The 1990s are back in style. Big pants, Nirvana t-shirts, and Doc Martens. And even the housing market feels a bit like the ’90s. Let’s talk about it.
UPCOMING SPEAKING GIGS:
10/18/24 Prime Real Estate (private)
10/22/24 Culbertson and Gray Group (private (I think))
10/23/24 SAFE Credit Union (details TBA)
10/29/24 Orangevale MLS Meeting
11/7/2024 Think Like an Appraiser (3 hours) TBA
11/19/24 Downtown Regional MLS Meeting Q&A 9am
ME IN THE ’90s
Okay, before we jump into real estate, let me introduce you to what I used to look like back then. Do you smell the Obsession cologne? And can you tell by my tan that I played water polo in high school? Haha.
PURCHASE APPLICATIONS ARE SO MID-’90s
Purchase application volume is at levels last seen in the mid-’90s when movies like Clueless and Braveheart were playing. And Leonardo DiCaprio’s girlfriend wasn’t even born yet. That’s sobering stuff, but the positive news is we’ve seen a slight uptick in purchase applications lately. My advice? Watch application volume by the week because it will be a leading indicator for demand in the housing market. Oh, and don’t base your self-esteem on this data.
SALES VOLUME IS SO MID-’90s
The number of closed sales nationally is at levels seen in the mid-’90s (and the Great Recession). For anyone who works in real estate, I recommend being realistic about a smaller pool of buyers existing today, and to continue to plan for low volume ahead. You might not hear this at a real estate guru seminar, but I think it’s best to expect low volume and rejoice if something else happens. The hope is to see an uptick in volume in 2025, but the truth is it’s going to be hard to return to normal levels without a sharper change to affordability. Nationally, there are many projections that volume in 2024 will end lower than 2023 for the United States. Locally, we’re ahead of last year by 265 sales, so the next few months will be critical to see how it pans out.
A REALLY GOOD WAY TO DESCRIBE THE MARKET
One of the best ways to describe the market in 2024 is sellers have come back more than buyers so far. This is true in Sacramento and many locations. The reality is there is a wider gap this year between the number of new listings and closed sales. In other words, supply has grown faster than demand, and that’s why the market isn’t as competitive compared to one year ago. Yet, both listings and sales are still far below normal levels. In fact, locally we’re missing about ten thousand listings this year from the pre-2020 normal number. That’s just wild (and sobering) to think about. One other thing. I wonder if we’ve forgotten what the market feels like when there are more listings and not a freakishly low amount like 2023.
IS THERE A SLIGHT CHANGE IN BUYER DEMAND?
Mike Simonsen has been talking about a slight uptick in purchase applications and pending contracts. Look, this is NOT a huge amount, so don’t write home yet. Let’s just watch to see if this is an inflection point or a nothing burger. This is what it’s like to follow real estate. We collect data, remain objective, try to interpret what we’re seeing in real time, keep things in context, sift sensationalism, and let time show us the trend. Know what I’m saying?
MORE PENDINGS IN SEPTEMBER LOCALLY
September was a solid month of pending contracts in the Sacramento region (compared to last year). This is good to see, but let’s remember there were five Mondays in September, and Monday is a big day for the number of pending contracts. All I’m saying is we want to be aware that monthly data can sometimes show extra or less depending on the day the month started or ended. With that said, I’ve been asking the real estate community if there is a change in demand, and it’s a mixed bag. Some people report maybe slightly more demand, but many are saying no change (or it’s hard to see if there is any change). In short, time will show us if the increase in pendings here is about the market or an extra Monday. Does that make sense?
Thanks for being here.
Questions: What are you seeing with buyers right now? Any change to demand? What is your favorite band from the ’90s or something you hope doesn’t come back in style?
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Party on dude! Most excellent post.
Maybe we’ll see volume come back once we’re on the other side of the election.
p.s. Email notifications worked this time.
Haha. Right on Joe. Thanks for the heads-up. I’m hoping that gets resolved. I still got a message from someone that he had three blog posts delivered in one day. Sigh. Hopefully we’re mostly done with that sort of issue though.
Thanks, you were in High School in 1990’s, really, I have to start my day by feeling really old. Geez. As the guy stating Powell is his homie. Guess he is reading the wrong article about how a drop in Fed Funds rates actually means an immediate drop in 10-year treasury. Hope the message is getting out that the 30-year mortgage rate is more closely tied with 10-year treasury. Good news down in my neck of the woods, the DOM has extended out by 5 days over the last three months. Hard to see the inventory growing much, so I am thinking folks (buyers and sellers) all have it in their heads the interest rates are going to drop significantly in the next few weeks and all will be right with the world. Ugh………….
Haha. I was. Graduated high school in 1994. And yeah, the image is somewhat meant to be ironical. I think many people expected the Fed cut to usher in a totally different era in real estate. Granted, we are at the beginning of this still, but Fed cuts aren’t likely the end-all solution for housing. Let’s keep comparing notes, Brad. Thank as always.
I’m feeling much more optimistic about next year than I was last year at this time. I think it will take several more interest rate reductions to see a meaningful shift in volume, but I’m hopeful that we are on that trend now.
That’s great. I think lots of people share your optimism. We’ll see what rates do. We need lower rates / affordability to create movement. I think there is a good chance to see more volume in 2025. Only time will tell.
The current housing market drawing comparisons to the 1990s may have to do with several factors that echo trends from that era. In the ’90s, particularly early in the decade, interest rates were high as a result of the Federal Reserve’s efforts to curb inflation. Similarly, today’s environment features climbing interest rates due to efforts to contain inflation following pandemic-era stimulus and supply chain disruptions.
Ryan, we’re seeing similar things in the Birmingham, AL market. Lower interest rates are not significantly affecting sales. Maybe it’s the election, who knows? I guess we will know after November 5th.
Thanks Tom. I think we just need more affordability to move the needle. We’ll know soon. For what it’s worth, I cannot wait until election season is over. Politics is such a hot mess right now (well, and mostly always).