Normal? That’s not a word we’ve used much to describe the housing market lately, but we are finally starting to see some normalcy. Many parts of the country are showing what looks to be normal seasonal slowing and that is a sight for sore eyes. Anyway, let’s talk about this and then I have lots of local stats.
The normal that should be happening: The market right now should be slowing for the season. That’s what normally happens and it’s what we are seeing in so many areas of the country too.
Sorta kinda normal: When a market cools for the season we tend to see some of the signs in the image below to one degree or another. Even though we are beginning to see many of these things show up in the market, we really cannot say the market is fully normal yet because supply and demand are still too imbalanced. But any hint of normalcy lately is actually a really good thing. Imagine the chaos of seeing another year like last year where the market just kept going up through the fall. That is exactly what we don’t want to see.
Anyway, which signs are you seeing or not seeing in your area?
Now let’s talk about slowing.
I’ve had a number of emails lately critiquing my use of the word “slowing,” so I wanted to talk about this openly. I hope that’s cool. If this isn’t your thing, just scroll down. By the way, I’m always good with constructive critique too.
Bro, don’t say slowing: Over the past few months the market has slowed. Or wait, it cooled. No, the temperature changed. I mean, it’s normalizing. Uh, it’s actually stabilizing. Thankfully there isn’t just one way to describe things. I’ve been talking about a seasonal slowing for months because that’s the story the stats are telling. But the word “slowing” almost seems offensive to some, so let’s talk about that.
The market isn’t fragile: The housing market is big and I feel like it’s splitting hairs to argue about whether we should use the word slowing, normalizing, or cooling. Here’s the thing. Use whatever word you feel best represents the market, but it’s probably going to take a few key phrases to do the trick. No matter what, recognize the market is NOT fragile (“fra-gee-lay“) and it doesn’t need you or me to protect it with glowing words. Look, I can think positive thoughts all day long about cryptocurrency, but that doesn’t change the value of bitcoin. In terms of housing, the market is dynamic, multi-layered, complex, and there is no such thing as jinxing the trend by using less-than-glowing words.
Moving fast & slowing: If you aren’t down with the word slowing, that’s fine, but in my mind it’s a reasonable way to describe the market. But to say slowing alone isn’t perfect either as I keep saying because the market is doing two things. It’s moving really fast. And it’s slowing for the season.
Okay, I won’t talk about this again for a while.
My commitment: I will never spin data or sugarcoat things to sound better or worse than they are. My goal is to be neutral while presenting analysis based on the numbers. I’ll come up with helpful word pictures to describe the market too (and sometimes crazy comparisons).
Respectfully,
Ryan
Any thoughts?
—–——– STATS SHOWING SOME NORMALCY ———––
Skim or digest slowly.
THE SHORTER VERSION:
The market is still moving faster than it should be for the time of year and stats are still just about at all-time high levels, but the market is hands-down cooler than it was a few months ago. That’s the story stats are telling and it’s absolutely what I’m hearing from the trenches of escrows. “The market is not slow, but it’s slower than it was” sums it up perfectly.
Overall it’s starting to take a little longer to sell, there were fewer multiple offers last month, and prices dipped from their peak in June. But overall stats from July to August were pretty flat, so if someone said the market felt a bit horizontal, I wouldn’t bat an eye. Of course we do expect some renewed attention on the market as the kids get back to school, so stay tuned for that.
One quick thing. I’m watching cash purchases and while we still don’t have much cash in the market, there has been a noticeable uptick these past two quarters.
Some visuals eh…
NOT AS MANY MULTIPLE OFFERS:
For four months in a row in the region we’ve seen multiple offers subside. Last month 62% of sales had more than one offer and that’s one of the most competitive months ever, but there is no mistaking a cooling seasonal trend too.
IT’S LESS COMPETITIVE:
The market is still ultra-competitive, but this image is crystal clear that the temperature of the market has changed in recent months. Even though prices were flat from July to August, this visual shows clear slowing from a few months ago. This is exactly what we should be seeing at this time of year. But here’s the thing. We should easily have half or more of sales selling at or below the list price, so this market is NOT normal yet.
This visual below is striking because it shows definitive change. A few months back I started to point out this change and it was incredibly minor then. I know at times it’s easy to scrutinize mentioning small changes and some people even get bent out of shape, but sometimes small changes are the beginning of a trend. That is EXACTLY why we pay attention to the small stuff (while not getting sensational).
PRICES PEAKED IN JUNE:
These visuals help show prices look to have hit their seasonal peak in June. This is pretty normal and historically August is sometimes lower than July and sometimes about the same.
VOLUME IS SLIDING (NORMAL):
The number of sales peaked in June and now we’re seeing fewer sales happening. This is exactly what should be taking place. The red line represents 2021 and it’s very consistent with the green line (which is the market average).
