Cash buyers are really showing up. They are the X factor this year to explain the bump in volume we’ve seen compared to last year. Today, I have some really cool stats to unpack what is happening in nine local counties. If you’re not in Sacramento, is this happening in your area too?
UPCOMING SPEAKING GIGS:
6/6/24 Golden 1 Credit Union
6/11/24 Elk Grove Regional MLS Meeting 8:30am
6/13/24 Sacramento Realtist Association (details TBA here)
6/21/24 Exporting data from MLS (register here)
7/9/24 Future Homes Q&A (private I think)
7/11/24 She Invests – REI Networking Group 6pm (register here)
7/23/24 Matt Gouge Private Event
9/17/24 Downtown Regional MLS Meeting Q&A 9am
9/20/24 How to Think Like an Appraiser class (details TBA)
10/18/24 Prime Real Estate (private)
10/29/24 Orangevale MLS Meeting
CASH HAS MADE THE MOST DIFFERENCE IN 2024
When looking at a breakdown of volume this year so far compared to previous years, it’s really cash transactions that have made the most difference with higher volume in 2024. Cash isn’t down as much from previous years either since these buyers aren’t as sensitive to rates being at 7%.
PLACER & EL DORADO ARE FLEXING
In the four-county region, it’s Placer and El Dorado that have come through the most in giving 2024 a boost to volume. Sacramento is the largest local county by far, but volume has been more lackluster. Why do you think that is?
ARE BUYERS MORE USED TO THE MARKET TODAY?
We’ve been seeing more volume all year, which is great news. I think the knee-jerk reaction is to say buyers using financing are more used to higher rates today, but what do the stats show? Well, it’s hit and miss by county as you can see below, but in the two largest local counties (Sacramento and San Joaquin), we’ve actually seen fewer financed offers this year and more cash. In others words, the modest overall bump in volume this year in these two counties is really due to more cash buyers. Yet, some counties are experiencing more financed offers. Overall, it’s cash that explains the volume bump when looking to the entire region.
KEEPING THE NARRATIVE IN CHECK
It’s easy to read a headline like my post today and say cash is completely dominating the market, but that’s not statistically true. In my mind, here’s the best way to say it. In 2024 so far, cash buyers in the region are playing a greater role than last year, and the bump in total volume is largely attributed to more cash (the bump is not just cash though).
IS IT ONLY CASH AT THE HIGHEST PRICES?
Nope. There are cash transactions throughout all price points. The median price for the entire year so far is $588,000, and 47% of cash transactions below $600,000 were cash. This tells us cash is dispersed above and below the median pretty evenly. Yet, there is more cash at the top. For instance, sales above $1M represent 9% of the entire market this year when considering all prices, but nearly 15% of all cash sales are above $1M. And put another way, 32.9% of all sales above $1M this year have been cash transactions.
WHO ARE THE CASH BUYERS?
There isn’t an easy way to perfectly unpack buyer demographics, but cash buyers aren’t just investors. Also, only about 20% of the entire market is cash, so it’s not true that cash is beating all other offers even though cash has seen an uptick. In short, cash represents flippers, long-term investors, some Bay Area buyers, and owner occupant buyers. Am I forgetting anyone?
REAL ESTATE FRIENDS
I think stats like this are important to be able to plan ahead for business and tell the story of the market. My advice? Position yourself to work with buyers who are using cash who are not as sensitive to rates. Yet, recognize the vast bulk of the market is financed too.
BREAKING IT DOWN IN 9 COUNTIES:
Here’s a much wider look at the greater region. The interesting part to me is to see both Sacramento and San Joaquin with very little growth despite being more affordable. Sutter has seen lower volume, and I wonder if part of that has to do with being a more outlying area compared to Yuba. Anyone have ideas why Solano is down this year?
EACH COUNTY FEELS A BIT DIFFERENT
When looking at various counties in the region, there are different stories to tell. I’d love to hear what stands out to you. What I like to see from a market health standpoint is more of all types of sales instead of just more cash.
I hope this was interesting. Thanks for being here.
Questions: What stands out to you most about the stats above? What types of buyers are you seeing use cash right now? What did I miss?
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You always deliver with some new way to look at the market. Super interesting to see how cash buyers have helped pushed the volume up this year in Sacramento.
