Are we finally starting to see more listings? Yes and no. Today I want to talk about a change we’re seeing with listings both nationally and locally. This is a really important topic, and some of it feels a bit technical because it’s about understanding new listings vs active listings. Anyway, let’s be on the cutting edge of the market by talking about stuff like this. Any thoughts?
UPCOMING (PUBLIC) SPEAKING GIGS:
10/27/23 AI Fall Conference (San Francisco) (register here)
11/30/23 Safe CU “Preparing for a Successful New Year”
NEW MEME:
It’s been a wild ride to watch mortgage rates basically do the opposite of what so many predicted this year.
TOO LONG DIDN’T READ:
1) No big change with new listings. Sellers are still sitting.
2) There’s been an increase in active listings due to fewer sales happening.
3) 8% rates can create more actives.
1) NEW LISTINGS HAVEN’T BEEN RISING:
Sometimes the narrative is we’re seeing an increase in active listings because there are more sellers, but that’s not what stats are showing.
NATIONAL NEW LISTINGS SHOW SEASONAL DECLINE:
Lance Lambert of Fortune Magazine put out this image a few days ago based on Realtor.com data, and new listings look like they’re following a pretty typical seasonal pattern across the country (see black line).
LOCAL NEW LISTINGS HAVE A SIMILAR VIBE:
Here’s a similar graph for Sacramento to show new listings in 2023 (orange) are showing a downtrend for the fall. In other words, there hasn’t been any notable change with more sellers coming to the market.
FEWER IN SEPTEMBER IS NORMAL:
Here’s a new visual to show what tends to happen with new listings between August and September. There’s only been one year since 2007 when new listings increased, so being down 11% this year is pretty normal.
2) ACTIVE LISTINGS ARE RISING:
Okay, let’s talk about where we are seeing change. There has been an uptick in the number of active listings both nationally and locally. The x-factor looks to be higher rates causing fewer buyers getting into contract.
NATIONAL ACTIVES SHOW A SLIGHT INCREASE:
Stats from Realtor.com show a slight uptick between August and September. This isn’t a massive change, but it’s something to watch. Altos Research has also been reporting an uptick lately, so we have two credible national sources reporting an increase. We need time to see the trend, so let’s keep watching over the next few months.
LOCAL ACTIVES HAVE ALSO INCREASED:
In Sacramento there’s also been a slight uptick in active listings over the past month (orange line). It’s nothing major, but it is noticeable when pulling comps and running stats. When I log into MLS, I’m tending to see 100+ more actives on any given day. This hasn’t been a dramatic change, but if rates persist to rise, we’ll likely see a bigger increase.
5.8% MORE ACTIVES IN SEPTEMBER:
It’s actually not common to see an uptick of active listings between August and September. At least, it hasn’t happened for a decade. When looking at the past sixteen years, there was an increase in active listings only 25% of the time between August and September. With that said, whenever we see a small change, we want to watch closely to see where it goes. No matter what, let’s keep our market antennas up.
BRO, DON’T HYPE THIS SMALL CHANGE:
It’s easy to blow this up and say, “Actives increased by 6% last month. The crash is happening. We’re all going to die.” But this is only 141 extra actives. Let’s remember when we’re dealing with a small number, it’s easy for a modest change to sound huge when talking about a percentage. And remember, it’s quick to spin a narrative, but it takes time to see a trend.
A NOTHING BURGER OR A TREND?
Look, this change has been slight, so we need to be really careful about giving it too much hype. But if rates keep increasing, I wouldn’t be surprised at all to see more actives. What happens with mortgage rates for the rest of the year will be the x-factor in propelling or cooling this trend. Bottom line.
BLAME BUYERS INSTEAD OF SELLERS:
Some people are going to see more listings and conclude sellers are rushing the market, but it’s actually buyers causing the issue (a lack of buyers, that is). Remember, we could have a low number of new listings, but if we see fewer pendings, it means the pile of actives can grow without sellers actually listing more homes. It’s basically an increase in supply due to waning demand. In other words, when pendings don’t happen, that helps the pile of active listings grow higher. And that’s exactly what we’ve seen lately. It’s not a huge change, but it is a change.
LIFE-CHANGING NEW VISUALS:
Okay, maybe these aren’t life-altering, but it’s fascinating to see how the gap between sales and new listings has changed. In 2008, between January and September there were just over 40,000 new listings to date, and today it’s been closer to 17,000. Is it 2007 again? Well, volume feels very similar, but we haven’t seen an explosion of listings today.
Remember, not everything that lists ends up selling. Do you see how this year doesn’t have as much space between the number of sales and new listings? Having fewer new listings has made the market more competitive.
ADVICE FOR SELLERS:
Sellers, my biggest message right now is to respect the pendings. Rates are flirting with 8%, and this makes it more difficult for buyers to afford a home today. Demand is still here, but higher rates will reduce the buyer pool even more. It’s easy to get stuck on sales from the past, but what are buyers willing to pay right now? We see that in current pending contracts. We also see what buyers aren’t willing to pay with overpriced listings (don’t price to those).
