Sellers have been sitting out of the housing market, and it’s made a massive difference in 2023 so far. Today I want to show what’s happening with new listings and talk about concessions. I hope this is useful, whether you’re local or not. Scroll by topic or digest slowly.
UPCOMING (PUBLIC) SPEAKING GIGS:
5/4/23 Housing Market Q&A 12-2pm
5/10/23 Empire Home Loans event TBA
5/18/23 SAFE Credit Union event TBA
5/22/23 Yolo YPN event (only for YAR members)
6/1/23 DJ Lenth Event TBA
7/20/23 SAR Market Update (in-person & livestream)
I’M A BROKEN RECORD
Inventory is low. It’s tight out there. Buyers have few options. Blah, blah, blah. We’ve heard it all before. But that’s where we’re at, so let’s talk about it.
NEW LISTINGS HAVE LEFT THE BUILDING
A lack of new listings in 2023 has altered the feel of the market in many locations around the country. In the Sacramento region we’re missing about 4,400 new listings from last year (and last year was already lower).
The good news is we’re seeing a seasonal uptick in new listings so far in 2023, but the bad news is the number of listings is really low.
April was even lower than 2020 during the thick of the market stalling during the beginning of the pandemic. Do you remember how the market paused during that time? Well, it’s been worse than that lately.
LOW SUPPLY MEETS LOW DEMAND
I added this portion after publication because I’m getting a few comments about demand. Yes, demand is still low. We have a weird dynamic right now where low supply has now met low demand. This is why the market is so competitive. It is NOT that we have a normal number of buyers.
STATS > SENSATIONAL HOUSING NARRATIVES
We have to keep letting the stats form our perception of the market. My advice? Be intentional about cultivating objectivity by being open to the stats, and letting the numbers shape what you say about the market.
WILL WE HIT A SEASONAL PEAK SOON?
I’ve been starting to hear a few agents tell me they’re seeing slightly less traffic at open houses lately. I’m careful with what I hear because a few stories don’t mean it’s a trend. However, the word on the street in real estate is so important because the stories of today become the stats of tomorrow. Thus, it’s key to listen to what market participants are saying (while sifting subjectivity). This is why I did a poll on my Instagram stories the other day. Look, I’m not putting all my perception of the market on this one poll, but the results are lining up with what I’m hearing from agents overall. Traffic is steady and the market is hot, but some agents are starting to report a bit less traffic. We’ll see if this holds. Keep in mind the market normally hits a peak in demand in the region in April with the percentage of multiple offers, so it’s not a shocker to see demand start to pull back around this time. Also, this doesn’t mean the market isn’t ultra-competitive or that some open houses aren’t packed, so thanks for saving your hate mail.
MULTIPLE OFFERS NORMALLY PEAK IN APRIL OR MAY
Just for context. The percentage of multiple offers typically peaks in April or May each year. However, these are for closed sales, which tells us the hottest time for multiple offers technically peaks about one month earlier in March or April each year. Prices typically peak around June in the region, which reminds us pendings are at their high in April or May before closing in June.
HOT MARKET = CONCESSIONS DECLINING
It’s normal to see concessions go down in the spring as the market heats up, but it’s also been a sharper change over the past few months in light of the housing temperature changing so much. Keep in mind it’s normal for concessions to rise in the second half of the year as the market softens.
NEW CONSTRUCTION IS A DIFFERENT ANIMAL
Here’s a local builder ad I saw last week where the builder was advertising buying down the mortgage rate and assistance for closing costs. Builders have had two months of volume rebounds, which is not the trend happening in the resale market. In short, offering concessions is a massive factor in luring buyers back into the game. Of course, we have to ask, would these properties padded with concessions be selling for that amount without the concessions? This is where appraisers are going to have to carefully analyze the market. The truth is concessions can inflate prices, which is something to watch.
CONCESSIONS AREN’T THE SAME BY PRICE RANGE
This is a new graph. Is it a keeper or not? Let me know. Basically, we tend to see more concessions at lower prices, and most concessions are under 3% too (topping out at 6%). Concessions are less common at higher prices, and they’re also lower in the amount.
And if you wanted to see the dollar amount instead… What I like about this is we can see the vast bulk of concessions are under $10-15K.
BRO, WHAT ABOUT MULTIPLE OFFERS?
What about properties with multiple offers? Does the seller still have to give concessions? In April, 56% of properties with multiple offers had concessions to the buyer. This is good for sellers to keep in mind. The bulk of these properties were under $550K though, which tells us sellers at the lower half of the market should still be ready to meet buyers with credits if needed.
THE MARKET OR THE MARKETING?
There are some really lopsided stories right now about properties going above the asking price, but the market isn’t always the culprit. Sometimes it’s the marketing. In short, if a seller prices 5-10% below market value, a property will naturally get bid up. This week someone asked me how much she might need to offer above the asking price, but that’s a hard question to answer because it really depends on the reasonableness of the original price. Look, lots of stuff at the lower half of the market is legitimately getting bid up because there are so many buyers competing, but some of it has to do with pricing too.
