Freakish price growth? Yes. That’s exactly what we’ve been seeing. Here we are again with what feels like a carbon copy of last year, which was our most aggressive market ever. In short, 2022 is doing its best to crush 2021. Let’s talk stats and perspective. I’d love to hear your take.
UPCOMING PUBLIC SPEAKING GIGS:
- 3/15/2022 NARPM Luncheon (details)
- 3/22/2022 SAFE Credit Union market update (details)
- 4/28/2022 SAR Think Like an Appraiser (details)
WHAT IS HAPPENING?
Buyers are essentially running to the market to get in before rates spike more. On one hand affordability has declined as rates have risen substantially lately, but so far this has only created a frenzy to buy. At some point theoretically we’d expect to see demand soften due to rate increases, but we haven’t hit any sort of inflection point yet where buyers are backing off the market. That’s something to watch though with the number of purchase mortgage applications, pending contracts, and sales.
FREAKISH PRICE GROWTH:
Below I’d like to show a few examples of what price growth looks like in the Sacramento region right now. I suspect many markets across the country look something like this too.
A QUICK RECAP:
Some quick stats. Feel free to share some of these images on your social channels too. But please see my sharing policy. Thanks.
1) MASSIVE MEDIAN PRICE GROWTH:
This visual shows the median price in February in black, and this year is so far above others. It’s normal to see prices rise in February, but this is massive growth – especially in the eleventh year of this price cycle.
2) RECORD-BREAKING DOLLAR GROWTH:
This year the median price ticked up $31,000 from January to February. This is essentially the largest dollar gain we’ve seen in the Sacramento area between these two months. From a percentage standpoint this was a 5.56% increase. This isn’t the highest percentage ever, but it’s the second-highest percentage gain from 2004 (2015 saw a larger gain).
3) WEEKLY PRICE GROWTH HAS STARTED TO RAGE:
Check out the black line. That’s 2022, and it’s been raging higher. Until the last week of February it looked like the median price for the month was going to be strong, but nothing too crazy. But then stats starting coming in, and we see a much different trend. Remember, closed sales from last week really represent the market from about a month ago when these properties got into contract.
4) BUYERS PAID WAY ABOVE NORMAL:
On average buyers paid nearly $16,000 over the asking price last month. This is far above a normal February where buyers tend to pay closer to $10,000 BELOW the list price. It’s important to note February 2022 was about twice as much as February 2021. Keep in mind this is the average of every single escrow. This number doesn’t perfectly describe every single transaction. In other words, some buyers went way above this number and some went lower. The takeaway here is to know how disconnected this number is from normal rather than offer $15,764 above list price thinking that is the winning number. It might have to be way more. Or in some cases it could be less.
5) FEWER MULTIPLE OFFERS TECHNICALLY
This month there were fewer multiple offers compared to last year at the same time, but we’re actually seeing a more aggressive market today. On one hand this stat suggests the market is slightly cooler in temperature, but it doesn’t feel cooler because the offers that are being made are higher.
6) BUYERS MADE MORE AGGRESSIVE OFFERS:
This month there were fewer multiple offers compared to last year, BUT the market was more aggressive since buyers offered higher amounts above the list price to secure properties. This speaks to buyers having a fear of missing out on low mortgage rates (and anemic supply of course).
7) MORE INVENTORY IS COMING
We are seeing more listings hit the market. Typically, the market really starts to hit more of a stride in March with listings coming, so stay tuned. We won’t have enough listings, but more is better.
YEAR OVER YEAR:
Year over year stats are important to digest, but don’t forget to look at month to month stats to understand what the market is doing right now. Also, not every location and price range are going to have the same stats.
MONTH TO MONTH:
Year over year stats are important to digest, but don’t forget to look at month to month stats to understand what the market is doing right now. Keep in mind Placer County has a limited number of sales too, so I would take Placer with a grain of salt from month to month.
OTHER VISUALS:
As if anyone really wanted more…
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?
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Observations based on the last 4 years: The exodus of sellers from CA reduces the number of potential listings; the “requirement” to be a nurse reduces the number of potential listings; the exodus FROM the Bay increased demand; the lack of collective memory of 8% rates has increased demand (FOMO).
Thanks Jay. I’m anxious to get more robust migration stats to understand more completely what exodus means. I know for certain we’ve had far fewer people coming to the state during the pandemic, and that has begun to affect the population. I am not a migration denier or a Bay Area denier in terms of the trend, but I will say the market everywhere feels just about like it does in Sacramento, which points to the FOMO factor you mentioned. It’s been unreal lately. And as you said, there are fewer listings, and we are really feeling that.
Great Data and Comments!!
Anyone think the homes under the new FHA limit price range will continue to increase more that the rest of the market due to low down payments? Also, any comments on the price range under 450K? Will the low end push up in price much more than the other price ranges? Let me know your thoughts Senior Lundquist?
Hi Christian. It would be interesting to break out price appreciation. There is definitely more competition below the median price. In Sacramento County the median price is just under $540,000. There is hardly anything even under $400K these days too. In short, there is tremendous upward pressure below $450K in particular. I’ll watch this. I’m not ready to commit to say this range will see profoundly more growth than other ranges. I do know this range is really sparse though.
okay so here is something to make you scratch your head and of course it has to be me. I wish I could upload my JPG capture of the bar chart of Temecula Tract homes over last three years on lots under 17,000 sf, but I ain’t smart enough so here is the Average Sales Price data:
2019- $381,134
2020- $447,976
2021- $584,979
2022- $551,568
Now if that ain’t weird enough about this, median sale price Temecula same lot size filter (in an attempt to keep the custom homes out:
2019- $439,000
2020- $495,000
2021- $625,000
2022- $655,000
So, remember how the all-knowing all-seeing Ryan, always says check your market and neighborhood, don’t assume, here is a great example of the head scratch moment. Yep, I didn’t filter this other than by lot size under 17,000 sf and city, Temecula. So, now that I have seen this it leads to a whole new data search to figure out listings, pending, and where are the sales coming from, but folks please don’t make the assumption when listing or appraising your subject property that everything is just peaches and cream. Sometimes more questions come up from data that doesn’t fit the headlines.
