The home price crash that hasn’t come

Real estate prices are going to tank. We’ve been hearing that since 2020, and here we are without much change in most markets. Let’s talk about prices today, and I want to share some new visuals to talk about distressed sales.

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UPCOMING SPEAKING GIGS:
12/18/24 Coldwell Banker Sierra Oaks
1/15/25 Mike & Joel Event (details TBA)
1/16/25 Sac Real Producers event (details TBA)
1/22/25 Windermere El Dorado Hills / Folsom (private I think)
1/24/25 PCAR Market Update (details TBA)
1/31/25 Prime Real Estate (private)
2/6/25 She Invests event (TBA)
2/11/25 MLS Meeting TBA
2/18/25 Travis Credit Union TBA
3/6/25 Yolo Association YPN Event
3/12/25 Windemere Sierra Oaks
4/8/25 Culbertson and Gray (private I think)
11/4/25 SAR Main Meeting

PRICES HAVEN’T DROPPED MUCH

Nationally, homes prices haven’t crashed despite so many YouTube videos saying that would happen. So, it seems crash predictions are going to be punted to next year again. The problem is sellers have been sitting back, and that’s really changed the way the market feels. To date, it’s just been too tight for a 2007 level price crash event. For instance, locally this year we’re missing about 11,000 listings from the normal number. Imagine how different the housing market would feel if we injected 11,000 more listings this year. Do you think prices would be declining? I think they would.

From a real estate friend on X:

BUT LOCAL ISN’T THE SAME AS NATIONAL

One thing to remember is there really isn’t such a thing as a national market. The so-called “national” market is comprised of thousands of local markets, and this year national price figures are up, but there are definitely some local markets that are down. Like I always say, the market isn’t doing the same thing in every location, so we want to be careful about imposing a national narrative on every local market. There isn’t such a thing as national weather, and the same is true for real estate.

DID NOVEMBER REBOUND FROM FLAT PRICES?

Local price growth has slowed, and in recent months it’s felt pretty flat. However, price metrics for November are up 4-5% for the region. Has the market rebounded? Well, three things to keep in mind:

1. We’re now comparing today with a time last year when rates were 8%, so many stats today are simply going to look better.
2. Square footage in the region was larger in November 2024 compared to last year, whereas the four previous months were lower. This can make a difference in the numbers.
3. Not every county is mirroring the regional trend of being up.

SIZE MATTERS

I pull stats for nine local counties, and I’ll say it’s hit and miss with size this year. Generally speaking, in counties showing negative price metrics from last year, homes tend to be smaller this year. And in counties with positive growth, homes tend to be larger. Ultimately, I wouldn’t get overly fixated on the latest glowing month unless we start to see a trend.

“PRICES ARE GOING TO DROP BY 40%”

I haven’t seen any reputable data firm say prices are going to tank by 40% in 2025, but I’ve heard that sentiment on X (usually from anonymous accounts). Look, here’s the thing. There is nothing wrong with prices going down, and that would be healthy to create more affordability, but we don’t have enough supply right now to see a massive drop like that. With that said, the positive news for buyers this year is we’ve seen a wider gap emerge between the number of listings and sales, and that has definitely softened the market (see chart). What we want to watch closely ahead is how this gap changes. If it grows wider, that could lead to prices softening, but if it gets tighter, that could leave space for some upward growth. I’ll talk more about this next month in my annual outlook.

BRO, SURFING FORECLOSURE WAVES

I thought it would be interesting to show distressed sales in a new way. I pushed out the first graph last week, and it created quite a bit of conversation.

• Only a few distressed sales lately
• The carnage after 2007 was vast
• The foreclosure market didn’t hit every area the same
• Distressed sales were more prominent at lower prices in some neighborhoods. This reminds us the market is NOT the same at every price point.
• Higher prices tended to be able to better weather the storm (more equity, more savings, higher income, more cash buyers, etc…).

NOTE: I chose different colors below just to mix it up

DISTRESSED SALES HARDLY EXIST

Very few distressed sales have hit the market lately. That’s what the graphs above show, and stats below show the same thing.

QUICK TAKEAWAYS

• Mortgage delinquencies have remained low, but it’s something to keep a close eye on.
• We’ve bottomed out with distressed sales, so there isn’t any place to go but up. Having more doesn’t mean 2007 though.
• Being underwater on a mortgage is not much of an issue today due to equity, so owners can often do traditional sales to deal with financial carnage.
• Let’s not fixate too much on REO and short sale stats because those stats don’t capture the owners who are selling right now due to distressed situations (they have equity to deal with their issues).
• Let’s watch rising credit card and auto delinquencies.
• Technically, short sales doubled from last year, but there were two this November compared with one last year.

The NY Fed has a great series of charts to show household debt, so check out their latest report here. And check out local delinquency rates from the CA Policy Lab.

And now local stats for anyone interested….

LOCAL STATS

Year-over-year stats. Remember, size matters here. For instance, Sacramento County had 6% larger homes this year, Nevada was 8% smaller, Placer was almost the same, and Yolo was 5% smaller in size. I may add a square footage category as I think it’s becoming more relevant for conversation. Stay tuned.

Month-to-month:

I hope this was interesting or helpful.

Questions: What’s happening with prices right now from your vantage point? Any insight or stories to share?

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