The housing market is definitely heating up for the spring, but it still feels frozen with so many buyers and sellers sitting right now. I recently talked about sellers sitting out of the market, but today let’s look at buyers.
UPCOMING (PUBLIC) SPEAKING GIGS:
3/06/23 Matt the Mortgage Guy YouTube Live 3pm PST
3/09/23 Matt Gouge Event (sign up here)
3/10/23 PCAR Market Update Lunch & Learn
3/28/23 Downtown Regional MLS meeting
4/1/23 NAA Conference in Sacramento
4/13/23 Realtist Meeting
5/4/23 Event with UWL TBA
GOOD & BAD TIMES IN REAL ESTATE DON’T LAST
Last week I had lunch with a real estate broker who’s been in the business a long time. He said the good times never last. And neither do the bad times. I just wanted to remind everyone of this truth. I loved the way he put that.
14 YEARS OF BLOGGING
My blog turned 14 years old yesterday. It’s been a fun ride, and I’m so grateful for all the relationships that have been built. Here’s to lots of conversations ahead and getting through these awkward teen years.
HELLO SPRING VOLUME
The housing market is clearly heating up for the spring. The black line below represents 2023 weekly closed sales, and we’re starting to see an uptick for the spring season. It’s a normal trend for the time of year to see volume increase, so this line should keep moving up even though it’s still clearly down from previous years (which reminds us the market also feels frozen).
MISSING & HAPPENING
When looking at the past 60 days of closed sales compared to last year, we’re missing 42% of volume this year. It’s easy to say we’re seeing fewer sales because of fewer listings, but this is about affordability rather than not enough listings (even though new listings have been down). For friends who work in real estate, I suggest dwelling on the part of the market that IS happening. I recommend obsessing over every escrow to understand who is buying and selling in today’s market (clues for how to focus business).
Okay, 2021 did have more sales, so let’s look at the pre-pandemic average too. This makes a slight difference in the stats, but really nothing major.
SELLERS & BUYERS
Sellers, the pool of buyers shopping today is still much smaller than normal, which means it’s critical to price correctly and negotiate as needed. Don’t walk into the room like you have all the power because buyers are sensitive to paying the right price, and we’re not seeing rampant overpaying like we did in 2021 (even though some properties are getting bid up). And buyers, be patient, be comfortable with the mortgage payment, recognize competition isn’t dead, and get all the market will give you.
PENDINGS DID THE LIMBO DURING JANUARY
2023 started with low pendings, but that’s not a shocker since it’s been the trend for many months. So far, the story is the same in February with subdued pendings, though the number of pendings is picking up for the spring as the market heats up. The hope is to see pending volume tick up more substantially as affordability improves, but that’s tough with rates shooting up lately. For weekly pendings, check out Redfin data.
BUYERS 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). Pending contracts have been tapering since the market changed last year, so we have a clear trend of buyers holding tight. The reality is the graph for new listings looks just the same, so we have a chunk of both buyers and sellers sitting right now.
CLOSING THOUGHTS:
We’re seeing the seasonal market heat up right now, but the market still feels a bit frozen since we’ve been missing about 40% of buyers. The bottom line is we need affordability to improve to get back to normal levels. I feel like a broken record saying this, but it’s true.
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 is it going to take to see more buyers? What are you seeing right now in the listings and pendings? I’d love to hear your take.
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Exactly. I think we’re going to see some slow activity and prices decline throughout the year. Nothing is going to come back until 30 year gets below 5 1/2%, could come back fast if inventory remains relatively low in 2024.
Thanks Christian. I’m hearing a number of people saying having fewer new listings will help stabilize prices, but the market has showed otherwise since the shift last year. In other words, it hasn’t mattered that supply has been low. Traditional metrics would suggest prices shouldn’t have declined last year based on the number of listings alone, so it goes to show traditional rules don’t matter so much right now. Both lower rates and lower prices can help promote affordability.
You are one brave soul to post your school picture when you were 14. I had a good laugh! Thanks for the info!
Haha. It’s actually not me. It was a meme made famous about a decade ago on Reddit. I don’t think I even have any photos of me as a teenager. If only cell phones existed in high school… But then again, I’m glad they didn’t. 🙂
5.5% is my target as well
Thanks. 5.5% seems like a level where a rate buydown especially can make a massive difference.
