Prices have been pretty flat. That’s a really good way to describe the housing market lately in many areas across the country. Let’s talk about that today as well as dig into insurance. I have some encouragement to share too about mindset.
UPCOMING SPEAKING GIGS:
11/7/2024 Think Like an Appraiser (3 hours) TBA
11/19/24 Downtown Regional MLS Meeting Q&A 9am
12/5/24 Made 4 More Team (Exporting Data from MLS)
12/11/24 Gateway: Think Like an Appraiser (private)
1/15/25 Mike & Joel Event (details TBA)
1/24/25 PCAR Market Update (details TBA)
2/6/25 She Invests event (TBA)
2/11/25 MLS Meeting TBA
4/8/25 Culbertson and Gray (private I think)
11/4/25 SAR Main Meeting
HALLOWEEN COSTUME?
Is anyone dressing up for Halloween? My wife and I were invited to a costume party, so I’ll be wearing a yellow hazmat suit and respirator to emulate my favorite cook from Breaking Bad.
HAVE PRICE BEEN FLAT?
One of the best ways to describe the housing market in Sacramento and some other portions of the country is to say we’ve had very modest appreciation over the past year. In other words, prices have been pretty flat. I’m noticing this in regional stats as the median price is only about 1% higher than last year, but I’m also seeing it when pulling comps. In 2021, there was substantial change between older comps and today, but that’s just not the reality right now.
NOTE: The flat trend may not be in every neighborhood and price range, so look to the comps to understand the market.
BRO, STOP BEING SO NEGATIVE
Before saying more, I have some quick thoughts about mindset. I find sometimes there is resistance in real estate circles to saying prices have been flat, as if it could somehow change the market by being “negative.” It almost reminds me how people didn’t want to say the name “Voldemort” in Harry Potter out of fear of consequences. I’m not trying to sound preachy, but there’s a huge difference between talking about slowing housing stats and having an optimistic mindset about life and business. Those are two totally different things. My advice? If you work in real estate, take the pressure off yourself. What you say about the housing market can’t change the trend (true for my words also), and your role is to simply find people who are participating regardless of what the market is doing – whether it’s hot, cold, or mild. Look, if real estate professionals could alter the trend, we wouldn’t be seeing such crazy low sales volume right now. One more thing. I can’t transform my stock portfolio by thinking positively. I can’t change the election next week by just thinking about it. And I can’t fit into certain pairs of jeans either just because I’m positive about my body image. Look, I’m a huge optimist in life, and cultivating positivity is essential. If you’ve lost your sense of hope, you need to dig deep to find it. Fight for optimism and surround yourself with people who will build you up!!! And unsubscribe from voices that only promote doom because there is an agenda there (and they’re getting rich off your clicks). All I’m saying is a positive outlook in life is something far different than being real about housing market conditions. Sermon done.
SOME NEIGHBORHOOD EXAMPLES
Here are some examples of scatter graphs with flat prices. I realize not everyone resonates with graphs like this, but do you see how the dots are sort of going more horizontal lately? Down some from 2022 and modest price growth at best since last year. Of course, not every neighborhood will look the same, but I wanted to share these examples lately.
THE BIG TAKEAWAY & DIFFERENT TRENDS
Look, if your property checks all the boxes, it’s highly possible to get multiple offers (if priced right). And stepping back, about 40% of pendings are getting multiple offers right now in the region (a pretty normal level). But otherwise, 2024 is a different vibe compared to 2021, and it’s important to adjust and price reasonably to capture the attention of buyers. In some cases, you might see older comps and recognize there hasn’t been any real value gain too. The other day a lawyer reading my appraisal report criticized me for using a comp from one year ago, but here’s the thing. There aren’t many comps today to choose from since volume has been down so much, AND the market today is at a similar level from then, so it was actually a really solid comp that didn’t need any adjustment for price change. Obviously, the trend isn’t exactly the same in every neighborhood, so I get it if you say prices are going nuts in XYZ Neighborhood. I’m speaking generally here, and stats are supporting the idea that the overall market has been…. flat.
THE INSURANCE CRISIS ISN’T JUST ABOUT FIRES
Okay, let’s look at one more big trend. We’ve been talking so much about the insurance crisis in outlying areas prone to fires, but one place we’re seeing insurance carnage is with condos / HOA communities. It’s not that individual owners are having a problem obtaining insurance, but the association itself is experiencing a massive rise in the cost of insurance, and that’s often passed on to owners with HOA fee increases. But it’s more than just the HOA fee. Check out my Facebook post yesterday where people chimed in about financing issues due to the HOA having insufficient funds, and even SB 326, which requires some condominium associations to inspect and repair balconies. All that said, condo sales have been slumping this year compared to detached units, which has caused condo inventory to spike. In short, watch condos carefully and recognize there could be some brewing downward price pressure here.
I hope this was interesting or helpful.
Questions: What have prices been doing in the neighborhoods you cover? What are you noticing about condos?
