Be an optimist in life. Be full of hope. And let nothing shake you. But when it comes to housing stats, be realistic about the market that actually exists. Today, let’s talk about getting high on housing hope (and unpack fresh stats).
UPCOMING (PUBLIC) SPEAKING GIGS:
1/18/23 WCR Market Update in Cameron Park (register here)
1/19/23 Big market update at SAR on Zoom (details TBD)
1/23/23 Residential RoundUP on Zoom (register here (free))
3/10/23 PCAR Market Update (detailed TBD)
5/22/23 Yolo YPN (details TBD)
A FEW THINGS ABOUT HOUSING HOPE:
1) Hope vs glaring stats:
Over the past week, I’ve had quite a few conversations with people who think the market is going to rebound in 2023 since they say rates are poised to decline ahead. I suspect purchase applications being up slightly over the past few weeks and mortgage rates dipping has birthed some enthusiasm. Look, it’s fine if that happens, and it’s nice to hear excitement about the future, but let’s be sure to embrace the market that’s actually here at the moment too.
2) Modest rate changes won’t alter the trend:
Modest rate declines aren’t going to be an instant reset button to bring missing buyers back to the market. We’re missing about 40% of buyers right now locally, so affordability is still a massive issue. That’s what I tried to communicate last week when talking about the market getting worse before it gets better. The idea is we won’t see volume get back to normal until affordability improves. And like I said, we don’t know how long volume will be subdued, and obviously rate declines can help boost affordability.
3) The housing narrative is like a ping pong game:
The housing narrative seems like a game of ping pong where glowing and dark outlooks are rallying back and forth. Some say the market is going to rebound, but then there’s concern about recent jobs numbers. Or in one breath some think rates will go down, but in the next there’s uncertainty about the Fed meeting next week. Or people are pumped about conforming loan limits increasing, but affording the market is still not doable for many buyers.
4) Nobody knows the future:
The truth is nobody can predict the future of the housing market with certainty. Everyone has ideas, but nobody knows for sure what will happen. This doesn’t mean we ought to be naive about trends or the future because we’re clearly in the midst of a market with depressed volume and dropping prices. The bottom line is housing needs to become more affordable. Keep in mind lots of predictions are based on rates at 6%+, so predictions will be amended if rates change. Ultimately, let’s keep watching and cultivating objectivity by embracing perspective formed by the numbers.
I hope this was hopeful. Thanks for being here.
———–——– DEEP LOCAL MARKET UPDATE ———––——
Scroll quickly or digest slowly.
HOW I’M DESCRIBING THE MARKET:
The market is still moving, but lots of buyers are missing in action, prices have dropped faster than normal, and it’s taking much longer to sell. Sellers aren’t quite up to speed with proper pricing, but they’re offering credits to buyers more frequently, which shows they’re listening. Sellers haven’t been rushing to list as we’re still missing a few hundred listings from a normal trend.
SELLERS ARE STARTING TO LISTEN:
This is good to see. 49.4% of closed sales in Sacramento County had concessions last month. This means nearly half of all sales had some sort of credit for repairs, closing costs, rate buydown, etc..
PRICES HAVE DECLINED 3X FASTER THAN USUAL:
There are two stats to look at here. How much has the market gone down in recent months, and much is it still up?
One thing to note is prices dropped a little less in November compared to previous months, but I wouldn’t write home over that. I’m anxious to see how the stats unfold in December. So far, a reading of pending properties suggests a definitive price drop for December. We’ll see.
NOTE: Placer stats bounce around more since there aren’t as many sales, so take the median price with a grain of salt.
SOME OF THE MARKET IS MISSING IN ACTION:
It’s easy to focus on prices, but I think volume is the bigger story because it shows how many buyers are actually participating in the market.
1) Past 7 Months: Since May we’ve seen over 5,000 fewer sales in the Sacramento region compared to last year. In other words, volume is down by 29% compared to last year. But, about 13,000 sales have happened, which shows the market hasn’t stopped.
2) Past 60 Days: But now let’s look at volume over the past 60 days to get a better idea of the trend. When we look at more recent history, it’s clear volume has dropped lately by nearly 43% (not just 29%).
3) The historic average: Lots of people ask if the comparison to 2021 is bad since volume was higher that year. Well, it makes a little bit of a difference, but not much. Here’s a look at pre-pandemic average volume, which shows the region is down 40% instead of 43%. But look at Sacramento County being down 45%, which is hardly different than the image directly above.
PRICES ARE OFFICIALLY DOWN FROM LAST YEAR:
It’s been a long time since we’ve seen year-over-year price declines, but that’s the market we’re in right now. This is exactly what should be happening since affordability has taken such a huge hit lately. Remember, closed sales in November really tell us what the market used to be like in October when the bulk of these properties got into contract.
MONTH TO MONTH CHANGE:
Looking at sequential months is key too so we don’t just get stuck or hyper-focused on last year (the past).
NOTE: Take Placer with a grain of salt (not many sales).
OTHER PRICE VISUALS:
OTHER VISUALS:
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 stands out to you above? What are you seeing happen with in the market right now? I’d love to hear your take.
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The nation’s overall housing supply remains limited, as those who purchased homes in recent years at extremely low mortgage rates are staying put. This tight inventory has kept prices from seeing deeper declines. homes are still unaffordable for many, especially first-time homebuyers.
