It’s been a stunning first half of the year for the housing market. Let’s talk about some of the bigger issues right now. Here are some things on my mind including weird stats, the anniversary of the market peak, Matt Rife tickets, and being ready for the second half of the year. I hope you get something out of this, whether you’re local or not. Skim by topic or digest slowly.
UPCOMING (PUBLIC) SPEAKING GIGS:
6/30/23 Halftime report with Ben Johnston 10am (Zoom)
7/20/23 SAR Market Update (in-person & livestream)
7/26/23 Fair Mortgage (details TBD)
8/18/23 Details TBD
10/23 SAR Think Like an Appraiser (TBD)
SELLERS ARE STILL SITTING BACK
New listings have been down about 40% compared to last year, and this has changed the market in Sacramento. We’re missing about 5,400 new listings from last year and 7,500 from the pre-pandemic average. Yikes!!
THE SIX-MONTH STREAK WAS SNAPPED
We had the worst volume ever for six months in a row, but May was finally better than 2007 levels. Should we throw a party? Haha. Technically the streak has been snapped, but let’s give it some time before hyping this as a trend.
ONE YEAR ANNIVERSARY OF THE MARKET PEAK
Prices peaked one year ago, and it’s been a wild ride since. Someone told me prices are back to peak levels, but I’m not seeing that in county or neighborhoods stats. If you are, let me know which areas.
NOTE: Some stats are starting to get weird when comparing to last year.
RATES ARE THE X-FACTOR FOR THIS MARKET
Low mortgage rates are keeping many sellers in their homes, and higher rates have been keeping many buyers from purchasing. That’s what’s so weird about today’s market. We have a situation where lower supply has met lower demand. Some people are saying things like, “Bro, this market is resilient, and nothing can hold it back.” Yeah, but if sellers were listing like normal, the market wouldn’t be competitive like this. Anyway, when thinking of the future, if rates go up, it takes demand out of the market. If rates go down, it’ll create more demand. Sorry, I know that’s obvious. But backing up, it’s likely easier to unlock demand than supply. I heard Michael Zuber put it this way first, and I agree with him. In other words, it will likely take more to move owners sitting on sub-3% rates than bringing buyers back into the market.
DECENT PRICE GROWTH THIS SPRING
Here are some different ways to visualize price growth. Which one do you like best? The median price grew 8.82% from January through May this year, which is a decent amount, but slightly lower than normal. Frankly, it feels astonishing though after an ice bath market for the second half of last year. Keep in mind this doesn’t mean every property grew in value by 8.82%. My advice? Don’t be rigid about the median (look to the comps).
STATS ARE GOING TO GET WEIRD (PLEASE READ)
Some stats are going to get weird as we compare this year to last year. For instance, sales volume for May 2023 was down about 20% from last year, which is SO much better than numbers from previous months. The issue is we’re now comparing today’s market with a depressed year in 2022. A better way to look at the numbers is going to be a comparison to the pre-pandemic normal, which shows volume is still down about 37%. Look, this is nerdy stuff, but there are going to be false narratives spun based on awkward comparisons. And some people will flex hard about how bad it is to compare to last year, but that gets problematic because we need to know these numbers. Moreover, there is tremendous value in comparing prices, days on market, and inventory, so a blanket statement about not comparing to last year seems off.
GOING BEYOND NORMAL
Many stats lately have crossed beyond a normal level, which means the market has become more competitive than usual. It’s stunning to see this since we had such an ice bath market in the fall of 2022. For instance, the percentage of multiple offers this past month is higher than the peak of every other year between 2017 and 2020. That’s stunning, right?
We also see crossing over when looking at properties selling above and below the original list price (see the black line crossing the red line). The market isn’t as competitive as 2021 (orange), but we’re now beyond normal.
Also, days on market is starting to be more competitive than usual lately.