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Hey Ryan, I’m seeing some stability in my markets too. For small markets, it’s very difficult to understand trends because of the lack of sales. I can’t wait to have more data available to help me do my job
Thanks Joe. Yeah, the flat sort of “stable” feel lately has been so noticeable in my graphs. Agreed on value. Meanwhile, FHA announced more appraisal waivers in a market with limited data (where value is more challenging).
Hey man, stop saying, “Flat.” :-D. Seriously though, flat is good for appraisal because it means fewer adjustments.
Haha. Yes, I’m a fan of less adjustments.
Hmmmmm, guess if you can’t say flat, then I can say declining. WHAT>>>>Q@???!!?!??!?!!! Get this guy with the Stetson off this reply box. How dare him. Well reality is that an over 55 age restricted community that I just appraised is declining. Not by leaps and bounds but heck two straightforward and knowledgeable RE agents made the same comment. At first, I thought I hit the wrong key on my Excel chart, but then I started looking at the data. Heck I was so confused I called a buddy of mine for a sanity check. He asked me how I segregated the market data and what was it showing. We got done and he went YEP, can hardly wait to hear how that ends up. Good friend that he is, he wanted to buy some popcorn and watch the show. UGH. Folks this is a neighborhood specific situation and YES there is an issue with HOA dues based on the HOA that runs the over 55 community. Oh, and did I say they have a small pending lawsuit. Things are getting weird, and it is coming quicker than some think. I will be glad when we get into early 2025, to see what the Fed has done, what has happened to the 10 year treasury rate, what happened in the election, can always hope for a split congress, did the whole state of California think they can solve the housing crisis thru Rent Control, and is there going to be another Indiana Jones, Star Trek, Harry Potter, Star Wars, or Three’s company sequel. Heck none of the rest of the world makes sense so I can only hope for a sequel.
Thanks Brad. I always appreciate your take. I’ve had a few agents tell me of declining values in some condo HOAs, and I may investigate that soon. I appreciate your sensitivity to the trend. Respect. I think during the fall it can be challenging to decipher seasonal softening and declining. I know you are discerning the difference here. I just wanted to mention that because my antennas are up every year to try to see if there is anything beyond a typical seasonal softening that is happening. Speaking of sequels, I’m ready for Gladiator II coming out in November. Hoping it’s worthy.
I’m beginning to see a few properties that sold for way over list during pandemic/low interest rates, perhaps for WFH (or maybe STR?), now up for sale again. Some have had to cut price, wiping out the 2021 gain, but still well above, say, a previous 2016 sale. Some are asking, and getting 30% above the previous price without any obvious big improvements made. (These are not flips.) Taken together, these may indicate “flat” market, but each property is unique.
However, what effect do such price histories have, when used as comps for nearby properties, that haven’t sold in 15 years?
Thanks MaddieB. I appreciate the examples. I’ve seen similar things. I find value today is down from mid-2022 in many areas, but close to one year ago (and also close to portions of 2021). So, it depends on when the property sold previously. Overpaying back then can lead to a shocker today. But since prices went up, down, and then up again, we have a few different times in the immediate past where prices are pretty similar to today. I don’t personally think the previous sale price tends to have much of an effect on today because sellers aren’t entitled to get the same amount or more. I find buyers don’t care what someone else paid (especially if the owner overpaid). However, a previous sale can sometimes be excellent for research. For instance, I inspected something unique this morning that sold previously in 2014. I am absolutely going to look up the previous sale to see how this very large home fit into the market. In other words, what did it compete with? Granted, the previous sale might not be a good indicator of value, so there is a sense where we have to take it with a grain of salt. Sometimes the previous sale is beaming with lots of insight for us though.
All that said, when looking at data, we have to look at many different examples to understand how a market is moving. I find looking at thousands of data points is beneficial so it weeds out examples where someone paid too much or too little maybe. And looking at multiple years of data can be so helpful too.
there are several reasons why property prices might have remained relatively flat depending on the locality. 1) Economic Conditions: If the local economy isn’t growing or is facing challenges, this can lead to stagnation in property prices. 2) Supply and Demand: If the supply of homes on the local market is high while demand remains steady or weak, property prices are likely to flatten. 3) Comparison to Nearby Markets: Housing prices in Sacramento can be influenced by the performance of prices in nearby areas like the San Francisco Bay Area. If nearby markets experience a downturn, it can affect buyer sentiment and demand in Sacramento.
Thank you. I appreciate your take. Agreed there are many layers to consider. Rates remaining high has diminished how fast prices can grow. But sellers sitting out of the market has been the x-factor in my mind over the past couple of years. This year we’re missing over 10,000 new listings in the region that did not get listed for sale (from the pre-2020 normal). It would be a profoundly different market today if we had anywhere close to normal supply. For now, prices have benefited from fewer sellers playing the game. So, it’s essentially been low supply meeting low demand. Yet, in 2024 we’ve seen slightly more sellers, so that’s making a difference. For any onlookers, from January to September we’ve seen 2,800+ extra new listings compared to 2023 (still down 10,000 though from normal). Yet, we’ve only seen just under 400 extra sales. In other words, sellers have come back more than buyers this year, and that’s taken away some pressure on upward price movement.
Thank you again for such awesome imformatation!
You are so welcome. Thanks Kari.