LET’S KEEP WATCHING:
Let’s watching by the week and comparing notes. Please keep sharing what you’re seeing in the trenches too.
Thanks for being here. I hope this was helpful.
Questions: What are you seeing happen with active listings? Are they taking longer to sell? What is open house traffic like? I’d love to hear.
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Great observations as always Ryan. I have another business that does Home Energy Scores prior to listings and we have seen stronger than normal demand for late September and early October up here in Portland.
That’s so cool you are diversified. So smart. I’m glad to hear that. I wonder if it’s one last rush to the market before the holidays. Or something else? Keep me posted. Down here I keep hearing from agents that it’s either bidding wars or crickets in escrows.
Folsom currently has 98 single family homes on the market. Looking a little deeper, 36 are new construction being sold by builders. So, actually 62 resale homes.
Typically, builders prefer to sell from their on-site sales offices, rather than putting them on MLS where they’d have to offer commissions.
I’m wondering how these numbers stack up against past years. I don’t have the data because past years are not active, but is there a way to find out?
My would be that over the past 5 or so years, new construction would be less than 10% of the market, rather than todays 37%.
When I consider the rise in inventory, I have to put the new construction in a separate bucket, as they don’t reflect owners who’ve decided to sell their primary residences or rentals.
What are your thoughts?
Thanks Steve. Are the builder sales on MLS? Part of the struggle with comparing new construction is builders don’t often list on MLS unless the market gets dull. I just looked up Trendgraphix, and it shows 160 actives one year ago. But that doesn’t segment new vs existing construction. In short, it would be tedious to run this, but it is possible with some Excel skills. I do like your idea of looking at new construction separately if it has become a larger piece of the pie, but at the same time, new construction is about 25% of the regional market today in terms of sales (not listings though because they are not always listed on MLS).
I would look at the total inventory number no matter what the motivation is for listing. A listing is a listing in my mind. Yet, we have to pay attention to how much new construction is making a difference too, so I get your focus. I did check, and it looks like at least 15 of the 98 listings are new construction right now. I did a standard search for Folsom actives, and when checking “new” or “under construction” for year built, I see 15.
One last thought. This data for active listings is a bit tedious to get, but if you focus on sales, you can gauge how many have sold as brand new. That would tell you the same thing, but the downfall is it doesn’t focus on active listings right now. But for instance, in September 2022 there were 12 new sales in MLS and there were only 2 in September 2023. I find this by doing a standard search for Folsom under year built. I might also consider typing in an actual year in the search box too just to be sure there aren’t some sales hiding out in that way. All that said, this can be wonky because builders don’t always list on MLS. It’s very possible there were more builder listings last summer when the market got really dull. And if rates keep rising, it’s very possible we’ll see a rising number this year.
Okay, those are my thoughts. Generally speaking, I would say to maybe just try to find out how many builder listings there are from here on out. The comparison to the past gets tricky, but it is possible. Let’s keep the conversation going as needed.
Hey Ryan, thanks for the reply. Yes, I was only referring to the new construction sales through MLS.
I should explained that I do a standard search for all listed SFR inventory, then sort the results by year built.
There are some with no ‘year built’. All are listed by builders. There are 16 others that show year built as 2023, sold by the builders.
I combine them under the category of ‘new construction’.
Am I doing it right?
You are doing it right. I like the thoroughness of searching in multiple ways. You are right about the year not always being there. Like many stats, sometimes we have to run the numbers a few ways to get a good picture.
I met with a client and builder, new home. I got the impression from the sales agent that buyers were standing in line to purchase their homes and this particular lot. base price 755k 2500 sqft. They charge a lot premium not large lot nor on a corner, because in a court. Mello Roos through the roof approx 4800 year! 2% credit from lender or 2500 credit if cash purchase. I not feeling warm and fuzzy about these terms and base price. It would be a valuable tool to be able to run comps for new construction. Recent sales is all we can compare too, with new phases in construction price will increase and new home sales seem to be non-negotiable. Buyers are at a disadvantage with no current info on active and pending sales!
Thank you for sharing Linda. You know, this is why it’s difficult to value new construction sometimes. If builders do NOT list on MLS, they basically control the data. And if you control the data, you control the narrative at times. Of course, sometimes builders do list on MLS, but they don’t pay any attention to their listings, so the listings mean very little. Ultimately, we can see serious statistical gymnastics when it comes to the base price, upgrades, concessions, etc… When I used to do appraisals for loans (I only do private appraisals now), I always wondered if I was getting all the information when the builder would hand me a stack of “comps” so to speak. I don’t want to see what someone gives me. I want to see everything.
One more thing. Those Mello Roos fees are no joke. $400 per month!!!