LOOSENED A LITTLE, BUT STILL TIGHT
The market has loosened up a bit, but it’s still really tight out there. What I mean is we have more active listings lately compared to the number of pendings, but there still isn’t much selection for buyers.
MATT RIFE TICKETS & HOUSING SUPPLY
Comedian Matt Rife is the latest example of shows selling out and people being outraged with Ticketmaster issues. Matt Rife is coming to Sacramento, and his show sold out here soon after tickets went live. Anyway, I can’t help but think of the housing market and the challenge to find a home today (especially something affordable). Last year the market experienced a sharp change up with inventory, but this year it’s been a sharp change down.
PLANNING FOR THE SECOND HALF
Here’s a visual I’ve been using in some of my presentations to list some of the things we tend to see during the second half of the year. This isn’t an exhaustive list, but it hits most of the main stuff. Keep in mind we are about to begin the second half of the year with more competition than usual, so there’s more room to soften before we feel “normal” so to speak. I’ve been noticing fewer multiple offers in the pendings and a slight increase in active listings, so it does seem like some of the typical seasonal slowing is starting to show up. This doesn’t mean the market is slow either, so save your hate mail. The dynamic is also way different than one year ago too, so be careful about imposing what happened in the second half of 2022 on today. Ultimately, it’s key to know what normal looks like so we can anticipate the market ahead (whether it’s a regular pattern or we see an extended spring season since conditions are so lopsided). Let’s keep watching.
RECAPPING THE STATS
Look, recap stats are getting a little weird right now with sales volume since May 2022 had lower volume, but many annual recap stats are incredibly valuable. Let’s not throw out stats like prices, inventory, and days on market just because volume stats are wonky.
YEAR-OVER-YEAR
MONTH-TO-MONTH
And let’s not forget month-to-month visuals.
I hope this was helpful.
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.
Thanks for being here.
Questions: What has stood out to you most about 2023 so far? What are you seeing right now in the trenches of escrow? Did you get Matt Rife tickets?
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Have you ever posted on a Sunday after shifting to one post per week? Graduation interrupting the normal schedule?
Thanks for providing context. With volume so soft, I’m continuing to struggle with understanding the current market. I keep mentioning uncertainty.
Haha. Yeah, that was an accident. It won’t email out to email subscribers until tomorrow, but otherwise, it’s totally weird to post on a Sunday. đŸ™‚ I don’t think I’ve ever done this before. At least not on purpose.
Uncertainty is a good word. I can relate. I find myself gravitating toward using “strange” and “weird” despite those words sounding so subjective. But it’s statistically true though also since the dynamics aren’t something we’ve seen before. It seems like today’s market is the love child between 2007 volume and 2020 competition.
I got the email this morning and it hit my RSS feed
Hmm, weird. If the email is from MailChimp, I would think it would go out tomorrow. Hopefully that’ll be the case. The RSS email should go out instantly though. Thanks Joe.
Love child indeed. This summer of love participant is feeling very unsure of their financial solvency during what is left of their dwindling golden years. Worrying times for some of us…
Hang in there Patty.
Great bunch of new stats. Thank you for all your hard work. Love the quote about not being able to hold this market back.
Thanks Gary. I appreciate you.
Ryan, thanks for all the ###’s. BVP
You are so welcome Bruce.
Okay so you used a term I am not familiar with. “You said stats were Weird”. Weird, I am confused what exactly do you mean????? Glad you know me and know I am pulling your stat leg. The thing that does concern me is over some of the comments by agents, NAR and others. This market is not going up as some have prescribed. Every time I place data into Excel I know I am going to get pushback, gnashing of teeth and an occasional “what the heck do you do for a living, you certainly aren’t an appraiser”. To say that I wish this market was a clear as 2009, 2010. Scary but at least everybody knew what was going on. Right now I have no idea what is going, confirmed by a confirming call I made to an agent, who told me she was surprised that her listing had 9 offers in less than 24 hours. She thought she was at the nose bleed pricing and would need to reduce. She is a pros pro and has been doing this for over 30 years. I have no idea about where this market might be going. So WEIRD is a very interesting market description. As to Joe Lynch getting post early, doesn’t surprise me as he is that important….LOL. enjoy and thank you for all you do, young man.