FLIRTING WITH A NORMAL RED LINE
It’s still early to pull monthly stats, but I want to give a preview. In April, 41.2% of sales sold above the original list price. The black line shows the trend in 2023, and it’s basically now flirting with normal levels (red line). Some people are saying it’s 2021 in the stats (orange line), but that’s not what the numbers are showing. But next month should be more aggressive as pendings from April start closing, so I expect the black line to go above the normal trend (which is bonkers to see in a market that is struggling with affordability).
And here are properties that sold below the original list price (black line). It’s a similar trend where stats are flirting with the pre-pandemic normal.
NOT EVERYTHING IS SELLING ABOVE
I know this is a hot mess, but I love this visual because it helps show how every property sold compared to its original list price. Look, the market is ultra hot right now, but that doesn’t mean everything is selling above either. Let’s look to the stats to help form our narrative. What we don’t want to do is impose one narrative on the market, whether that’s doom and gloom or glowing.
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 are you seeing right now in the trenches of escrow? What are you seeing with concessions? I’d love to hear your take.
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Great info as always Ryan. Based on a current appraisal I am working on where I will have three different time adjustments, one up, one down and one back up again, I will be going dark for a while as I am going to check myself into a facility. This market has made me lose my hair and my mind as an appraiser. Seems that an institution would be appropriate about right now. Maybe when I get out the interest rates will have normalized, politics will have normalized and there will be a balance in supply and demand and all this craziness will be discussed out on the front porch with a sweet, iced tea in hand in about 10 years as one of those remember when stories. Oh brother. Hope you and your family are doing well. Off to go teach some RE agents about appraising. That ought to be interesting, when I explain my thoughts on the current market. Maybe I will just check myself into the institution now and just cancel the class. LOL ? As always thank you for your insight and things to make me think about. Regards
Haha. Brad, you are such a wordsmith. I hear you too. This market has been insane to watch. And I think sometimes it feels like dartboard. We see value on paper, and then we just have to see how buyers will respond. While it’s technically not 2021 in the stats, the dynamic is really lopsided. I’m definitely hearing more about waiving contingencies and waiving the appraisal. Not symptoms of health and balance. Ah, a balanced market… What would that be like?
Very good points. Do you think buyers are sitting on the sidelines as well? I’m guessing it was tough for a lot of people to get it off ran and excepted her in 2020 and 2021. Also I’m sure there’s a lot of people that can’t afford to currently by or don’t want to take on a big mortgage payment and are waiting for the rights to go down.
So it could be a double whammy next year if rates go down, there’s a buildup of fires and lack of supply? Please let me know your thoughts on the buyers?
Thanks Christian. Absolutely, yes. We are seeing buyers and sellers both sitting out. I didn’t talk about that here, but it’s something I’ve talked about quite a bit lately. This market is in a weird place where we’re basically seeing low demand meeting low supply. Some are calling this market normal, but that’s not at all what the stats show for both the number of sales and the number of listings. It’s worth noting that some say we only have low sales because we don’t have enough listings, but a trend of low sales has been present prior to a huge drop in listings in 2023, so we need to concede the bigger picture of missing volume is about a lack of affordability (not saying low listings don’t matter). The problem ahead is it’s likely going to be easier to unlock demand than supply. I think the math starts to work more easily for buyers than sellers. There are many moving parts here. Let’s keep watching.
Great info abd format as always. Thank you!
Thank you Patie. I appreciate it, particularly about the format. I try hard to make my posts easy to digest or skim. I know they’re long, but there is just too much to say lately. 🙂
Thanks Ryan. I think the story is sales volume is 40-50% off where it should be. Buyers and sellers sitting out as Christian pointed out.
I had the same conversation with a realtor last week about offering above initial list. I’m not as crazy as Brad but my last report had time adjustments through 1/1/23 and nothing after that.
I’m not a fan of the graph by concessions dollar amount because context is lost. By percent is much more useful. And I do like that one.
See you either at Laws & Regs next week or at the Yolo YPN event.
Thanks Joe. Yeah, I find dollar graphs don’t hit as well with some people. I would split hairs to say context isn’t lost though because we can still see the dollar amount and closed price together. I get it though.
great edition. lots of good points and the data is always interesting to see.
Thank you so much Brady. I appreciate it.
You always have some data that stops and make us think. Thank you.
Thanks Gary. Sometimes we just have to stop, collaborate, and listen.
In Orange County, the madness is back. Multiple offers over asking price and waiving the appraisal contingency are not uncommon in the purchase contracts. Seems like the switch got flipped within the past few weeks and buyers have again resorted to buying on emotion and irrational exuberancerather than acting as a “knowledgable buyer”. Hard to keep up with but quite amusing. Brad, if you feel like being institutionalized-feel free to venture off the ranch and down to the beach. We can set sail for nowhere and forget about it all for half the day. Maybe when we return and dock the boat, the market will normalize. (Not holding my breath) Thanks for the insight to your market, as always-great stuff!
