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2007 had ten times more housing supply than today

October 4, 2023 By Ryan Lundquist 17 Comments

Ten times more housing supply!!! That’s what 2007 had compared to right now. Today I want to share a stunning supply visual for Sacramento, and talk briefly about what’s happening with sellers and prices. Enjoy if you wish.

UPCOMING (PUBLIC) SPEAKING GIGS:
10/4/23 KW Sac Metro Big Market Update (register here)
10/6/23 How to Think Like an Appraiser at SAR (register here)
10/27/23 AI Fall Conference (San Francisco) (register here)
11/30/23 Safe CU “Preparing for a Successful New Year”

TWO NEW MEMES

A couple new memes to show the sting of rising rates and how wrong so many predictions have been this year.

TEN TIMES MORE SUPPLY IN 2007

In September 2007 we reached the peak of housing supply in Sacramento County at 14.3 months. This means if nothing else came to the market, there would have been enough listings to satisfy demand for over fourteen months. In contrast, today we have about 1.4 months of supply. As I said a couple weeks ago when comparing 2007 and 2023, volume today feels very similar to 2007, but today inventory hasn’t been building like it did back then. That’s something that could change in the future, but it’s not the vibe right now.

SELLERS HAVE BEEN SITTING

We’ve had about 8,000 fewer new listings compared to last year (a low year), and about 13,000 fewer compared to the pre-2020 normal. Lots of people online are talking about supply building, but that hasn’t been the case in Sacramento.

17,000 SELLERS HAVE LISTED SO FAR

About 17,000 sellers have listed this year (and closer to 18,200 if we add in condos). This number would be closer to 30,000 in a normal year, but normal isn’t what we have right now. It’s a market where many sellers and buyers are sitting. Yet, not everyone is sitting, and I have 17,000 data points to prove it.

ONE THING TO WATCH WITH 8% RATES

Rates are flirting with 8% right now, and one thing we could see is the pile of active listings grow if rates keep going up. Keep in mind this wouldn’t be growth in supply due to more sellers listing their homes. This would be the stack of active listings getting higher if buyers back off the market. In other words, an increase in supply by waning demand (fewer pendings). This is what happened during the second half of 2022, and it’s something we need to watch closely in coming weeks. We’ll know soon if 8% rates are an inflection point for buyer demand.

PRICES HAVE BEEN FLATTENING

Last year we saw sharp downward price change, and it felt like the oxygen masks dropped from the ceiling during a crash landing. Today has felt more like a normal seasonal descent in terms of prices softening. That could change if rates keep spiking, but sharp change hasn’t been the description for 2023. We are starting to see prices higher than one year ago too.

WEEKLY PRICES

I like watching weekly prices because we get clues into what the monthly metric will look like. Do you see the flattening black line in 2023?

MONTHLY PRICES

It’s honestly a few days too early to share monthly prices, but I wanted to give a preview of the trend. Between August and September, prices were more flatter than not. Definitely not the sharp change we saw last year.

APPRAISER COLLEAGUES (ASKING AGAIN)

Earlier this year, I did a free webinar thingy on Zoom to talk about private work, and I’d be open to that again if there is demand. I’m starting to get the itch to bring some colleagues together, so let me know if you’d be interested. I got some good feedback last week, and I’d like to hear from some more too. This would be free. I’m not looking to make money on this.

Thanks for being here. I hope this was helpful.

Questions: What are you seeing in the market right now? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Chuck Norris eats 8% rates for breakfast

September 27, 2023 By Ryan Lundquist 26 Comments

Travis Kelce, Taylor Swift, and mortgage rates. So much drama this week. Let’s talk about it. Today I have some thoughts about believing the Fed, Chuck Norris, and building a bigger network. This post is all over the place, but hopefully something resonates.

UPCOMING (PUBLIC) SPEAKING GIGS:
9/28/23 Yuba City Big Market Update (in Yuba City (register here))
10/4/23 KW Sac Metro Big Market Update (register here)
10/6/23 How to Think Like an Appraiser at SAR (register here)
10/27/23 AI Fall Conference (San Francisco) (register here)
11/30/23 Safe CU “Preparing for a Successful New Year”

BELIEVE THE FED ABOUT HIGHER FOR LONGER

This isn’t my meme, but I think it’s perfect when talking about the Fed Funds rate (I don’t remember where I saved it from). Look, nobody knows what will happen with rates exactly, but the Fed has been saying higher for longer, so I recommend believing the Fed. My advice? If you work in real estate, plan on low volume, low supply, and higher rates unless something changes the trajectory of the trend. I like the idea of being realistic by planning for the worst and rejoicing if something else happens. The MBA has an optimistic outlook that the 30-year fixed rate will be 6.3% in Q4 2023, and that’s the rosiest projection I’ve seen. Look, I don’t predict rates because almost nobody gets it right, but like body weight, it’s been much easier to go up instead of down, so I’m not quick to embrace this projection. Time will tell.

