It’s either hot or cold. A bidding war or crickets. That’s what I’ve been hearing from real estate agents about their listings. Today I want to talk briefly about the word on the street, hot pockets, and I have some really cool stats to share. Skim quickly or digest slowly by topic.
UPCOMING (PUBLIC) SPEAKING GIGS:
7/26/23 Fairway Mortgage (free and limited space)
8/18/23 Details TBD
8/29/23 Elk Grove Regional MLS Meeting
10/23 SAR Think Like an Appraiser (TBD)
10/26/23 Orangevale MLS Meeting
WHAT ARE PEOPLE SAYING ABOUT THE MARKET?
I run stats galore, but what people say about the market is important since the stories of today turn into the stats of tomorrow. Yet, I’m careful about stories because they’re subjective. I find some people are more in touch with the market than others too. Anyway, here’s a tweet I shared. Also, thanks to Amy Winslow for the title of my blog today.
IT’S A HOT POCKETS MARKET
The housing market is like a hot pocket taken out of the microwave a tad too early. Some portions are blazing hot while others are only warm (or cold). What I mean is not all neighborhoods and price ranges have the same temperature. Moreover, we’ve hit a seasonal peak, so the hot spring temperature is cooling. I first shared this analogy in 2016 and it seems fitting today.
WHAT’S HAPPENING RIGHT NOW?
We hit a seasonal peak in June in Sacramento like we normally do, and we’re undeniably seeing a slower market. But mortgage rates are also hovering around 7%, and that can have a chilling effect on buyers. So far, I’m not seeing any sensational changes in the stats, but there are about five hundred more active listings than pendings right now. This really isn’t a high number, and it’s normal to see more new listings hit the market around this time of year, but compared to April when there were more pendings than actives, it feels way different. This is something I’ll watch closely ahead, but for now the stats look mostly like they should for the time of year with all of the metrics slowing. With that said, I’m finding some of the stories from the trenches are more inflamed than the stats, so I’m paying attention to that.
HEY SELLERS
We have a price-sensitive market where so many buyers are struggling to afford historically high prices at 7% rates. At the very least, the market peaking for the year needs to motivate sellers to price reasonably, reduce the price if needed, and offer concessions to buyers if required.
WHAT TO EXPECT FOR THE REST OF THE YEAR
It’s hard to predict the second half of 2023 because what happens with mortgage rates and inflation are such big factors. The housing market could be really dull if rates increase, but it could be more competitive if rates go down. Here’s what normal looks like for the second half of the year:
– more price reductions
– lower demand
– fewer multiple offers
– more concessions to buyers
– softening prices
– longer days on market
– lower SP/OLP%
– lower sales volume
– fewer new listings
– new listings tend to have smaller square footage
– one last dash to the market in the fall before the holidays
– other (add in comments)
BUT SERIOUSLY, THE MARKET ISN’T THE SAME
I’m excited for these new stats. Do you see how the market isn’t the same by price range? If you like these images, please use them on your socials unaltered with credit of course. Thanks.
NOTE: Smaller counties tend to be all over the place since there aren’t as many data points. I recommend giving more weight to the region and Sac County.
And by special request (just once):
DON’T GET SUCKED INTO SENSATIONALISM
For anyone who wants to be a real estate expert, now is your time to shine. Understanding the seasonal trend is a huge part of being on top of the market, and my sense is every year some people freak out about the market changing because they aren’t anchored to the stats. My advice?
1) Know the season: Know how the seasonal market normally changes so you can give good advice and spot anything abnormal.
2) Paint the trend: Be careful about painting the entire market trend based on your personal experience. The properties on your desk or what you’ve looked at may or may not line up with the stats.
3) Cultivate objectivity: Get to know the numbers and cultivate objectivity. My sense is objectivity does NOT happen by accident. It’s something that has to be cultivated by knowing the stats and sticking to them when people misinterpret the trend. The market should be slowing at this time of year, and that’s something to embrace. Granted, if the market does something more than just slowing, we’ll be able to catch that by watching lots of metrics like the number of pendings, number of actives, price reductions…
4) Slowing vs crashing: I find it’s easy for the real estate doom narrative to interpret slowing as crashing. It happens every single year. Maybe it’s intentional to get clicks (gross), or maybe doom prophets are naive about the seasonal trend. Look, if prices go down and the market shows a huge dip this fall, that wouldn’t be a bad thing because we need more affordability. But let’s not look at a change in days on market or softer prices and call it a crash unless that’s what the stats are collectively showing. In real estate it’s dangerous to impose a narrative on the numbers. Not a fan of agendas.
Thanks for being here.