Thank you. Yeah, inventory still feels subdued. Spot on. Lots of markets are on the cusp of seeing year-over-year price declines finally, though not every market is the same. Some areas have a different trend. In Sacramento, our months of supply is modest overall, but we’ve seen a sharp price decline still. It just goes to show that technically modest inventory hasn’t really mattered much (or at least held back declines in some markets). But to your point, if we had two to three times the number of listings, that would very likely be making things worse… Thanks for the comment. Appreciate it. Now that you have an approved comment, there is no moderation (unless you share a link).
You can analyze and speculate to your hearts content. The housing market will always be there in one form or another and you will have to roll with the flow. The one question that will make or break the future of residential real estate is the fed and how they implement economic policy. The need and desire of the public will always be there. But, will the fed bolster the industry or crash the financial ability of the people? Our wonderful government has not been of the people by the people and for the people for a very long time. I hope someone in authority makes good decisions but I for one cast a vote of no confidence in the present regime. They are in it only for themselves. Even though we must work with what we have toward any possible positive outcome. This country has come through bad times and the people not those in the capital will make it through again.
Thanks John. The market is always moving, so we have to consistently analyze to understand the story of what is happening. But yeah, right now it seems Fed policy is front and center. I think that’s why to some it feels like the market could rebound. And then to others they’re expecting more pain ahead. No matter what, it’s a mess right now. That’s what our experience shows, and that’s what the stats show.
It’s hard to point and yell at anyone in the government. Both political parties gave out billions in stimulus that people didn’t need and just left the FED to deal with the aftermath. Granted they shouldn’t have kept rates so low for so long but hindsight is 20/20.
Thanks Kyle. Yeah, I’ve yet to hear either main political party pin the trend on the other side. That’s likely telling. Low rates felt really good for lots of people…. but what a mistake for the health of the market.
I will keep the hope alive Ryan.
Nothing wrong with hope.
You’ve become a chart monster! Really bringing transparency to your market. Great stuff!
Thank you so much Jonathan. I really appreciate it. That’s the goal.
Excellent data as always Ryan! Thanks again!
Thank you so much Neil.
By the way, someone said my post today was inappropriate content. Is saying “high on housing” off limits? Feel free to DM me if you think so. No need to respond publicly. I think this is simply a word picture designed to create conversation. I think it works well, and clearly I’m not advocating drug use. What I’m trying to speak to is being so hungry for hope that some people are getting distracted from seeing the market. It’s like having blurred vision. Hey, whatever works.
WOW! Ryan another great post. I am a big fan. Sorry to hear that the party is winding down in your neck of the woods. Looks like the homeowners are getting over their hangovers. Over here on the right side of the country (the eastern) 🙂 , we are starting to see a shift but not even close to as drastic as your data. California has a reputation for being a trendsetter, so I’m sure it will eventually reach here in Northern Florida. 2008 was just a little hiccup in our region compared to other parts of the country.
You always have such interesting charts and graphs and you have inspired me to start doing some of the same. I’ll have to contact you, so you can help me get off to a good start. Just started my Blog but it has been tough getting it going.
https://www.checkmarkappraisals.com/blog
Hey Mark. Yeah, the party seems like it’s at that stage where 40% of people raging have left because the cops were called. So it’s quieter now for the moment. Haha.
I appreciate hearing about your area. Yes, we do tend to have extremes in California. Sacramento has been making lists with other markets like Boise, Phoenix, and Austin. It’s like we were previously on lists for being one of the hottest markets, and now we’re on lists of top cooling markets.
Congrats on your blog. That is awesome. I really wish more appraisers would put out content to engage with the public and tell the story of the market / appraisal stuff / etc…. Please reach out any time you have questions. I’m happy to share successes and failures. The good news is there is no such thing as a perfect blog post, you don’t have to do it like anyone else, and you’ll figure out what works well for you and your audience. So the great thing is there is no pressure. My hope is to simply get on base each week when writing, and then hopefully I’ll score runs over time.
Great content! I appreciate your focus on the local markets. I’ve been looking to buy a place in Placer County for the past few months, but I can’t find a house I like. I’m hoping more people will list their homes this spring so that I can find something.
Thank you Peter. This is exactly why I write. Please keep me posted with any questions or insight into what it’s like in the trenches right now. I’ve heard quite a few buyers echo what you just said in that they don’t like what’s on the market right now. We should start to see new listings tick up in January, but it’s a slow trickle. It picks up much more in February, March, and beyond. That’s the normal seasonal pattern anyway. Hang in there.
When that CP lie Report comes out On December 13th oh I’m sorry I mean CPI report. Things might get interesting With rates and stock market. Thanks for all your great data Ryan!
Haha. Thanks Tom. Yeah, this meeting will be the talk of the town. Who would’ve thought inflation would be such a big household topic. On a random related note, the price of frozen pizzas has been skyrocketing lately. In short, we need home prices to come down to be able to afford more pizzas… 🙂 Looking forward to things calming down eventually, and I’m here for the ride. Let’s see what comes next.
Great market update, Ryan. It seems like the most consistent thing going on in the market right now is uncertainty. I love seeing your graphs explaining what is happening in the Sacramento market. Keep up the great work, Ryan.
Thanks Tom. Yeah, uncertainty is the word of the year. On a side note, I hear Oxford English Dictionary chose the word of the year as “Goblin mode” (whatever that means).