THE MARKET WILL FIGURE IT OUT

No matter what rates do in coming months, the truth is the market will figure it out. That’s what markets do. Sellers, if buyers continue to lose purchasing power though, it’s time to be quick to listen and adjust accordingly. Purchase applications have been at 1995 levels lately. If you don’t remember 1995, that’s when movies like Toy Story, Braveheart, Billy Madison, and Clueless were out. Sellers, there is a smaller pool of buyers out there, lower the price if you’re not getting offers, and be open to giving buyers concessions if needed. And remember, Chuck Norris eats 8% rates for breakfast, but ordinary buyers aren’t Chuck Norris.

Okay, a few other things on my mind.

IT’S EASY BEING AN EXPERT DURING GOOD TIMES

I’ve been thinking about expertise quite a bit lately. When a market is good, it’s easy to feel like an expert, but real expertise shows up most when things aren’t so good. Know what I’m saying?

STAYING AFLOAT

Scroll to the bottom for some thoughts on building a bigger network and staying afloat in today’s market.

MOVING FAST IF PRICED RIGHT

With so much talk about the housing market slowing, I think it’s important to recognize things have still been moving historically fast in Sacramento at least. It’s just not a 2021 speed. Keep in mind if rates start to spike, we could see a sharp change in days on market and lots of metrics. Remember, we see change first in active listings, mortgage applications, and the sentiment in the trenches of real estate. If we wait for closed sales before spotting a trend, we’re going to be way behind the market.

ALL SHIPS RISE AND FALL WITH THE TIDE

This week I’m speaking in Yuba City, which is a cool opportunity to pull some stats for an area I don’t normally cover. I love the idea of creating visuals that haven’t been seen before and hoping they resonate (fingers crossed). Anyway, Yuba and Sutter County are north of Sacramento, and the price trend is VERY similar (see black and green lines). Data from CAR.

HOLY BATMAN, LOOK AT SAN FRANCISCO

I made this visual a few days back, and it’s stunning to see how close the price trend in San Francisco used to be to California in the early 1990s, but then it pulled so far away. This just goes to show that some areas don’t have the same exact trend (even though all ships tend to rise and fall with the tide).

And some local counties with California.

Okay, other stuff on my mind.

GROW YOUR NETWORK TO STAY AFLOAT

In my talks lately I’m sharing stats of course, but I’m also talking about the importance of increasing the size of your network. This is something I work hard at personally, and every day I push out perspective on purpose in order to be a resource and build relationships with people. Anyway, in light of volume contracting so heavily this past year, it’s vital to cultivate a bigger network to sustain business since we’re in a market with less movement.

Some questions to brainstorm:

– How do you plan to increase the size of your network this year?
– Who do you need to get to know?
– Who are the gatekeepers to the types of work you want to do?
– Who do you need to get in front of this week?
– How do you need to diversify?
– What do people need from you right now?
– How are you going to build good relationships and show up for people in today’s market?

APPRAISER COLLEAGUES

I know it’s been tough on many appraisers lately, and there is no sugarcoating that. I only do private work, so if you ever have questions, please reach out. Earlier this year, I did a free webinar thingy on Zoom to talk about private work, and I’d be open to that again if there is demand. I just can’t pull that off this month, but November could work. I’m starting to get the itch to bring some colleagues together, so let me know if you’d be interested.

Thanks for being here. I hope this was helpful.

Questions: What do you think of Taylor and Travis? Or what about anything I talked about in the post? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Pent-up demand & glowing new construction

September 19, 2023 By Ryan Lundquist 7 Comments

There is some serious pent-up demand building. The number of sellers who have not listed their homes this year is really starting to add up – not to mention a growing pile of buyers. And speaking of building, new construction has been glowing this year. Let’s talk about it.

UPCOMING (PUBLIC) SPEAKING GIGS:
9/26/23 Orangevale MLS Meeting
9/28/23 Yuba City Big Market Update (in Yuba City (register here))
10/4/23 KW Sac Metro Big Market Update (register here)
10/6/23 How to Think Like an Appraiser at SAR (register here)
10/27/23 AI Fall Conference (San Francisco) (register here)

13-MINUTE INTERVIEW WITH NPR

I did a 13-minute interview last week with our local NPR station, Capital Public Radio. And yes, I mentioned Taylor Swift when talking about inflation.

