Do you remember the movie, The Matrix? It came out in the late ’90s, and in a classic scene, Morpheus offered two pills to Neo, a red one or a blue one. Neo, of course chose the red, and the rest is history. Well, there are two “pills” I want to talk about for today’s housing market, and I think it’s a situation where sellers should consider offering both of them at the same time.
UPCOMING SPEAKING GIGS:
2/18/25 Travis Credit Union TBA
2/19/25 NARPM (private)
3/6/25 Yolo Association YPN Event
3/12/25 Windemere Sierra Oaks
3/20/25 HomeSmart iCare Realty (private I think)
4/10/25 Yuba-Sutter Association (details TBA)
4/15/25 Culbertson and Gray (private I think)
5/8/25 Private event (details TBA)
5/13/25 PCAR
6/5/25 Auburn Marketing Meeting
9/26/25 PCAR
11/4/25 SAR Main Meeting
THE MATRIX MEETS REAL ESTATE
TAKE THE PURPLE PILL
The red pill for worked well for Neo, but sellers today would be wise to combine red and blue to offer the “purple” pill so to speak. Too many sellers are still struggling with overpricing, and they’re not in sync with supply growing more than demand. So, if there aren’t any offers coming in, why not reduce the price AND be ready to offer a concession if needed (credit for repairs, credit for closing costs, rate buydown…). I realize the dream is to keep the price high while offering a credit, but buyers are extremely picky today about price, so they may want a reduction AND a credit. Look, there isn’t just one way to do this, but my advice is to keep the purple pill on the table as your secret weapon.
HOUSING DOCUMENTARY BY 8TH GRADERS
By the way, some 8th grade students from Natomas Charter School created a documentary on housing affordability. I was honored to pitch in a few thoughts, and they really killed it. Check it out here (six minutes). I’m blown away.
HOW COMMON ARE CONCESSIONS?
I just pulled some new stats, and I think this is a cool way to see the market. Concessions don’t happen in every escrow, but they are common – especially at lower prices.
HAS THE NAR LAWSUIT AFFECTED THE STATS?
Some people have wondered if the NAR lawsuit has affected the concessions field in MLS. In other words, are agents now entering compensation as a concession? I don’t have any way to know with certainty, but I do have stats, and the percentage of concessions this January is actually only barely higher than one year ago, and that suggests the NAR lawsuit has not broken the concessions field so far. I’ll keep watching this. Someone suggested that this field is not credible, but there is very clear seasonality observed, and that suggests credibility to me.
FIVE WAYS TO DESCRIBE THE MARKET
1) SELLERS ARE COMING BACK MORE THAN BUYERS:
The great news for January 2025 is we saw buyers and sellers outpace 2024 numbers. This is exactly what we want to see because a healthy housing market has more buyers and sellers participating. Yet, the bigger trend is that sellers came back more than buyers. This is on brand with what we saw in 2024, so it’s not a shocker that the trend carried over into 2025. One thing to keep in mind is there were five Thursdays in January, so the number of new listings was slightly inflated (the highest number of new listings hits on Thursday).
2) WARM IS THE RIGHT WORD
I’ve been calling the housing market warm so far. Not blazing hot. That’s what the stats are showing as well as the word on the street from the real estate community. Look, we’re seeing definitive signs of spring, but it just hasn’t started out as an aggressive rocket ship year. I think buyers are feeling the higher rates.
The Super Bowl is over now, so we should start to see more competition ahead as sellers and buyers thaw out for the spring season. Yet, the heat level is poised to be more subdued if rates remain elevated, so don’t expect 2021 vibes at all. Here’s what the normal pattern looks like, and each year we want to watch closely and ask whether we’re seeing normal seasonality or something else.
3) THE GAP IS GETTING WIDER
This is such a big trend to watch. The gap between active listings and closed sales is widening, and this affects the temperature of the housing market. Do you see how the gap in 2024 is much wider than 2023? But backing up, it’s actually normal to have a wider gap like we saw prior to the pandemic, so what we’re seeing today isn’t freakish. Yet, it’s been really hard for many to adjust to today’s dynamic after having lived through 2021.
4) THE PROFILE PIC IS HOTTER THAN REAL LIFE
Have you ever seen somebody’s profile pic, and the real thing just doesn’t look the same? Haha. Well, that’s what the housing market feels like right now. Price stats are up four to five percent from one year ago, but prices actually feel really flat when pulling comps (in many cases). So, there’s a disconnect between glowing price metrics and what we see in real life. What’s going on? A few things. First, homes were larger this year compared to last year, and that matters. Second, it’s possible some of the stats last year were still a bit dull after rates hit 8% in the fall of 2023. And lastly, we’ve seen more higher-priced units selling, and that can make a difference in the numbers.
5) HOT POCKETS
The market doesn’t feel the same everywhere. What I mean is the housing market is like a hot pocket taken out of the microwave too early. Some spots are frozen, some are lukewarm, and others are blazing hot. In the local market, new construction has been hot, condos have been frigid, luxury price points have been blazing, overpriced units are freezing cold, and properties in good condition that are priced right are the hottest units on the market. This is a good reminder that there is never just one adjective that perfectly describes every aspect of the market.
NOTE: I intended to have more recap stats today, but I had to rewrite this post because it didn’t save for whatever reason. Doh!!
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Questions: What stands out to you above? Anything else to add? What did I miss?
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The concessions field in Metrolist today is Yes, No, and the infamous Call Listing Agent. We no longer get the details because of litigation concerns over agents trying to report buyer broker compensation in the concessions field. Why are there concerns regarding agents reporting Yes, No, or CLA? I have not run into agents reporting this incorrectly.
And for those who care about cash equivalency, we continue to push Metrolist to go back to allowing agents to report concessions amounts.
I don’t think there is any notable concern about this in the marketplace, but my concern has been whether the buyer’s agent compensation would be reported as a concession since the commissions field is no longer present in MLS. That doesn’t likely matter to many people, but it does matter for stats if we want to be able to extract data from that field. What people input into MLS really matters. I think there is a margin of error though because some agents report a price reduction as a concession and whatnot, so sometimes a “yes” really doesn’t mean yes. Overall, the field seems solid. I follow it religiously and extract data from it every month. I’ll keep doing so as long as the results are solid.
And yes, let’s hope Metrolist can work some magic. I appreciate the group of appraisers who have offered a solution to the concessions field in a post-NAR lawsuit world. It would REALLY help everyone pulling comps to be able to see specific amounts for specific concessions (not relating to compensation). Our idea was to have a drop-down menu that would say things like, “closing costs credit” or “rate buydown.” And then a specific amount can be entered for that specific field only. There would be no mention of compensation and no place to write in something else besides the specific drop-down categories. Can this fly in a post-NAR lawsuit world? I think that’s a good question, and only time will tell.
Would love to see an article or some data about outdated housing. I’m wondering if the renovated properties that have new finishes are a hot commodity because of the age of housing?
That would be cool, but it’s hard to quantify condition on a big scale for stats. I haven’t cracked the code at least. If someone has, speak up. Age is a factor for buyers, but it seems like buyers in most cases are focused more on condition and upgrades than age. In other words, effective age is the big issue. My sense today is buyers are very sensitive to condition for two reasons: 1) The cost to buy a house is massive; 2) Buyers might not have enough funds after purchasing to renovate the house, so a home that is already updated or at least clean is a huge plus.