Questions: What stands out to you about the stats? Has it been a bidding war or crickets for you lately? I’d love to hear your take.
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Good post as always. What jumps out for me is the days on market for the $1 million market. Seems low.
Thanks Joe. I thought the same thing. It could be a reflection of only thirty days of data. However, this is only for closed sales. Days on market for million-dollar listings tends to be much different. That’s the stat I would show to sellers.
What do you think the reason is that new listings in the second half of the year tend to have smaller square footage?
Hi Will. Great question. I’ll have to post a graph to show this dynamic. It’s a real thing. I can’t speak for all markets, but this is definitely the trend in Sacramento I’ve observed through the years. I think it’s a matter of the “best stuff” so to speak hitting the market in the spring. What I mean is listings tend to be larger in size and higher in price during the spring. Sellers know demand is strongest during the spring, and there is so much attention on the housing market. This is when many sellers choose to list. It’s also when some sellers list after waiting for the holidays to be over in the fall. It could also be about school schedules and such for some market participants. One agent I know tends to think it’s more of a move-up market in the spring and more of a first-time buyer market in the summer. I get his logic, and I do think there’s something to that.
On a related note, some of the price growth during the spring really comes down to larger homes, and some of prices going down during the second half of the year has to do with smaller homes.
Hope that helps.
A move up market in the Spring makes a lot of sense. That’s a perceptive data point to notice. Thanks for your insight!
Thanks Will. I think it’s something I learned over time as I played around with numbers and made visuals. Without the visuals, I don’t think I ever would have noticed.
I’m sure glad to see a market that isn’t dramatic one way or the other, despite the hot pocket occasional burnt tongue. One year ago today I was worried about what it would look like today.
Definitely. I’m eager to see how this second half unfolds. I’m getting very mixed messages from the trenches with the real estate community. So far the stats look normal-ish. We’ll see.
My crickets chirp loudly. I get three to five “offers” a month on my sfr listing. It’s the lowest priced non-fixer in its zip code, always listed at $10,000 below the next lowest active, pending or sold non-fixer comparable . The “investors” routinely offer 50% to 60% of market value. Seven months, no one has even offered 80% of market value yet.
Hmm, that’s interesting to hear Jim. What price point? I’m wondering what is holding buyers back? We’re at a place where we should be seeing a transition from the spring season, but rates near 7% could be a bigger issue that’s not showing up in the stats yet so much.
By the way, I thought of you this week when an agent in Roseville told me a newly constructed home was a better deal that the resale market. I didn’t pull comps on what she said, but with the price and credits back, it felt like a better deal to the agent. Her sense was the resale market couldn’t even compete with the new home.
Great information. Thanks Ryan.
Thanks Rick. Always my pleasure.
My distressed SFR received 15 offers in June, while my sweet updated listing received 2 this month . . . possibly time of year considerations . . . My take is that most folk are worn out with all the swing from panic to hopefulness. So I really appreciate all your good statistical info and level, calm advice. It really helps us steer through the ebb and flow!
Thanks for sharing. I really appreciate hearing stuff like this. Congrats on the offers too. Yeah, we’re at that time of year where we should be seeing all the stats slowing. Yet, there is still an element of uncertainty in the marketplace in light of mortgage rate volatility, so we wonder how much 7% rates will freeze out buyers so to speak. Let’s keep watching, staying objective, and sharing stories.
On a side note, 54.3% of pendings over the past ten days in the region have had multiple offers (59.8% in Sac County). This is a higher percentage than normal for the time of year, and it’s also lower than over 60% a couple of months ago. A stat like this helps speak to seasonal slowing. Yet, this stat doesn’t speak to listings that are sitting on the market, so it’s obviously not the end-all market indicator. Just wanted to share what I’m seeing statistically. I follow this stat every single week, and I’ve been watching this percentage lessen over the past couple of months, so it’s definitely a stat that shows seasonality. I’ve actually found this is a leading indicator stat in our market. It’s helped me in recent years talk about real estate temperature change before we see change in the sales.
Great post, Ryan. Since you published this, interest rates have indeed increased this week. This has to be so difficult for new home buyers. Historically high prices combined with recently historically high interest rates are not a good combination if you want to buy a house. Something’s got to give. I would think that sellers will need to take this into consideration and price their home accordingly and/or offer some type of concessions to buyers if they want to sell within a reasonable amount of time.
Thank you Tom. Great commentary. Rates are stubborn at 7% right now. It’s like losing that extra 20 pounds that just won’t go away… Did I say that out loud? It is a concessions game right now for a good chunk of the market. Yet, only about 40% of units are getting concessions in the resale market in Sacramento County. I wish I had that stat for builders. I bet it’s higher.