Thanks so much Gary. I’m absolutely fascinated with stuff like this.
Do you have a graph showing how inventory has changed from 2023 to 2024 in Sac county
If number of sales hasn’t changed much between 2023 and 2024, but inventory has increased noticeably, it tells me that buyer demand has softened. Would you agree?
I do have several graphs, and part of it come down to what you mean by inventory. There are three metrics I track: number of active listings, number of new listings, and months of supply. These are all technically different ways to look at inventory. There has been an uptick this year, but the number of new listings is still about 30% lower than the pre-2020 normal. In specific terms, we had about 500 more new listings hit the market in May in the region compared to one year ago, but in a “normal” year we would’ve had 1,200 more than we got. In short, there has been an uptick in listings and supply no matter how we look at it. Yet, we’re still quite a bit below pre-pandemic levels. You’re right that a change in listings could be a reflection of less pending contracts (or demand), but it can also be a change with sellers listing more (supply). Basically, today we’ve had more pendings than last year, so this isn’t so much of a demand issue even though pendings really feel pretty lackluster. In short, we’re seeing supply grow more than demand, and that is creating a market that isn’t as competitive as one year ago. It’s not like what we’re seeing in portions of Texas and Florida though where supply has REALLY grown exponentially.
One thing to note is I think we are really feeling the difference this year. While we are still far from normal levels, having those extra 500 new listings is something we feel in the trenches of the market.
Happy to share some graphs if you send me an email. I may share some this week though too in my post.
Thank you for sharing your insight. Not surprised we have more pendings, but we’ve also had more inventory as you have said.
So it would interesting to see some inventory graphs on this blog post or on your next one along side sales data. Data tells a more interesting story when you compare it with other data points as you know
Thanks John. I don’t always post all the graphs I make on my blog. I do post stuff pretty much every day on my socials. There are many ways to show inventory, and you’re right that it’s all about understanding context. This post wasn’t about inventory, of course, which is why I focused on volume. You can DM me if you want some visuals though. I don’t know when I’ll post about inventory next here. I’m probably due to share some stuff.
Hey Ryan, I am based in Rochester, NY and I am seeing a lot of buyers using a “Cash guarantee” lender program where if the appraisal falls short, the lender will cover the difference. Some agents even marketing that this program is better than cash. In regard to your question, I am seeing a lot of “cash” deals being sold on our MLS system, however, once you click on the tax record, you see that there is in indeed a mortgage put on the house. Is this really a “cash” deal? And are you seeing this type of transaction in your market?
I appreciate the information you put out through statistics and conversation. You’re an inspiration! Thanks, Ben.
Hi Ben. Thanks for chiming in. I see that too. There are definitely some programs to get in with cash and then finance after escrow closes. I see the reverse sometimes too where someone will get a loan, but then pay off the mortgage as soon as another house is sold. It would be really tedious to find these transactions. I wish there was an easy way to segment these. My sense is this is a small part of the stats, but overall the numbers are speaking to buyers still struggling to afford the market.
There Are elements of transactions that are “self-reported”, and therefor are hearsay.
You are absolutely correct, Ryan! I just got my listing into contract with an agent that has all cash buyers from Texas. They paid over asking price and will close in just 12 days! Cash is King!
Thanks Tracey. And congrats. Wait, aren’t people supposed to move from CA to TX? Haha. In truth, CA typically sends the highest amount of residents to TX, and TX typically gives the highest amount to CA (the joke is it’s Californians moving back).
you are saying that not all cash buyers could be investors. Can’t disagree, but curious I haven’t reviewed in about 18 months or so the amount of inventory held by some of the largest investors in the state. But I would be willing to bet that their inventory of purchases has increased as they buy then turn and rent.
Hi Brad. I suspect the big institutions haven’t changed much in California. I don’t know if you follow Lance Lambert with ResiClub, but he has some great stuff on institutional ownership. It seems like big companies are targeting other states besides California right now. There are some more build to rent outfits growing in the state, which is something to watch.
Everyone, I’m not sure what is happening, but some people got this post today instead of one week ago when I wrote it. I think there is some sort of a problem with my feed right now. I don’t know how to solve this yet.