Ryan figured it was time to throw a monkey at the wrench. Take good care my friend and as always thank you for the inspiration and thank you for your kind words over the phone and via email. You are a true gentleman.
Thanks Brad. That’s really interesting. This is definitely why I look at more than just one price metric too. If we put all our eggs in the average price basket, for instance, we might end up saying the market has declined. This is 100% why we ought to consider the median, average, and average price per sq ft. This helps give us a balanced view of things in many cases. I wonder what the reason is for this. It’s puzzling because I’d expect to see an increase in the average price also. But if your market saw many more sales at lower prices or fewer at higher prices, that could certainly skew the numbers. You are so right that we have to look at the numbers rather than impose hot headlines on every neighborhood and price range. Thanks for the monkey wrench. And by the way, the band Foo Fighters has a great song called Monkey Wrench. You won’t know this band most likely (other than me mentioning them a few months ago), and I’m pretty sure this wouldn’t be up your alley. I just wanted to mention this song in passing in case you needed something new for your playlist when riding horses…. 🙂
Sorry but my horse aside from country enjoys, spa music and Frank Sinatra. LOL. Okay so Charlie just likes Country. Although he from time to time has tried to be “Food” Fighter, probably not the same thing……. I didn’t get into the meat and potatoes of the data, it was just bizarre on first look and I thought it was timely for all we seem to be going thru. Bizarre market and Bizarre data. Thanks Ryan as always great job young man.
Monkey Wrench great song, great video. On my top list
Thanks Nick. I don’t think I’ve ever seen the video. I’ll check it out. Love the song though.
Thanks as always for the great information and insight Ryan! I have three new listings coming to market this month, and pricing them has been quite the process. I took one of the listings back in November, was waiting on the heirs to empty and clean out the house. In just that period, the newly sold comps in the neighborhood suggest that we go from our initial list price of $1.1 million to a list price of at least $1.2. million. Crazy!
That’s nuts Michael. Thanks for sharing. It has been extremely rapid lately. I share your thoughts also. I think sometimes we pull comps and think, “Is this really what homes are selling for?” On a side note, my sense is properties need space to breathe too. What I mean is it’s important to price reasonably and then see what the market does (as opposed to pricing too high and getting zero offers).
Exactly what I told my sellers who are listing at $1.25! They have seen some comps that might suggest an even higher list price. However, sellers agreed to my strategy of listing at a more sensible price so we don’t end up chasing the price downward. Tons of interest already, we hit the market tomorrow, we’ll see where we end up….
Smart move. Congrats!!
I’m so relieved to see the market getting a good start this year after all the doom and gloom news. Hopefully this market can absorb the rate increases. It will be good for everyone if it does.
Thanks Gary. Yeah, there was so much doom and gloom (and there will continue to be). I’m anxious to watch for an inflection point where buyers hit the brakes or pause somewhat. It would be healthy to see that too. It’s such a tough environment right now though with such anemic home supply.
What is a “FOMO”?
What area/state does Brad Bassi work?
The comments lost me this week, not yours.
FOMO stands for “Fear of missing out”. Brad is in Southern CA, and he’s a legit cowboy (seriously). I’ve had coffee with Brad before in person. Such a nice guy.
When you think the market can’t get any crazier than it is…it does. Great market analysis.
Exactly. This goes to show why it’s so difficult to predict real estate. The run to the market lately has been unreal. The year is not over, so it’s going to be interesting to see how long this run can keep up. It’s so lopsided. There is nothing wrong with balance.
Big question for you Ryan?
How many homes are going to go on the market in the next few months, same % as history? Or less because sellers will hold off due to low rates locked in?
Or Will the bay keep driving our market? Or homeowners sell off and leave Cali putting more product on the market?
Sounds like a risky bet that it will continue up….
We’ve been way down from previous years. I’ll actually push something out on Friday on my social channels to show what listing volume on April 1st looks like compared to many previous years. In short, it’s chopped way down. For now we’ve been seeing an uptick in listings as a normal seasonal trend, but nothing abnormal at all. I think some people are maybe interpreting this as a negative trend to be seeing more listings, but we are really far from normal right now (and buyers shopping right now know that it feels like there is nothing out there to buy). If buyers backed off the market, it would make it look like there are more listings hitting the market too. We need some time to see the trend. Up until this point it has been really subdued, but a bit better than last year at the same time. I suspect some sellers will try to push up their listing date, but these are sellers that were already going to sell. I’ve heard this sentiment from a number of agents over the past week.
The Bay Area is poised to still be an influence, but I’m always reminded that the market here feels like the rest of the state for the most part. So it’s not like it’s just the Bay Area driving the trend. I recall in 2018 when the market softened too that the Bay Area dynamic didn’t stall softening. This was before pandemic migration, but I wanted to mention it because there are big forces driving the overall market, and at times I think we give too much credit to the Bay Area (I’m not diminishing their power either). Ultimately, working from home still is a viable option for many coming from the Bay Area. On a side note, these buyers would be wise to know it is FREAKING HOT in the summer here. I suspect not everyone leaving California owns a home or sells a home. This is still an unmistakable trend to leave the state. Up until this point though, during the pandemic we have not seen a massive increase in inventory despite what we would think of as increased outbound migration. But yeah, if you’re looking for inventory, I think it’s important to tap the heading-out-of-state crowd to give us something at least.