PENT-UP DEMAND IS BUILDING

I hear many real estate professionals say things like, “Bro, if rates drop to 6%, it’s going to be wild.” I get it because there have been so many buyers and sellers on the sidelines. This year we’ve seen 7,700 fewer new listings in the Sacramento region compared to last year and nearly 12,000 compared to the pre-2020 normal. In short, even if we take the smaller number here, there are close to 8,000 people who did NOT list their home this year through August (and about 7,000 fewer sales compared to the pre-pandemic average). So, yeah, there is some serious pent-up demand among both buyers and sellers, and at some point these people are going to want to move when affordability works for them (or their lifestyle or economic situation warrants a move).

10,000 HOUSEHOLDS

Look, we talk about pent-up demand all the time, but let’s put some numbers to the conversation. By the end of 2023, it’s very likely we’re going to see about 10,000 fewer new listings compared to last year (which was already a low year). It’s sobering to think there are potentially ten thousand households who may want to move as soon as circumstances allow. This certainly doesn’t mean they are all going to jump in the market at once. I’m just saying in the background we have some serious unmet demand building.

STUBBORN RATES

By the way, rates have been stubborn above 7%, so it seems wise to plan on them being higher, and delighted if they go lower. I’m all for being optimistic in life, but a sharp rate downtrend seems really hopeful. I could be wrong, but I’m a big fan of being realistic about the market that actually exists and not getting too hyped about what could happen in the future.

GLOWING NEW CONSTRUCTION

Now I’d like to share some new construction numbers. I’m excited for these visuals, and I put these together thanks to stats from North State BIA.

A SOURCE FOR PERMIT DATA

First, here is a cool source for permit data from the US Census Bureau. You can look up any state and county, and I pulled four local counties. The wild part to me is to see how close Sacramento County and Placer County are right now considering such a vast population difference.

NEW VS OLD

New construction volume has been robust this year. It’s been the second highest year of new sales over the past decade besides 2021. This has been stunning to watch, and I don’t recall many in December 2022 predicting new construction volume would be so strong. Yet, here we are.

SAGGING OLDER SALES

In contrast, the existing sales market (older homes) has shown the exact opposite trend with sagging volume. Keep in mind the existing market is so much larger, so higher new volume hasn’t been able to make up for all the missing buyers today. In other words, new home construction isn’t the savior for total volume. One last thing. There have been nearly 12,000 sales so far this year, which reminds us buyers are still here. I mention this because sometimes the narrative is that nobody is buying, and that’s fake news.

WHERE ARE PEOPLE BUYING?

Here’s a look at the top cities for new builds last month. I feel like a broken record to say Roseville took the top spot again. I find Roseville typically represents about 25-29% of total volume.

NOT THE HIGHEST YEAR EVER

It’s been a solid year overall for new homes, but years like 2002 through 2005 were higher. I know, I’m such a killjoy, but I wanted to share some wider context. It would be great if we could see levels like 2002 again, but it’s not in the cards at the moment. Besides, there likely isn’t enough labor to build that fast anyway.

NEW HOMES ARE A BIGGER CHUNK OF THE MARKET

New homes sales represent over 25% of the entire regional market so far this year in 2023. What I mean is when we add the existing market (blue) and new construction (yellow), new homes this year are 25% of everything. This is why I keep emphasizing new construction in my market talks. If you’re a real estate professional and not in tune with new construction, why not?

Here’s another way to look at it. I prefer the bar chart above, but we can fight about it in the comments if you think otherwise. And remember, it’s not that there are vastly more new homes this year, but the issue is the number of new homes is a greater percentage of everything.

TWO MORE GRAPHS THAT NOBODY ASKED FOR:

I know the top one is chaos, but I wanted to share the madness of what putting two decades on one graph looks like (don’t do this at home, kids).

THE ASTERISK NEXT TO GLOWING STATS:

Without concessions and rate buydowns, we would NOT be seeing strong new construction volume. Bottom line. I know, builders have the benefit of attention from consumers since there are less sellers listing their homes, but in my opinion the stronger force for creating potent volume this year has been concessions to buyers. A few weeks ago, I talked with a buyer who got a $20K price discount, 2% credit for closing costs, and a rate buydown. It’s stuff like this that is making ALL the difference.

TWO PEOPLE TO FOLLOW:

Here are two individuals on the cutting edge of talking about new construction. I highly recommend following both on Twitter (X) or LinkedIn.

– Rick Palacios Jr with John Burns RE Consulting
– Ali Wolf with Zonda

I hope this was helpful.

Questions: Any thoughts about pent-up demand or new construction? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

Is it 2007 again in the housing market?

September 12, 2023 By Ryan Lundquist 22 Comments

Is it 2007 again? There’s so much talk online about today’s housing market being like 2007, but what are the stats showing? Today I want to walk through three parts of the market. I suspect many locations are experiencing the same trend as Sacramento too. Skim by topic or digest slowly.

A brown background with some blocks that say, "normal" (crossed out in red). There is a white background rectangle with the title of today's post in black also.

