There is so much talk about buyers sitting on the sidelines right now, but let’s talk about sellers who are also sitting. This is a local trend, but it’s something showing up in many markets across the country also.
UPCOMING (PUBLIC) SPEAKING GIGS:
2/8/23 SAFE Credit Union “Snacks & Facts” (for RE) (register here)
3/06/23 Matt the Mortgage Guy YouTube Live 3pm PST
3/08/23 Matt Gouge Event TBD
3/10/23 PCAR Market Update Lunch & Learn
3/28/23 Downtown Regional MLS meeting
4/1/23 NAA Conference in Sacramento
WORST JANUARY EVER OF NEW LISTINGS:
New listings in January 2023 were down 39% from last year in the Sacramento region. And remember, last year was a lower year of new listings. We basically saw about 800 fewer listings this January. For a national perspective on listings, check out Redfin data and Altos Research.
SELLERS HAVE BEEN SITTING SINCE THE SHIFT
January 2023 is obviously lower than the start of any other year, but check out the black line (2022). New listings have been tapering since the market changed last year, so we have a trend on our hands of sellers holding tight.
QUICK CLOSING THOUGHTS
1) The replacement home: Many would-be sellers are sitting comfortably with a sub-3% mortgage rate, and there isn’t any plan to list. Low rates have been like stay-at-home orders for sellers, and the contrast of higher rates and prices has made it really difficult to afford a replacement home.
2) Not the reason volume is low: Sometimes I hear stuff like, “Bro, sales volume is low because we’ve had fewer new listings.” I know, this sounds logical, but it’s a false narrative. The reason why sales volume has taken such a hit has to do with affordability – not the number of listings. I’m not saying anemic new supply can’t affect the market, but blaming low volume on low supply is ignoring the bigger issue of affordability. For instance, there are over 2,000 active listings in the region today, and buyers could devour these units if they really wanted to, but the problem is affording these properties.
3) Squeezing supply & demand closer: One of the struggles of having fewer new listings is it squeezes the gap between supply and demand, which creates more competition. Last week I talked about the market going from an ice bath in the fall to a hot shower in January, but imagine how different the temperature would be with 800 more listings like a normal January.
I hope this was helpful.
MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.
Questions: What would it take for you to move right now? When do you think sellers will list more? I’d love to hear your take.
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You circled 2023 on the graph and I still almost missed it because it’s so far off last the last few years. LOL
Haha. Thanks Gary. You know, I should’ve made it a more prominent color, so that’s probably some of it. No joke about being far off from last year (or any year). Listings have been down since the market shifted, but these past few months in particular have been REALLY low.
we were seeing rates come down and helping the affordability factor but that got whacked in the head Friday and we back tracked. But if we can get into the mid 5s consistently I think you see more buyers and that will encourage more sellers.
Yeah, there was so much optimism about a 5 handle, but now it’s 6.45% today. If rate hikes keep up, I may be writing a post called, “The market went from an ice bath to a hot shower… to a cold shower.” We’ll see. Rates have been like teenage drama or reality shows. All over the place lately. I will say lower prices would help more sellers and buyers participate in the market. It seems one of the solutions for increased market activity is to have prices that buyers and sellers can afford… We have quite the market right now.
Ryan:
I enjoy your insight. Appraiser from Wisconsin and born in ’59. Yep typical age of appraiser right? Affordability would certainly seem to be one of the lynchpins for this market. While your market is overall higher value than ours(avg sales price in our county(Waukesha;Pop. 350,000) was just about $500,000. Interest rates are certainly having an impact. As to our personal situation we, like many other our age, are empty nesters have a home too big but it doesn’t make sense to move. We have a low interest rate, lots of equity but if we downsize in size we will side size in price. The tradeoff is not worth it. We are happily stuck and that is likely to continue for the near future. As for my appraisal work it has not been this slow in years and years(20 years in the business and never this slow). Cleaning up my house, doing side jobs and XC skiing. I enjoy your posts and have referred you to other appraisers and agents. Keep up the good work. Jim
Haha. Thanks Jim. Yes, typical age. I’m a young appraiser I guess (born in 70s). Thank you for sharing your story. Your statement, “happily stuck” resonates. I hope work picks up for you. This market has been so tough on many real estate professionals. Hang in there friend. And thank you for pitching in some thoughts.
Ryan,
I wanted to Thank You for these Sacramento Region (4-County) graphs that you have been publishing. They are very helpful in educating broader trends while staying focused on the Sac valley. Thanks.
You are so welcome. Thank you Michael. I appreciate the encouragement. I think it’s so key to be hyper in touch with the local market. I find the “national” market so to speak may or may not reflect what we’re seeing locally.
Thank you for your focus on Cause and Affect, the granddaddy of the Supply and Demand, the #1 Rule of Commerce.
Why high interest rates? “To lower inflation,” the Fed is artificially trying to raise prices in order to suppress demand — instead of good government getting out of the way so that supply increases (https://www.commercialsearch.com/news/economists-view-the-feds-misguided-path-on-interest-rates).
Why inflation in the first place? Because the new White House in 2021 declared war on oil (https://www.foxbusiness.com/energy/timeline-biden-actions-oil-gas-priorities), so aggressive inflation followed (https://www.investopedia.com/ask/answers/06/oilpricesinflation.asp).
And even before that, why are lumber prices and prices of other housing materials so high? Bad government restricting the renewable supply of our God-given natural resources (https://californiapolicycenter.org/fixing-california-part-seven-forest-management), and imposing high taxes and fees (https://www.latimes.com/california/story/2019-08-06/high-housing-fees-california).
To be sure, there are other factors. But these are the big elephants in the room.
It seems like the Fed is trying to bring pain to the economy, but we keep getting glowing jobs numbers…
When the problem is Supply being attacked and severely decreased, the solution is to increase Supply, not decrease Demand. What the Fed is doing to “cover” for the White House Occupant is Frankensteinian “economics” adding unnecessary hurt to a very foolish harm.
Thanks Scott. We have a supply problem and a demand problem. I’d like to see progress addressing both. Hey, let’s be careful about too much politics here.
Great blog post! Yes, who wants to move when we’d have to give up our below 3% mortgage? Let’s make mortgages portable! What would it take? It would take buyers willling to pay sellers 2021-22 top of the market prices. Meaning sellers are stuck in the past prices. But many of the buyers coming out are unable to pay even today’s prices due to higher interest rates. Lastly, maybe after covid, people got off the keeping up with the Jones’ and are finally being content with what they have because its tough right now with increasing prices on everything. That’s my take.
Thank you Camelia. I have to think lower prices would help some sellers move eventually. There is a cost to giving up a rate though. I completely agree. And on your note about Covid, with so much remodeling during those years, that may help some people stay put also. I spoke at a meeting in the past two weeks and asked people to raise their hands if they have a rate below 3%. Many hands went up in this crowd of 200+. Then I asked the same people to raise hands again if they had incentive to sell right now. Literally one hand went up. While this isn’t a scientific study, I think it highlights the reality of what the market feels like right now. Low rates have helped keep people in their homes. For now at least.
Ryan- Well Said, affordability is a key factor among buyers in todays market.
Thanks Michael. Yep, totally agree.
Continued bad news for everyone who cares about transaction count. Yikes.
Yeah, it’s no joke. Thanks Joe. Technically there is still plenty of room for buyers to absorb active listings, so it’s not a crisis level, but this isn’t a trend we want to see persist. There is such a heavy focus on prices in real estate, but it’s all about volume. I think volume speaks to market health more than anything.