INVENTORY IS UP SLIGHTLY:
Monthly housing supply is still sparse, but it’s up from a few months back. It actually declined slightly from July to August in most local counties. Ultimately supply is still SO LOW. But isn’t it amazing how with even this slight uptick lately we feel a difference in the market?
IT’S TAKING LONGER TO SELL:
It took a few days longer to sell last month in Sacramento County, which is what we should be seeing at this time of year. Properties are still selling about as fast as they ever have, but clearly we’ve seen a softer trend over the past few months compared to the intensity of spring.
HOW PRICES ARE DISTRIBUTED (NEW IMAGE):
This visual shows how prices are distributed throughout the market. In other words, about 10% of homes last month sold between $300-400K (just to give a clue on how to read this one). This is a new visual. Do you dig it?
SMALLER HOMES ARE SELLING (HUGE POINT TO WATCH):
It’s normal around this time of year to start to see the types of homes selling change. We tend to see the largest homes in the market sell during the height of spring and then smaller homes for the rest of the year. There was actually a huge spike of larger homes selling during the first year of the pandemic, so it’s going to be interesting and important to watch how this trend unfolds. Keep in mind some of the massive price increases over the past year has to do with a focus on larger homes.
LAST YEAR VS THIS YEAR:
Year over year comparisons get a little weird these days because the market was so atypical last year, but in my opinion this is still worth digesting since we want to be good students of the market. I suggest taking these percentages with a grain of salt and recognize these percentages DO NOT actually mean every house is worth that much more either.
JULY TO AUGUST FEELS A BIT HORIZONTAL:
The market was somewhat flat month to month. Nothing too sensational. Keep in mind some of the smaller counties have fewer stats, so the numbers bounce around each month. This is why I would suggest giving strong weight to Sacramento County and the region as a whole to decipher the bigger trend in the market.
ONE LAST VISUAL:
Price per square foot as a metric has yet to soften. I think it’s going to take a little longer for that because smaller homes have been selling these past few months and since smaller homes tend to have a higher price per sq ft, it only means this metric is going to be a bit more inflated.
Anyway, this is getting too long…
Do you see what I mean about the market trying to get back to normal? What a different vibe from last year.
MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.
Thanks for being here.
SHARING POLICY: I welcome you to share some of these images on your social channels or in a newsletter. In case it helps, here are 6 ways to share my content (not copy verbatim). Thanks.
Questions: What are you seeing out there in the market? What do you think about my take on the market not being fragile?
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Who needs an official Red Ryder, carbine action, 200-shot, range model air rifle, with a compass in the stock and this thing that tells time when you can get the facts?
Only One Thing In The World Could’ve Dragged Me Away From The Soft Glow Of Electric Sex Gleaming In The Window.
Such mastery with words. Haha.
You’ll shoot your eye out
So good Joe. I appreciate you picking up on this small detail too. I love it.
interviewed two local agents today. They did their best not mention a slow down. It was like quick sand without a rope for them. Pretty funny. But both finally agreed that things are on the market longer, less offers being made and if sellers didn’t price right and are still looking at May headlines they will be on the market for longer than most. I feel bad for the listing agents trying to convince these individuals that their castle is nice but it ain’t for that much more than the model match down the street. Thanks Ryan, great post as usual.
Thanks Brad. I firmly believe in being positive in life, but let’s recognize there is a difference between a positive mindset and positive spin. Those are mutually exclusive, but I think at times it’s easy to confuse them as being the same thing. Hope you’re well. Thanks for the story and commentary as always.
New factor in the north state market at this time of the year is Forest Fires and smoke.
The struggle is real. It’s sobering to think that fire season is actually a thing. There are many layers here for consideration including insurance costs. We have seen more migration to outlying areas during the pandemic and I’m curious if we’ll see that lessen in light of some workers no longer being remote and of course fires. I’m open ears in case you ever see anything interesting in terms of trends and such. Thanks Stan.
The lessening of mult offers is a direct result of realtor education/information and price saturation. That means that realtors and seller have heard enough media blitz about fired up market(remember media blitz in 2006-8?) that they have finally collectively decided to “take” the buyers for all they are worth and started listing properties for insane and stooopid amounts hoping to win the lottery.
That narrows the pool of idiots to 1 and results in a single offer instead of low pricing and auction fever.
Another local factor not yet seen in the data is the school effect typical for this time of year-you know-settling in on staying put for the school year or being too busy starting school to look/change houses.
The market isnt slowing, it is saturating with a pool of newly greedy agents/sellers and a smaller pool of buyer money.
