYS THE MARKET IS NOT SLOWING:
1) Record prices: The market still has upward price pressure in lots of areas and each month we’re seeing old price records shattered (nominal prices not adjusted for inflation). See stats below for specific price metrics.
2) Buyers paying big money over asking: On average properties sold $25,865 above their original list price last month. This is a wild stat considering it represents over 2,800 sales. This figure is higher than any of the previous three months too, which shows the market is still bananas. By the way, the average amount clearly does not perfectly represent every individual escrow.
3) Record sales price to list price ratio: Last month properties on average sold 4.1% above their original list price. This might seem low, but it’s actually higher than it’s ever been. This is a good reminder that not every stat is showing slowness. In other words, when a market slows we don’t always see it in every single metric. Of course it’s good to keep in mind sales in June really represent pending contracts from May more than anything.
Okay, two last thoughts.
NOT CRASHING: The doom and gloom crowd loves to look at slowness and say the market is starting to crash, but that’s what they say every year when stats sag. Look, I’m not saying the market is perfect. I’m just saying stats right now don’t support a crash and burn narrative.
IT LOOKS SEASONAL EH: In a normal year we’d expect for the housing market to crest around this time and begin a seasonal descent for the rest of the year. So it’s no surprise to see the market slowing right now.
——————– BIG MARKET UPDATE ——————–
For those interested, here’s a big Sacramento market update:
THE SHORT VERSION:
Here is a highlight reel to talk through some of the bigger themes right now. In short, the stats are sensational and we are in the midst of an incredibly competitive market. But we’re also seeing some slowing. Both things are true at the same time.
THE LONG VERSION:
Stats are on steroids and we are still seeing one the wildest markets we’ve had. It’s just some metrics are showing some symptoms of what looks like seasonal slowing. Here are some of the bigger themes.
FORECLOSURES HAVE NOT INCREASED:
Some folks are talking about an increase of foreclosures, but that hasn’t been happening. What I mean is these properties are definitely not showing up on MLS. I keep hearing of a coming foreclosure wave also due to forbearance rates, but those keep going down.
MAY TO JUNE PRICE STATS INCREASED (NOT A SHOCKER):
How has the market changed recently? Take a look at May to June prices. In short, every metric in all surrounding counties showed an increase last month.
LAST YEAR VS THIS YEAR:
Last year the market was dull at the beginning of the pandemic, so this year versus last year gets a little weird for a comparison. My advice? Take these percentages with a grain of salt because they’re inflated due to sagging numbers last year. And remember these percentages DO NOT actually mean every house is worth that much more either.
MORE PRICE VISUALS:
A few more visuals to show the insanity of price growth lately. Look how far disconnected 2021 prices are from previous years.
SALES VOLUME HAS BEEN STRONG:
For thirteen months in a row we’ve seen higher monthly sales volume compared to the previous year. This June was up from the previous two years and overall at a fairly normal level. Frankly it’s impressive to see this many sales in light of having such low supply. It just goes to show buyers have been getting it done. Keep in mind last year did have lower volume due to two lower months at the beginning of the pandemic, so that’s one reason why the percentages are up so much this year. But we’ve also seen increased migration this year too, particularly in El Dorado and Placer County.
Anyway, this is getting really long.
MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.
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Questions: What are you seeing out there in the market? What are you hearing buyers and sellers say? I’d love to hear your take.
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Great stats as always. I wish we had the multiple offer statistic on our market.
Thanks Gary. It’s definitely a cool stat to consider. It’s funny because at times people question whether it’s really accurate to see 70% multiple offers, but I find the stat actually lines up really well with other stats. For instance, about 23% of the market sold at or below the list price last month, which makes us think many of these properties likely only had one offer. Anyway, just wanted to share.
Great post Ryan! I’m seeing a very similar trend. Things are slowing a bit in my market, with some small increases in supply, which is also seasonal here. Home prices are still soaring here, though our median sales price is a lot lower than in your market. I completely agree with you that there are no major signs of an impending crash. Perhaps just some easing of the amazing price growth at some point. I always enjoy comparing the trends in your area to mine. ?
Thanks so much Jamie. I appreciate you reading in depth. I find this type of market is ripe for doom and gloom articles, but there just isn’t any credibility in putting out doom content every single year. I mean, at some point the market will do something else and then some of these narratives will be correct. But it’s like repackaging this year’s prophecy for next year when it didn’t come true this year (and then claiming to be a market prophet when the market actually does turn).
For any onlookers, it’s so important to know the numbers and be in touch with the seasonal market. Not only does it help boost your street cred in real estate, but it helps you stay objective in the midst of articles and narratives that are sometimes swaying others. In my mind the numbers are sort of the rudder for the ship that help us navigate things. Without really knowing the numbers we are tossed back and forth by every sensational narrative out there. Okay, I’m not sure if that analogy works, but that’s what came out.
You are welcome my friend! I have to admit that when the pandemic started, I was thinking that things were going to go into decline. However, when things went in the opposite direction, I really learned a good lesson about predicting. I also totally agree with you that knowing local seasonal trends is an excellent way to measure what’s really going on. I’ve learned a lot from you, and I appreciate your fantastic analysis over the years!
Thank you for the kind words. I truly appreciate it.
You’re not alone in thinking that. I would guess the bulk of people thought the pandemic was going to make the market implode. For me it strongly reinforced the importance of remaining objective and letting the numbers tell the story of the market. That’s not always easy to do when public opinion is one thing and people are freaked. I know in the beginning I increased my skills and started making new types of visuals to help talk through what was happening the market with pendings, listings, cancellations, and prices. I’m not trying to sound like a douchebag, but I think I was putting out really important context in those days to help navigate uncertainty. That was not a fun time, but it was a fascinating time to watch the market take a definitive dip and then morph into this completely unexpected aggressive market.
For any onlookers, when the pandemic first began I was thinking through how I was going to visualize the market and how my narrative might change also. I had many conversations with lots of colleagues and I worked really hard to stay on top of the stats and offer objective analysis. During March in 2020 I reached out to my friend Jonathan Miller (https://www.millersamuel.com/housing-notes/). I asked him for advice on talking through trends in such an uncertain market. I mean, who else has been through a global pandemic? I just wasn’t appraising during the Spanish Flu days, you know. Anyway, Jonathan gave me strong great advice in saying to shoot straight, don’t pull any punches, and don’t apologize for a weak market. That really resonated with me and helped influence and reinforce the way I’ve put things out there.
I’m rambling maybe, but I can’t help but put this stuff out there. This is a passion and I’m just so grateful to have these conversations.
I’ve definitely learned a lot from Jonathan as well! He has always given me excellent advice!
Pulling stats and really analyzing them has definitely helped me to be a much better appraiser. Thanks for taking the lead in such a public way!
And to be real, I felt very similar to you. I wondered if the market was going to take a big turn. Just wanted to throw that out there.
Great job Ryan! Interesting increase in cash sales%. Good thorough reports! Thank you!
Thank you so much Sally. Cash really isn’t too much of the market these days, but it has increased a bit from the beginning of 2021 also. Something to watch. Back in the Blackstone days we saw about 30% of the entire market as cash just in case any onlookers wanted some real estate Jeopardy trivia… 🙂