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:
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.