Are prices finally starting to slow? Can it really be happening? Have home prices likely started to crest for the year? The answer is YES. Here are two quick things on my mind. These trends are for the Sacramento region, but I suspect many markets across the country are starting to show similar stats (or will soon).
Glowing & slowing market update:
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TWO THINGS ABOUT PRICES:
1) Prices have likely started to crest: This chart tracks prices by the week, so it gives a preview of trends before monthly stats come out. Check out the black line which represents the weekly median price in the Sacramento region. As you can see prices have started to dip over the past few weeks. This really isn’t surprising though because it’s been a pattern in recent years to see price changes around July (besides 2020). In short, unless something unexpected occurs to give another boost to the market, it looks like prices have started to crest for the year. In other words, it wouldn’t be surprising if regional prices hit their peak for the year. But here’s the thing. If 2020 has taught us anything, it’s impossible to predict the future. This is where we need time to see the trend.
Prices in the fall: Keep in mind not every fall season is exactly the same. Sometimes prices stay flat for a few months around July levels before dipping a bit more at the end of the year, and other times we see a more definitive slower season with a bigger dip. The future hasn’t happened yet, so we don’t really know what sort of fall we’re going to have.
2) Monthly prices: Now let me show you how normal it is for prices to tick down in July by focusing on monthly prices. Here’s a look at the preliminary median price this month (July in black). As we know July is not over yet, so we need another ten days for stats to be solidified. With that said, when looking at multiple years it’s obvious we usually see a dip in July. And as far as we can tell that looks to be happening this month too. Not a shocker.
A bigger dip? I wouldn’t make too much of a bigger dip this year because this is still preliminary data. Honestly, I’m a bit hesitant to push out early stats because this monthly figure could change over the next two weeks. But I think it’s valuable to show it’s not just weekly prices that are softening. Anyway, let’s wait to see how this number looks in about ten days before having too much conversation.
FOUR QUICK TAKEAWAYS:
1) Not the same: The temperature of the housing market is not the same in every price range and neighborhood. In other words, it’s possible for prices to be doing different things in different areas, so it would be a huge mistake to assume prices are dipping everywhere.
2) Not dull: The housing market is still moving very fast and it’s super competitive. In short, it’s still not easy to get into contract. Yet it is easier than it was three months ago.
3) Just say NO to rosy narratives: When a market starts to soften it’s tempting for some in real estate to avoid talking about slowing. Here is part of a talk I gave last week where I mentioned this reality (three minutes).
4) Doom and gloom: While some interpret prices softening to mean the market is starting to “pop” so to speak, it’s important to recognize a dip in prices is what normally happens this time of year. I don’t say this to sugarcoat the narrative. This is simply a fact. In my mind it’s premature to be saying the sky is falling because the stats right now don’t support that idea. My advice? Be really careful about painting what looks like a seasonal trend with a doom and gloom brush. Also, be patient for more data in coming weeks and months so we can get a fuller picture of the trend. We need time. And as we get more data we can absolutely adjust what we say about the market.
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Questions: What are you seeing out there in the market? What if anything strikes you above? I’d love to hear your take.
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Hey Ryan,
I’m assuming these are closed sales statistics? The chart labels aren’t specific.
Interesting to see what appears to be a baby step towards a normal market.
I’m so glad you mentioned that. I don’t know what happened to my first visual, but the y-axis title was totally missing for whatever reason. Doh!! I updated that one. I did clarify the monthly graph from “sales” to “closed sales” also to be completely clear. Huge thanks for the catch Joe.
Great information as always. I was wondering if this year was going to be like last year where the market just didn’t take a breath, but it looks like it will. With half the entire population on vacation, I just didn’t see how things would continue as they had. I’m not saying doom and gloom, I’m just saying possible normal seasonal swing this year.
Thanks Gary. Yeah, it’s a good thing to see some normalcy hitting the market these days. Having another year of the market basically just going up would not be a good thing on multiple levels. It’s still to be determined of course how this fall will unfold, but at least for now it doesn’t look like it’s going to be a repeat of last year. Let’s keep watching (and hopefully enjoy some time off too).
Most of my stats in the Austin area indicate a resetting or slight dip about the time summer started (early July). My stats for the previous 30 days indicate no appreciation or even a 2-3% drop (in most neighborhoods). As of now, it looks like May and June were our peak, with the majority of the appreciation in the first several months of 2021.
I love the commentary Slade – particularly since Austin has been an incredibly hot market from everything I’ve read. And you are 100% correct. If prices show a dip in July it’s really a result of what happened in probably May or early June. It just took a month or so for all those slightly lower pending contracts to close. Great stuff.
Ryan what is the luxury market doing $1-$3 million?
I don’t have any price stats for this range. It’s not easy to gauge prices because sales tend to be all over the place and sparse, which means stats by the month or even quarter really might not be a credible way to read the market. This is where I am more focused on comps at the neighborhood level and assessing the market when looking at sales, listings, and pendings.
I have yet to pull volume stats for July, but above one million has been an astounding market over the past 12 months. We’ve essentially had about 1,000 more sales above one million in the region compared to the prior year. Huge demand and lots of growth. I just don’t have a great way to unpack prices as the range is just all over the place. With that said, one thing I’ll be watching carefully over the next six months is what is happening at higher prices in terms of volume because that could influence the metrics. So if we see the luxury market go more dormant during the fall, that could impact stats for the entire market.
What are you seeing out there? I’d love to hear your take.
Hi Ryan, long time reader and first time commenter here. Thanks for this post. You mentioned in the post that the temperature in every neighborhood and price is not the same. Are there price ranges and neighborhoods that are not dipping in June/July? If so, which ones are they?
Thanks so much for reading (and now commenting). By the way, now that you have an approved comment you can comment without moderation as long as you use the same email address and name.
I haven’t run any stats for various price segments or neighborhoods against each other, so I don’t have a great answer. I may do that at some point to see if inventory has risen a bit more in various segments and I’ll likely push out some neighborhood-specific stuff through the course of the month. I need to play with the numbers more. I just wanted to generally mention for now that the market isn’t the same at every price range or neighborhood. This was meant more of as a reminder that we cannot take one regional trend and project it on every segment of the market. That would be like looking to the temperature in California as a whole and assuming everywhere in the state is the same. Not so. Death Valley, Modesto, Sacramento, and Bodega Bay all have different temperatures most likely…