Wait, so rates aren’t going down now?

It’s been a pretty normal spring season so far, but if mortgage rates keep ticking up, that’s an x-factor in changing the feel of the market. Today, I have a big market update. This post is designed to skim by topic or digest slowly.

UPCOMING SPEAKING GIGS:
4/11/24 Lindsay Carlisle Event (private)
4/25/24 HomeSmart iCare Realty (details TBA)
4/26/24 Prime Real Estate (private)
5/9/24 Empire Home Loans (details TBA)
5/15/24 Investor Meetup (details TBA)
6/6/24 Golden 1 Credit Union (details TBA)
6/11/24 Elk Grove Regional MLS Meeting 8:30am
6/13/24 Sacramento Realtist Association (details TBA)

INFLATION IS HOTTER THAN EXPECTED

Over the past couple of years, there have been so many ideas about what the Fed is going to do with rates. The truth is so many predictions just haven’t panned out, and prophecies keep getting punted down the road. For now, it looks like higher for longer is the name of the game, and that really matters for the economy and housing market. Let’s keep watching this closely and talking about what could happen (while not promising the future). For anyone who works in real estate, plan for the worst and rejoice if something different happens. That’s probably not something you’ll hear at a seminar, but I think it’s solid advice. 

HIGHER RATES MAKE A BIG DIFFERENCE

Rates ticked up this week, and we could see the effect of that in closed sales in May. But backing up, closed sales volume in March was lackluster in Sacramento because rates went up in February, some buyers backed off, and that led to a lower number of sales in March after those February pendings closed. 

REALLY LOW MARCH

This was the lowest month of March volume since at least 2001. What the? Volume for the year is up from one year ago, but March was lower in almost every single county due to a lower number of pendings in February most likely. The theme for this year is “More in 2024,” and so far for the entire year, we’ve seen more sales, more pendings, and more new listings, but if rates tick up too much, that’s going to interfere with the theme.

NOTE: Someone said volume could be lower due to Leap Year at the end of February and then Good Friday to close out the last business day of March. That’s something to consider, and I guess time will help us see the trend. Yet, pending volume was legit lower in February per my stats and even Redfin stats, so we can’t discount that. Any thoughts?

Here’s one more way to look at volume. Do you see how the March line sagged? In a normal year we should have seen this line rise much more.

PENDINGS ARE WHERE WE SEE THE TREND

We see the trend first in the pendings, but it takes a month or so for pending contracts to turn into closed sales. Do you see how February pendings were lackluster? This week mortgage rates spiked again, and if that persists, we could see fewer properties getting into contract. Of course, only time will tell, but an average of 7.37% today can definitely soften demand.

NOTE: I’m careful to not get swayed by daily rate changes because it can be so manic from one day to the next. All I’m saying is we need to watch this because if we stay closer to 7.3%, that’s going to soften demand.

NEW LISTINGS ARE OUTPACING LAST YEAR

The number of new listings is thankfully higher than last year, but it’s still way down from normal. There has NOT been a flood of new listings like some people think. The number of active listings is still low too.

Here’s another way to look at new listings.

ALMOST NORMAL, BUT NOT QUITE

Here’s an image from a presentation I’m giving today. As you can see, we’re more competitive than normal, but we’re way closer to normal than a year like 2021 (thankfully).

BRO, SUPPLY IS STILL LOW

Supply is still thin – even with more new listings compared to last year. This is a big part of why it still feels competitive out there. We’ve basically seen low supply and low demand meet. That’s a perfect way to describe the trend.

COMPETING WITH FINANCED OFFERS & CASH

The bulk of properties out there are being financed. That’s what the stats show, but I think the narrative at times says it’s all cash. Keep in mind there is more cash at higher price points.

COMPETITIVE, BUT ALSO CLOSER TO NORMAL

Here’s a cool way to look at the market. This percentage tells us how close properties sold compared to their original price. Last month, properties basically sold about 0.7% below the original price on average. This is still more competitive than normal, but so much closer to historic norms though too.

PRICES HAVE GONE UP FOR THE SPRING SO FAR

It’s been a pretty normal spring season so far, and we’re basically seeing all the normal stuff we tend to see with days on market going down, prices going up, more new listings, etc… I’ll have my county images out over the next week, so please see the STATS tab for data for nine counties. For now, here’s a look at the entire region. Keep in mind a 5-7% price metric increase from one year ago doesn’t automatically mean comps today are going to be that much higher. My advice? Look to the comps to understand.

VOLUME COMPARED TO ONE YEAR AGO

Prices are a bit higher this year, so we’re seeing less sales at lower prices this year (and more at higher prices). This is interesting to see because I find some people say things like, “The top of the market is getting destroyed,” when the stats actually don’t support that narrative.

UNEMPLOYMENT HAS TICKED UP

Unemployment is not at alarming levels, but we want to watch the trend. Here’s a look at the unemployment rate in a number of local counties. And I know the second image is a hot mess, but I wanted to show how some smaller counties look on a graph (much more erratic).

FINANCING SINCE 2009

If you wanted to see what buyer financing and cash sales look like since 2009, you’re in luck. Hopefully your life is now complete.

MORE COMPETITIVE THAN DOOM PROPHETS ARE SAYING

Stats show it’s been more competitive than the pre-2020 normal, but not by too much though. It’s nothing like 2021 out there thankfully. Yet, it’s not a walk in the park. I think many people who perpetuate housing doom are actually quite disconnected with how competitive it is right now. In short, the good stuff goes quickly, and getting multiple offers is very common still. But getting 10 offers and going 10% over value is not the dynamic today. Granted, if you are priced 10% too low, you’re going to get bid up most likely. That’s what happens when pricing low.

Anyway, more out on my socials this week. This post is getting too long.

Thanks for being here.

Questions: What are you seeing in the market right now? What are buyers and sellers saying? I’d love to hear your take.

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