Are buyers finally gaining more power? Yes. The truth is the market is still ultra-competitive, but there is a slightly better chance buyers can get into contract these days and maybe not pay as much above the asking price (maybe).
Big (Free) market update: On September 23rd from 11am-12pm I’m giving a market update for CornerStone Title Company. This is for the real estate community only. Sign up here.
Teaching my favorite class: On September 28th from 9am-12pm I’m teaching my favorite class at SAR called How to Think Like an Appraiser. It’s three hours, which sounds painful, but I love this one because we have space to dig deep into comp selection and adjustments. Sign up here.
BRAND NEW VISUAL:
I’m excited about this visual because it focuses on a dollar amount. I could be wrong, but I don’t think anyone has published this in my area.
FOUR TAKEAWAYS:
1) Freakishly high: Over the past few years buyers on average were NOT paying above the original list price, but that changed this year. In fact, in June buyers paid $25,000+ over the original list price in the region. I know that almost seems low because we’ve been hearing stories about properties selling $200K over asking, but this is the average and it represents over 2,800 sales.
2) An average of $11,211: Last month buyers on average paid $11,211 above the original asking price in the Sacramento region.
3) Fall prediction: In a normal year buyers pay less during the fall and it looks like that’s what we’re heading toward since two months in a row we’ve seen a softening from the height of the seasonal market in June. Ultimately unless something unexpected happens to reverse the seasonal slowing we’re experiencing, we should continue to see buyers on average pay less above the asking price over the next few months. This doesn’t mean it’s not competitive though (see #4).
4) Still not normal: The good news for buyers is the market is slowing for the season, but the harsh news is the trend is still more aggressive than it should be for the time of year. So it’s like the car was going 130 mph and now it’s going 90 mph. It’s still speeding. For instance, buyers paid above the original list price in August even though that’s not common (see above). As I keep saying, the market is showing seasonal slowing, but that doesn’t mean the market is slow. In short, buyers ought to enjoy having just a little more power in today’s marketplace, but it’s important to realize the market is still tilted toward sellers.
MORE VISUALS:
I hope this was helpful. Thanks for being here.
Questions: What are you seeing out there with buyers and sellers? What advice would you give for pricing a property right now?
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Hi @Ryan,
As always, thank you for the insights, precious, especially for investors residing outside the Sacramento area. My question is: do you think that the decline is due to the fires and severe drought?
Thanks,
Hi Jorge. That’s a great question. I think the answer is NO. What we’re seeing should be happening at this time of year regardless of drought and fire. Granted, we need some space to figure out what the market looks like in portions of El Dorado County in the path of the fire, but otherwise this is actually normal for the time of year to see a decline.
Thanks – Keep up the good articles!!!!
Thank you for another great post Ryan! I appreciated Jorge’s question and your response as well. Personally, I feel we could use a little bit of “normalcy”! (Wishful thinking?) I am expecting some of my potential buyers to step off the fence in the coming months and plan to watch the trends closely. Again, thank you for providing such valuable content for our community!
Cheers,
Adriana
Thank you Adriana. Why would your buyers sit back? I’m curious.
Thank you! I have a few clients who were in the more challenging price ranges and were tired of being beat out by other offers. I have three buyers who are currently “waiting it out” due to buyer fatigue.
Thanks. Yeah, it’s a struggle in some price ranges. It’s particularly challenging under $400K as only 12% of the entire regional market was under $400K last month (excluding condos).
Hi Ryan
I appreciate your article and your insight. I have a handful of clients that refuse to be in a bidding war (I am Southern Ca). However, my clients are realizing that if they continue to wait for a reduction in price then the interest rates will go up. They are hopeful that come Oct-Dec will be a better time to purchase while interest rates are still low and also hoping, that more properties will be on the market by then. Do you foresee more listings on the market due to the deferment expiring for many? What’s your thoughts?
Hi Cecilia. Thanks so much. I get the idea of refusing to be in a bidding war, but that’s a tall order in some markets. Even in Sacramento we are still seeing lots of offers (just not as many as we were having in April). Typically during the fall we see fewer newer listings hitting the market, but we also tend to see fewer sales also. So at times it starts to feel like there is more inventory because there we do see less activity from less demand. When looking at the last 7 or so years locally we tend to see monthly supply between September and November at about the same level as the height of summer and then it dips in December. It could be different in your area of course.
Technically it’s a great time to buy in the fall, but the best stuff usually hits the market in the spring, so that dream home might not be on the market during the fall season (especially in November and December when so many people are thinking about the holidays).
By the way, I’m sure you know Steven Thomas in SoCal, but just in case you don’t, I enjoy his Friday videos on Facebook Live. I like the way he talks about the market and avoids spin. https://www.facebook.com/SocalSteven
I don’t really have stats on how many properties there are where rent is not being paid, so if anyone has a data source they’d like to pitch, I’m open ears. With that said, I suspect there will be some listings from this, but it’s hard to imagine it would solve the listing shortage problem. In short, the market is hungry for more listings and I suspect it would easily absorb more listings from forbearance and the eviction moratorium ending. Though there is a difference between some listings and an avalanche like some of the sensational narratives are talking about. For now I wouldn’t bank on the idea of a tsunami of listings because that sounds so sensational, but I’ll be the first to change my tune if we actually do get these listings.
Hi Ryan
Thanks for your insight. Yes, I subscribe to Steven Thomas’ County reports. Between your information and his, I have a pretty good grasp of the California market and data trends. Thank you for all you do.
Right on. And forgive me if I’ve mentioned him before to you. I tend to mention him when SoCal real estate comes up. 🙂 Thanks for the kind words.
Thank you Ryan! As always I get so much out of your blog posts.
Thanks so much Charlotte.
Great stuff as always and nice to see you got out the crystal ball this week 😉
Haha. Yes, I had to bring it out a bit, though my prophecy is based on normal trends. I’m anxious to watch the market and see how fall exactly unfolds. It looks like we’re poised to see more normalcy, but nobody knows for sure. I do wonder if we can get below 100% SP/OLP before the year is up. We shall see.
As always, great info Ryan! Always looking forward to seeing your commentary on our local market.
Thank you so much Paul.