Ha ha. You know, it’s a pretty subjective word, and I didn’t really unpack much meaning here. What I’m getting at is these market conditions are atypical. It’s out of the ordinary to see heavy competition in the midst of such incredibly low volume. In that regard, the trend is freakish. Oh wait, there’s another subjective word. Ha ha. Moreover, Some of the stat comparisons are also going to have the potential to really be misunderstood if we do a comparison without context. I guess that’s what I mean.
Have a question for you. Do you or anyone you know tract the # of rental properties (SFR, not multifamily) are currently owned by Venture Capital companies and or other large entities that have been buying up housing inventory over the last 13 years? I ask because if we had an idea on that number it could be used to understand the current housing shortage. Thanks Ryan.
That’s a good question. I only dabble in counting the numbers. These companies are sometimes pretty difficult to track because they have so many different names under which they buy. Everyone I know who even attempts to track this sort of data says the same thing. This includes reporters. I don’t know of any one definitive source that does an exhaustive job, but once in a while, Freddie Mac and John Burns real estate consulting put stuff out. But companies like Invitation Homes also put out reports annually that show their holdings in various states at least.
I’d love your take on insurance and property values. I’m in the East Bay and nearly everything is now considered a fire zone. We are hearing that knob and tube wiring, and roofs over 20 years old are going to be problematic too. Our company put together a zoom call with an insurance broker and they said, “no trees near the house, no branches over the house, and really, if it’s your listing, clean the roof of every leaf and do drone shots so we can prove the condition”. All we are talking about is insurance here, rates are almost quaint right now. It’s not just the “no new policies”, it’s companies not renewing as well. Homes that were paying 2.5k annually are not on the Fair plan paying 8-12k. I’m curious about what it looks like elsewhere. This might motivate some sellers to sell.
Insurance is a real issue in outlying areas in a few local counties near Sacramento. Transactions still happen, but it’s really expensive. Unfortunately, when traditional insurance isn’t available, it’s ultra expensive through the California fair plan. The market is able to work stuff out like this. Buyers and sellers tend to figure it out, but there is no mistaking it is an inconvenience or even a hindrance. This is definitely something we have to keep on the radar and watch over time. If the entire area has the same issue, then it’s sort of something that’s baked into the data because every property is subject to the condition. Please keep me posted with anything you are seeing.
“It seems like today’s market is the love child between 2007 volume and 2020 competition.” I laughed out loud…Priceless. I always appreciate your posts, Ryan, with the detail and humor. Keep up the good work!
Ha ha. Thanks so much Matt.
Nice job avoiding the real issue: brokers and loan officers shot themselves in the foot, for about the 50th time in my 50 years of appraising. Always the horizon is the next 30 days, as far out as they are capable of perceiving. So, here we are, property owners intelligently refusing to let go of their low mortgage payments, especially now that they are also the stubborn would-be sellers, demanding unsustainable increases in nominal dollars while also realizing there is no alternative place to go if they sell. So, of course, they don’t even consider selling.
Equilibrium will take a long, long time. About 50 percent of owners will have to die without heirs who want their propert(ies) before the market will have a sufficient supply to allow normal forces to take effect again.
Thanks James. I’m not totally sure what you mean by brokers shooting themselves in the foot and how that’s the real issue. Equilibrium sounds nice, and I agree it’s going to take some time. It seems like we’ve just scraped the surface at understanding the consequences of such low rates.
As always, a great breakdown of the market, Ryan. Glad you touched on the Matt Rife tickets. All I have been seeing is the memes and did not know who he was. Hope you enjoyed your vacation.
Yeah, everyone is talking about him. And thanks. It’s been so good to have the week off. I really needed this.