Ryan – Congrats on your 14th BLOG birthday… Breaking news…. Per Robert Schiller, Nobel Prize winner in Economics , on CNBC this AM…. ” The Stay at Home / Work at Home, will have a long term impact on home sales…” This has been stated before by others… moreover, the rise in interest rates will continue the “cooling” in next year, in my view. Thanks Bruce J. Ford / 31 yrs CA. Certified Appraiser / Fha and VA Approved / Accredited Green Appraiser
Thanks so much Bruce. I have yet to hear that, but we’ve seen a real effect in the market so far. Since rates went below 3%, the number of new listings has been much lower. And now we’re in a place where we wonder about both listings and sales ahead. I think we’re still scraping the surface of understanding the long-term consequences of such historically low rates.
Thank you! Super informative, as always!
Thank you so much.
Happy 14th year BLOG! Congratulations.
Thank you Janet.
Happy blogaversary! Thank you for your continuing realistic and detailed analysis of trends in the market, much appreciated!
Thank you Michael. It’s my pleasure. I think it’s fascinating to watch the market by the week and develop new language along the way to help describe the market… And dad jokes where possible.
Ryan, another awesome blog, thank you!
Unfortunately mortgage rates aren’t cooperating to help with affordability right now, having worsened for roughly the past month. Though most inflationary data is trending lower, we’re still seeing conflicting signs like the UK Services sector figure coming in much higher than expectations today, one of the main reasons for today’s MBS sell off, giving us higher rates today.
Thank you Jeff. Please keep this type of information coming. I recall in January getting so many DMs about the housing market getting ready to rebound big-time this spring, but so much of that hope seems to have subsided in February.
Congrats on 14 years.
Party? Should I bring balloons? Can we play pin the tail on the donkey?
Haha. I’m planning a 15-year party. I did a the 10-year bash. I guess I have to figure out something cool for next year. I do have a few ideas already, but I’ll need to find a venue. I don’t drink any more, but I’m not opposed to buying the first 100 beers somewhere if we target a brewery. We’ll see.
14 years is legit, i appreciate the info and think you are spot on. congrats on the milestone. keep the hard work
Thank you sincerely.
Reaching 14 years with your blog is amazing. The average lifespan of a blog is 2 years. In blog years, your blog is 700 years old. That’s getting into Yoda territory.
Haha. Always so funny. Thank you Gary.
By the way, things I’ve learned in these years:
– Original content is hard work, but fun
– It’s not easy being brief (sorry)
– Don’t copy others
– Just get on base
– It’s impossible to please everyone
– Be yourself
– Be a resource
– Be consistent no matter how busy you get
– ALWAYS put the audience first
– People will come and go
– Keep growing
Thank you always for analyzing and presenting data in a way that helps us understand and even portend market trends. It makes us all better to be able to speak intelligently about the market and help our clients position their listings for the best possible outcome. Congrats on 14 years! We both had big relationship goals this weekend. 😉
Thanks Stephanie. I really appreciate it. Your goal was bigger than mine. 🙂 Congrats!!!!
I agree rates need to get into the 5s and prices drop by another 5%. Not sure I believe the fed saying hes going to get inflation back to 2%. He will change his tune and except 4% inflation.
Thanks Tom. I’d like to hear a timeline of when the Fed thinks they can get inflation under control. I’m not sure if seen anything in that regard yet.
There is a good interview with Powell at https://www.c-span.org/video/?525838-1/federal-reserve-chair-jerome-powell-discusses-state-economy
The question about “why 2%?” and how long it will take (not this year) starts at 7:15 (full text is below the video).
Fantastic. Thank you Monica. I’ll check this out.
I just see no way for rates to come down. My PGE bill was $500 last month and I have solar. I had a bacon and egg breakfast at a restaurant for $20 My gas is almost $5 a gallon. My daughter started her 1st job while in high school and makes almost $18 an hour. The Greed Genie Is out of the bottle not sure how you can put him back in. So I think the options are .
1. lie about the inflation numbers. Which no one would ever do. ?
2. Change the inflation goal from fed Achieving 2% to 4%.
3. Paul Volcker 80s fed.
We have some real issues. Food costs are insane right now. I think my household is feeling it with teens especially. Haha. No matter what, it’s going to take time to figure this out. I don’t know the future, but it seems wise to buckle up and cut expenses. Err on the side of being frugal where possible. That’s my motto.
Ryan, Straight and to the point. Are we going to see appraisal work increase this spring?
Yes and no. There are more sales happening, so there should be a seasonal uptick in appraisal work, but volume is still poised to be down in light of affordability struggles, so it’s very unlikely to return to normal levels until more buyers can participate in the market. This means the level of mortgage work is poised to be subdued until volume returns. I would personally plan for this, and be delighted if the trend turns out differently. If rates keep ticking up, that’s not likely going to be positive news for volume either (and mortgage work).
