Ten times more housing supply!!! That’s what 2007 had compared to right now. Today I want to share a stunning supply visual for Sacramento, and talk briefly about what’s happening with sellers and prices. Enjoy if you wish.
UPCOMING (PUBLIC) SPEAKING GIGS:
10/4/23 KW Sac Metro Big Market Update (register here)
10/6/23 How to Think Like an Appraiser at SAR (register here)
10/27/23 AI Fall Conference (San Francisco) (register here)
11/30/23 Safe CU “Preparing for a Successful New Year”
TWO NEW MEMES
A couple new memes to show the sting of rising rates and how wrong so many predictions have been this year.
TEN TIMES MORE SUPPLY IN 2007
In September 2007 we reached the peak of housing supply in Sacramento County at 14.3 months. This means if nothing else came to the market, there would have been enough listings to satisfy demand for over fourteen months. In contrast, today we have about 1.4 months of supply. As I said a couple weeks ago when comparing 2007 and 2023, volume today feels very similar to 2007, but today inventory hasn’t been building like it did back then. That’s something that could change in the future, but it’s not the vibe right now.
SELLERS HAVE BEEN SITTING
We’ve had about 8,000 fewer new listings compared to last year (a low year), and about 13,000 fewer compared to the pre-2020 normal. Lots of people online are talking about supply building, but that hasn’t been the case in Sacramento.
17,000 SELLERS HAVE LISTED SO FAR
About 17,000 sellers have listed this year (and closer to 18,200 if we add in condos). This number would be closer to 30,000 in a normal year, but normal isn’t what we have right now. It’s a market where many sellers and buyers are sitting. Yet, not everyone is sitting, and I have 17,000 data points to prove it.
ONE THING TO WATCH WITH 8% RATES
Rates are flirting with 8% right now, and one thing we could see is the pile of active listings grow if rates keep going up. Keep in mind this wouldn’t be growth in supply due to more sellers listing their homes. This would be the stack of active listings getting higher if buyers back off the market. In other words, an increase in supply by waning demand (fewer pendings). This is what happened during the second half of 2022, and it’s something we need to watch closely in coming weeks. We’ll know soon if 8% rates are an inflection point for buyer demand.
PRICES HAVE BEEN FLATTENING
Last year we saw sharp downward price change, and it felt like the oxygen masks dropped from the ceiling during a crash landing. Today has felt more like a normal seasonal descent in terms of prices softening. That could change if rates keep spiking, but sharp change hasn’t been the description for 2023. We are starting to see prices higher than one year ago too.
WEEKLY PRICES
I like watching weekly prices because we get clues into what the monthly metric will look like. Do you see the flattening black line in 2023?
MONTHLY PRICES
It’s honestly a few days too early to share monthly prices, but I wanted to give a preview of the trend. Between August and September, prices were more flatter than not. Definitely not the sharp change we saw last year.
APPRAISER COLLEAGUES (ASKING AGAIN)
Earlier this year, I did a free webinar thingy on Zoom to talk about private work, and I’d be open to that again if there is demand. I’m starting to get the itch to bring some colleagues together, so let me know if you’d be interested. I got some good feedback last week, and I’d like to hear from some more too. This would be free. I’m not looking to make money on this.
Thanks for being here. I hope this was helpful.
Questions: What are you seeing in the market right now? I’d love to hear your take.
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How does the demand compare to 2007?
Very similar. Like I said in the post, volume was really similar (which reflects demand). That’s what makes today such a strange market. 2007 volume vibes, but early 2020 supply and competition vibes. Weird dynamic.
Ryan how about some analysis/comparison on how the market preformed in the 80’s when the interest rates were really high!!! I know it is ancient history to many of the group but it did happen & deals still got done.
That would be great. My main problem is I don’t have volume stats for the 80s and 90s. I do have price stats, and I push out visuals every once-in-a-while to talk about the local price trend. In fact, I shared some 1990 and onward graphs in the past two weeks on my blog. But the bigger story is often volume. When rates shot up in the early 80s, volume stopped and builders in particular were really struggling because they couldn’t make the numbers work for consumers. I’ve heard that in the stories and I’ve read it in newspaper archives. And it makes logical sense too.