It’s a strange market today with low volume and low supply. It feels a little amateurish to call it weird, but that’s a pretty good description.

THREE WAYS TO COMPARE 2007 & 2023

1) INVENTORY IS NOT BUILDING LIKE BEFORE

One thing that is REALLY different today is inventory is not building like it did in 2007. Supply has actually been subdued in today’s market as sellers have pulled back from listing their homes, and that’s the opposite of what we saw between 2005 and 2008. In fact, when prices peaked in August 2005, housing supply literally tripled in one year in Sacramento. Prices weren’t all that impacted the first year, but in the background, there was a tidal wave of supply building. Look, I’m not trying to sugarcoat today’s market, but we have a different vibe today where supply is not showing 2007 vibes. Granted, this doesn’t mean the market is healthy today. I’m just saying it’s way different.

Housing supply is actually lower today than one year ago.

New listings are down 34% from last year and 44% from the pre-2020 normal. Basically, we’re missing 7,700 new listings in the entire region compared to last year and 11,900 from the pre-2020 normal. I don’t have stats for 2007, but do you see what was happening in 2008? Yikes.

2) LOW VOLUME TODAY FEELS LIKE 2007:

One part of the housing market that feels really similar to the previous housing crash is the number of sales happening (volume). In 2005 prices peaked, and while prices weren’t down all that much the first year, the real change was seen in volume falling off a cliff. In real estate it’s easy to obsess over prices, but the real trend is often seen with volume.

We’ve basically had the lowest volume we’ve seen through August, so today really does feel like 2007 in terms of volume.

Not to beat the dead horse, but here’s another way to look at volume.

3) COMPETITION DOESN’T SMELL LIKE 2007

The stunning part about today’s market is how competitive it is in the midst of some of the worst volume ever. This is why I often call today a hybrid market. It’s like 2007 volume and 2020 competition gave birth to 2023.

Here’s a different way to compare competition in 2023 and 2007. Any dot above the 0% line went above the original list price, and anything below went below. Striking difference, right?

And days on market:

CLOSING THOUGHTS:

First of all, what happened last time isn’t the new template for every future housing correction, so even though I’m ironically writing a post about 2007, let’s remember that 2007 isn’t the new formula for every future downward cycle. With that said, today’s housing market feels like 2007 with volume, but it’s an entirely different beast with low supply, intense competition, and very few foreclosures. Ultimately, it’s not accurate to call this 2007 because it feels so different. Every time someone says it’s 2007, a puppy dies. Okay, that’s probably not true, but we do need to let stats form our narrative.

Though like 2007, we’re in a place where it would be healthy for prices to come down so more buyers and sellers can participate. The reality is sellers sitting back this year has so far catered toward keeping prices higher rather than fostering more much-needed affordability. I know, to some people it sounds like real estate sin for me to say this, but we have an affordability problem, and it’s not a healthy dynamic to see higher prices with lower volume. That’s not good for buyers, sellers, or real estate professionals.

What’s going to happen ahead? It’s impossible to predict the future with certainty since we’ve not had a market like this before. We have ideas for how long sellers might sit out, but the truth is nobody knows for sure. What happens with rates is a huge factor, and rates have persisted to be stubbornly high. No matter what, it’s important to not minimize the struggle of affordability today. In a traditional system low supply can help keep prices higher, but we’re not in a traditional market today, so over time we’re going to find out which is the more meaningful force. Affordability or low supply.

For now, we have a market that feels very stuck with a good chunk of sellers and buyers on the sidelines. It won’t be this way forever, but we seem poised to continue to see low volume and low supply until something changes the trajectory of the trend (rates, economic pain, etc…).

It does feel like 2007 in some ways, but in other ways it’s just so different.

—————— LOCAL HOUSING MARKET RECAP ——————

I have so much to say about today’s housing market, but let’s keep this short and sweet. I’ll push out a ton of stuff these next two weeks on my blog and my socials. Basically, we’re experiencing a pretty normal seasonal slowing so far. It does not feel like the crash-landing market last year in 2022 where most metrics saw incredibly sharp change. Basically, all the metrics are showing pretty normal seasonality so far (and they’re even more competitive than the pre-2020 normal). It looks like prices and volume have peaked for the year, which is normal to see. It’s worth noting we’re starting to see slightly higher prices compared to one year ago. Of course, volume is depressed and inventory is still sparse, so it’s a strange market.

SHARING POLICY:

Please share some of my images on your socials or in a newsletter. Here are 6 ways to share my content (not copy verbatim). Thanks.

ANNUAL STATS

Remember, some annual stats like volume get a little weird because we’re now comparing today with a slumping market last year. But we still need to know these numbers, so I’m going to be pushing them out.