Here’s a graph I have bookmarked as a leading indicator. The big problem right now is both purchase applications and refinance applications have been really low. If we start to see these lines tick up, that will be the leading indicator of more mortgage work coming. https://www.mortgagenewsdaily.com/data/mortgage-applications#chart-apps-purchase-vs-refinance
Here is another source for applications that comes out every Wednesday: https://www.mba.org/news-and-research/research-and-economics/single-family-research/weekly-applications-survey
For appraisers doing mortgage work, I would recommend paying attention to the volume of deals happening. Is FHA starting to increase? If so, it’s time to position yourself for the market that is happening.
All that said, there is lots of private work out there, and it’s likely a good idea for appraisers to diversify business because mortgage work looks thin right now. I’m an optimist in life, but I’m not so optimistic about robust mortgage work for appraisers this spring. I hope I’m wrong.
For me, I’ve opted to focus on private work on purpose. To each his/her own. There isn’t one way to do this.
Now for any onlookers who are struggling and interested in private work, here are a few things to consider. I cut and paste these from a presentation Q&A I just gave on Zoom last month.
THIS IS DOABLE. IT’S ABOUT BASIC STUFF.
– It takes time to build non-lending work, and it’s worth it
– Change your mindset about the real estate community
– Identify the type of work you want to do
– Identify the gatekeepers to the work you want
– Don’t be the lone-ranger angry appraiser stereotype
– Private work is about building relationships
PRACTICAL IDEAS / UNSOLICISTED ADVICE
– Decide to begin. You just have to go for it.
– Be confident and take small steps forward.
– Come up with a plan and work it. Be consistent no matter how busy you are.
– Dear Downturn letter (write a letter spelling out how you will specifically make it through this downturn).
– Dust off your social media profiles and start talking about the market or appraisal stuff (look in your sent folder for content (questions you’ve answered)).
– Start connecting with local real estate pros online and join conversations on social media
– Attend free real estate meetings.
– Find ways to get into real estate offices (Appraisal Minute)
– Try to get invited to give a Q&A presentation (do presentations on your terms)
– Comment on local real estate videos on YouTube
– Reach out to CPAs and attorneys
– Push out market stats (use a simple template).
– Get to know other appraisers (great referral source also)
– Just be you and be about building relationships.
A FEW RESOURCES:
– A presentation I gave about five years ago at AppraiserFest. Maybe there are a few nuggets in there. Maybe not. https://sacramentoappraisalblog.com/appraiserfest/
– Ideas for private work from Working RE Magazine. https://www.workingre.com/fhfa-slows-bifurcated-appraisals/
– Graph tutorials https://sacramentoappraisalblog.com/graphs/
Hope that helps.
Thank you for your thoughtful commentary, Ryan. It’s always interesting and informative. I’ve been appraising through market cycles since 1988. Since then, they’ve always taken 5-10 years to go from bottoms to new highs, and 5-7 years to come down from the highs to the next low. Am I wrong to think this time won’t be different?
Hi Dan. I appreciate the kind words. I suspect the decline is going to vary by the market, but in Sacramento and California, the decline alone can be 5-6 years as the norm. My observation is since the 1970s, the peak to peak has been growing over time in Sacramento. I have a graph in the following post that shows price cycles have basically gotten longer over time. But the interesting part this time around is the market really artificially increased due to 3% rates, and that could have easily extended the cycle. Usually the market doesn’t rise for 10-11 years, so that was atypical. https://sacramentoappraisalblog.com/2022/10/25/are-home-prices-declining-what-are-appraisers-saying/
All that said, it wouldn’t be surprising to me to see a normal trend in this cycle, but I think we have to concede we’re not locked into 5-6 years either. Some wonder if the availability of so much data online can help speed up a market cycle too, and I think we’ll need time to understand if that’s legit or not. What the Fed does can matter here, of course. With volume down by 40% or slightly more right now locally, it seems very logical that it’s going to take some time to get these buyers back (unless something unexpected creates affordability).
Ultimately, nobody knows for sure, but I tend to be skeptical of ultra-positive narratives that aren’t conceding that affordability is still a glaring issue.
A motto lately. Expect the worst and rejoice if something else happens.
Thanks Ryan! Congrats on your Blog Anniversary!
Thank you so very much.
Ryan, Happy Anniversary and thank you for all your hard work to help us understand (at least try!) this crazy market!
Thank you sincerely, Lisa. It’s been a wild ride over the past year in particular. Let’s keep watching.