I do have some price stats I’ll push out soon because I have a post I’m planning regarding presidential elections, and I’ll look at the 70s through now. But like I said, I think the real trend is volume, and I’ve never seen stats for that unfortunately (for Sacramento).
If any onlookers have access to volume data, I would be your best friend forever.
Housing markets are like big container ships. They … turn …. ohhhh … sooo … slowly.
Housing prices are at the undulating peak of a long-term cycle. A little up, a little down, up again, down again …. but we’ve arrived at the broader average peak nonetheless. Remember, the “2007 market peak” was actually a long undulating peak (up down up down) that spanned three years, from 2005 to 2008. It wasn’t until 2Q08 that housing prices actually began their “crash.” And even then it took almost a year for that 20% fall (25% from 1Q07 absolute peak).
California housing inventory will stay low until the job market turns sour. And it will turn sour. We just don’t know when. All of the Federal covid money (i.e., massive $33T national debt) is keeping our economy artificially inflated. For now. Once the economic debt dominos start falling, they will likely fall fast and hard, with massive layoffs as a result. It’s then that housing inventory will skyrocket, home prices will crash, and interest rates will finally soften.
And THAT is how the Fed tames inflation.
Thanks Josh. Locally, our market peaked in August 2005, and prices started to scream down in the summer of 2007 in particular. I just wanted to clarify that it was not three years here. It may have been that way nationally. Prices clearly lag volume. Yet today it’s so awkward because we’re not seeing supply build, so 2007 isn’t a perfect comparison or template. The truth is we haven’t seen a market like today with so many sellers sitting. It’s been very artificial to see this dynamic play out. I’m not saying we can’t see price declines because of this. It’s just an unfortunate complication that has thus far keep prices from correcting. As I keep saying, it’s hard to argue we haven’t seen a volume crash. We just haven’t seen a price crash.
Yup, those are national averages, from the Fed. Local markets were all over the map, as they are today (check Florida, Idaho, and Texas!)
https://fred.stlouisfed.org/series/ASPUS
On the Fed chart, take a look at the steep up-slope from 2020-2023. The largest and fastest “deviation from norm” in housing price history. By definition, deviations do not last, and a rubber-band “return to norm” is baked-in. Personally, I thought the return to norm would have been a lot sooner.
Got it. Thanks. Yeah, it was freakish to see 2020 through mid-2022 in terms of price growth. The market was slowing down through 2019 in terms of price growth, and then it sped way up. I have some visuals to show this, and it’s shocking really. Last year felt like the start of a return so to speak during the second half of the year, but then sellers stepped back in a big way this year, and that has changed the dynamic so far. Weird times.
By the way, based on the Fed’s 30-year avg slope, national housing values are, today, around 20-25% overvalued from long-term norm. Pretty much the same over-value we saw in the 2006-2008 period. It’s not a question of “if” it returns to norm. Just when.
Can’t argue with being overvalued. It was very unnatural to see 40% price growth over two years after eight years of price growth already. We are not in a normal market.
Nice one Josh. However here’s an analyst who thinks the Cent Fed will be left shortly utterly useless:
Russell Napier
go on internet for his latest interview. You will enjoy (maybe).
I would be more than happy to join in on as you called it a zoom thingy regarding private work. Please let me know when it is planned
Right on Bill. Good to hear from you. Thanks for chiming in.
Boy I’ll be the first to admit my predictions were wrong. I didn’t think there was any way prices were going up from a year ago. I thought as rates went up, prices would go down, down, down.
I’ve photographed some new construction lately, and I’m seriously shocked at the prices. One-story in Rocklin for $800k, then a two-story in Folsom last week at $1.4m. Hot DAMN.
My prediction: Construction quality has to start seriously tanking from here. I don’t see how anyone will be affording a well-made home with high-end options. “Higher for longer” rates are going to mean “smaller and crappier” new homes, if we’re lucky. If we’re not lucky, more people will be living out of their cars.
Thank you Joda. You know, I thought we would see price declines and more of a buyer’s market this year, but then sellers stepped back substantially, and it changed the vibe. Seeing 43% fewer sellers from the pre-2020 average has been a game-changer for the trend. I feel similar at times when I see prices.
Some incredible stats to think about. I love all the historic comparisons.
Thanks Gary.