I appreciate you sharing. Aye aye captain!! That actually sounds very similar to Sacramento right now. My sense is we reached an inflection point in mid-March. My theory is supply hit a low point where demand began to outweigh supply. It’s such a strange dynamic here to have six months in a row of really low volume in Sacramento County (worse than 2007 levels). Yet, the market feels like 2020 in terms of competition. I’m eager to see the rest of the year as we presumably crest for the season soon.
I doubt I am that good of a first mate, better at riding horses and roping as a header than sailing, but willing to leave for a while and hang out with Jimmy Buffet and see what happens to my 1950’s brain that was fried in the 1960’s. That is another story all together. As to the multiple offers and waiving appraisals, guess that means all the McMansions after sales are heading to my neck of the woods (or maybe out of state). If my neck, then I guess things will get stupid over here shortly. Maybe it is time to go for a sail, but if no wind, I am heading back to the big ranch and start branding cattle. More predictable………
I liked comparing the % to $ in the concessions table. From your chart I learned that round dollar amounts: $10,000 and $15,000 are more common appearing than 2% or 3% of price. An entire discussion could be developed around why Realtors prefer flat round numbers to percentages. I’ll tease that it’s because some of us don’t like math. Of course all the Ryanistas subscribing to the newsletter are math whizzers; because Ryan stans are wonkier than the average agent.
Reading about the fires waiting for the rights to go down made as much sense explaining the reason for this ca-razy market as anything I could come up with.
Haha. Jim, you are awesome. And it’s amazing how we see things like that. I have to think buyers resonate in various dollar amounts on some level. I suspect a figure like $10K is cheaper than 3% too, so there is maybe an advantage in that amount. It’s wild out there. Let’s keep comparing notes.
Hmmm. Did we not double the number of homes we are short, something like 2200, which is now 4400? It’s a rough market from a lead gen perspective too. I still want to see what Jerome Powell has to say. The WSJ says that the builders improvement will make it hard to hold. We really need a break here.
Yeah, we’ve been seeing the number increase as the year has unfolded. It’s hard to imagine this number improving much ahead. Thanks Debra. And I’ve been hearing the same thing about lead generation. It’s a market of hearing NO many times before a YES happens.
Hey Ryan! Another way to look at the closed sales April 2023 graph is how accurate realtors can get with their listing prices. Looks like a pretty even spread of those too high and those too low…
Thanks Brad. Good eye. Yeah, it really does look evenly dispersed for the time being since we sort of have a similar number of homes selling above and below. This visual does change as the market trend changes. It’s almost like all the dots simply go up or down together depending on the dynamic at hand. In 2021 there were portions of the year where 75% of sales were going above asking price, so this graph looked way different then. And at the time people would argue with me that 75% couldn’t be accurate. “There is no way 25% of homes are selling below. Where are these homes?” The wild part though is 75% was incredibly high compared to the normal trend. It just goes to show having an understanding of what normal looks like is often the x-factor for market interpretation.
Hi Ryan,
I understand there are a lot of moving parts in this “awkward” market. But as an appraiser I find it awkward that numerous appraisers cannot come to the terms or accept that this awkward market is basically due to the rise in the interest rates. Simply, 2+% is a big difference to 6+% or 7% interest. In most markets homes dropped in price and most buyers can’t afford the cost of money. Sellers are waiting for appreciation and buyers are waiting for those low interest rates again, which I don’t see anytime soon. I see the market(s) reaching an equilibrium but nothing like the one we have had. It’s ok to talk about the real cause of the slow down in the market, rising interest rates.
Hi Ron. Thanks for your thoughts. I appreciate it. I’m not sure if the comment is directed at me or appraisers in general, but rate change has played an enormous role in shaping the market we’ve had over the past year. Is anyone really saying it’s not a factor? Or were you just hoping to see that mentioned more specifically here? I’d love to hear more on that if you want. I will say there are other factors at hand that we need to be talking about. Namely, the change in listings lately has been stunning in many markets across the country. Seeing over 40% fewer new listings NOT hit the market in Sacramento in 2023 has definitely affected the market. Of course, the listing trend is tied directly to Fed policy from sellers getting low rates over the past few years and now sitting.
Thanks for the update Ryan. I am sitting in my office trying to find the words to describe the current market and it feels like a an insecure teen who can’t figure out who they want to be. I am hoping our peers are paying attention to the rapidly fluzuating mood swings of the real estate market. Maybe one day things will feel “normal” again.
Thanks Kyle. It really is a weird dynamic, and I think the constant task at hand is to find language to describe the trend. I guess that’s what makes real estate analysis so exciting because there’s always something new to say. But it’s also difficult, and sometimes we throw our hands up because we’re in the midst of something we’ve not seen before (like right now). I’m a big fan of metaphors and analogies to help with that too.
My favorite three word pictures lately:
1) The housing market is like a Hot Pocket taken out of the microwave too early. It’s somewhat hot, but it’s sort of frozen too.
2) The market was an ice bath, and now it’s a bloodbath.
3) The housing market feels like a relationship that’s been struggling, but it just had a good vacation. There is some excitement at the moment, but there are still deep underlying problems.
Okay, that’s the way my brain works. Haha.
Great post and graphs as always, Ryan. Keep up the great work of telling the story of your market.
Thanks Tom.