In ETX there are 2 factors keeping things humming along->200,000 people/month across southern border. Ignore politics-those people WILL live somewhere. They will rent or cause demand on rentals which if vacancy zero, then rents go up. once rents go to x then renters who can say-I will buy for 900/month instead of rent for 1100/month.
Or-people get fed up with the influx and move-putting pressure on other parts of the country.
Local, the number of out-of-state lic plates is 2-3x normal… and property managers have told me 50% of applications are looking for month-month and are from out of state.
Draw your own conclusion…
100% price increase in last 3 years and 80% of that since chinavirus….
draw your own conclusion.
free money(low interest)
expensive building materials
political/social pressures in some places/freedom in others…
yes-there is a political element but dont start getting mad-look at the data and take in account the reason for the data in spite of whatever belief you have.
no ‘slowing’ here.
Thanks Mark. I get what you are saying, but there is a rhythm to the market each year where lots of metrics start to change. Boiling it down to agent greed is misplaced because while agents are very important players in the market, they don’t make the market move. The same is true with appraisers. Despite some people thinking that appraisers are the brakes or gas for the market, it’s just not true. If agents did have the power to alter the market, I suspect we might only have upward cycles. If agents did control the market, then what happened in 2007? (rhetorical question).
Some of the market changing is clearly about school as you mentioned and some of it is definitely seasonal as the weather changes and people take vacations and such. There is a rhythm to life and there is a rhythm to real estate markets too. There are certainly many layers that make the market move though. There is no mistaking that.
Ryan, I love the new:
HOW PRICES ARE DISTRIBUTED (NEW IMAGE):
graph. Thank you Graphmaster! Don’t you wish they taught your skill in high school math? If agents cannot articulate a market because one word freaks them out, they should not be counseling the public. Thanks for the sanity.
Bob
Thanks Bob. I really love this one too. I’m not sure why it wasn’t always in my bag of tricks. I think it’s a cool way to see things. One word should not freak us out. Here’s the thing too. A positive narrative works in an upward market only, so it’s just not a good idea to embrace that shtick because it’s only built for the good times so to speak. There are players in every market regardless of what prices are doing, so the key for real estate professionals is to keep finding buyers and sellers who have incentive to play the game regardless of price trends. To me this sort of takes the pressure off of having to convince anyone that it’s a good time to buy or not too. In my mind the key is finding people have are moving because of their lifestyle. That’s why most people move anyway. My two cents.
Thanks as always.
“The market doesn’t care what you think or what words you use to describe it. You cannot change the trend with positive or negative adjectives.” I love this!!!
I have shared the speeding car analogy from your last post with many clients and friends. Thanks Ryan, it is such a clear and easily digestible comparison that everyone understands.
It is also not a bad sign that the market is changing either. We shift too. My buyers may have a slightly better chance of getting the house now.
Thank you so much Charlotte. I know those words sound direct, but I think we need to challenge the belief that the market needs to be somehow coddled with glowing terminology. The market is so much bigger and it’s much more exciting to be on the cusp of what is happening, embrace changes, and find new ways to describe trends too.
That’s awesome about the car analogy. And I totally agree about your last statement. Buyers having a slightly better chance sounds healthy. A market that feels like an insane auction isn’t sustainable.
Thanks again. I appreciate your kind words. Sincerely.
Thanks Ryan! I look forward to your next post and to see what happens with the market.
Hi Charlotte, agents I interview down south have the exact same comment. Hoping now that some of their buyers can get an offer accepted. Keeping my fingers crossed for those individuals. Good luck out there in the trenches.
Thanks Brad!
Ryan,
Ignore the people criticizing the words you use. You spend a lot of time providing excellent data to us, for which most of us are extremely grateful. I’ve been using your speeding car analogy for how we’re slowing and racing at the same time, clients get it, THANK YOU for everything you do!
Thank you so much Deniece. I love hearing that about the car analogy. I’m going to use that one in a presentation today myself. I appreciate your encouragement too. I do my best to not allow some people to affect me. I get concerned when I hear thoughts like this from people though. It underscores a need for education. The teacher in me always wants to try. 🙂
one other comment – a slowing market IS positive news for the buyers!
Preach it. I absolutely agree. This is one of the problems I have with a positive-only narrative. It’s not bad news for the market to be showing some signs of normalcy. Frankly I think we can see inventory double. Getting back to a realistic pace would be a win.
Amen to that Reverend Ryan. Not only for buyers. But how about those appraisers trying to do their job right with a run a way market ie. trying to catch a speeding car. Great post young man and have some fun with your Sermon…!!! Hmmm from now on Rev. Ryan. Okay so I went over the top and slide down the hill on the other side. Enjoy my friend. Keep educating.
🙂 Thanks Brad.