Sacramento Appraisal Blog

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The housing market went from an ice bath to a bloodbath

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The housing market went from an ice bath to a bloodbath. That’s a good way to describe the contrast between the dull fall season and the spring. In today’s post I want to highlight national vs local stats, a dead cat bounce, and dive deeply into local trends. I hope this is helpful.

Scroll by topic or digest slowly.

UPCOMING (PUBLIC) SPEAKING GIGS:
5/10/23 Empire Home Loans event TBA
5/22/23 Yolo YPN event (only for YAR members)
5/25/23 TBD
6/1/23 DJ Lenth Event TBA
6/07/23 SAFE Credit Union event for agents (register here)
6/08/23 Made 4 More event TBA
7/20/23 SAR Market Update (in-person & livestream)

HOT NATIONAL STATS & CAPPUCCINOS PER CAPITA

Before getting into the blazing spring, here’s something on my mind… I like to hear what’s happening with national real estate stats, but numbers on the bigger level might not mean anything at all for the local market. It’s sort of like national stats for cappuccinos per capita. That could be interesting, but also totally meaningless locally.

A NATIONAL PREDICTION I’M SEEING SOME TALK ABOUT

Over the past month I’ve kept hearing about 117 housing experts who say prices are going to climb in 2024. After seeing this a few times on social media, I wanted to find the source of the information, which ended up being a poll by Zillow. Here’s the gist. A poll from December 2022 interviewed 117 housing market experts and economists, and they basically predicted a lackluster 2023 and a rebound in 2024 for the national market.

I LIKE POLLS, BUT WHAT WOULD 117 BARISTAS SAY?

I’m intrigued with polls, and I use them in my own practice, but I’m also aware that 117 people looking into the future may not have it right either. I am not diminishing the expertise of anyone polled, but the future hasn’t happened either. I always wonder what these same people predicted last year and what they’ll say one year from now. Moreover, what type of results would we get if we polled 117 surfers, baristas, or teachers? Somebody please do this.

THE NATIONAL MARKET COULD BE DIFFERENT

Okay, back to the national vs local issue. This Zillow poll focuses on the national market, which is not always the same as the local trend. For instance, the Sacramento market had definitive price declines in the early 1990s, but Zillow’s press release described the national trend as “relatively stable from 1987 to 1999.”

THE BIG TAKEAWAY

I’m not trying to be a killjoy, but let’s be careful about forming a local housing outlook from national stats or what experts think might happen nationally. I’m not trying to throw shade on this poll either. It’s interesting. But it might not be meaningful at all for the local market.

——————— big market update below ———————

7% MEDIAN PRICE GROWTH THROUGH APRIL

The spring started out more subdued, but it’s really become competitive. When looking at median price change from January to April, we’ve seen about 7% growth so far in the region. This is pretty decent for the time of year (slightly lower than normal). Based on what I’m seeing in the pendings, we should see some standard if not strong growth ahead in May closed sales. Keep in mind this does NOT mean prices are up 7% for every property. Please look to the comps. The median price does NOT translate rigidly to every parcel or area.

NOTE: Prices rise in the spring almost every year (even in a declining cycle).

And here’s Sacramento County, which is more subdued. Keep in mind the median price was a little higher than usual in January, which is maybe causing the trend to look minimal. I know it sounds like I’m trying to be ultra-positive about prices, but I’m not. I’m only trying to explain why this stat is a bit more subdued.

SHARING POLICY

I welcome you to share some of these images on your social channels or in a newsletter. In case it helps, here are 6 ways to share my content (not copy verbatim). Thanks.

IS THIS A DEAD CAT BOUNCE?

A dead cat bounce is a temporary or short-lived recovery in the price of a declining stock (Wikipedia). The idea is even a dead cat would bounce if you thew it off a building. Sorry, I know that’s graphic. Please send your hate mail to whoever invented the phrase. In real estate we had a dead cat bounce in 2009 when the federal tax credit was introduced. The housing market was declining at the time, but then it got really hot while the tax credit was here. Yet, as soon as the credit ended, we saw prices continue to decline in Sacramento. Well, in today’s market, some onlookers are wondering if the spring season is a dead cat bounce. In other words, the idea is we’re in a declining cycle, and this spring is simply an expected seasonal uptick, and we’ll see declines persist after the hot season subsides. On the positive narrative side of things, some would say this is NOT a dead cat bounce at all. The idea is we’ve bottomed out and we’re going to increase from here on out. Look, I wish I could tell you what will happen, but here’s what I know. The market is not affordable in Sacramento for many people. During a declining cycle we normally see prices drop for 5 to 6 years. Keep in mind what happened in the past isn’t automatically the new template for the future though. Moreover, we’re in a weird spot with sellers sitting, and what happens with inflation, mortgage rates, the economy, and Fed policy can change the feel of things. On a practical note, I’m way more interested in the second half of 2023 after we get through the glowing spring. I do want to say I’m not a fan of saying the market has recovered in Sacramento. That’s the wrong sentiment in my opinion. I think it’s best to say we are seeing a decent to strong spring seasonal market in 2023, and we need to keep watching to understand how the market is going to unfold.

Okay, here’s an awkward analogy. Honestly though, I think it’s perfect.

STILL SEEING FREAKISHLY LOW LISTINGS

We still have more pendings than listings in the region and Sacramento County. This is a lopsided dynamic as a normal market should have a much higher selection of actives. It’s been so tight out there lately, and I feel for buyers. It’s basically a situation where we’ve seen low demand meet low supply. It’s not that we’ve returned to normal.

WATCH FOR THE SEASONAL PEAK

Normally prices peak in June, which really means there was a peak in late April or May (and those pendings close in June). In short, be on the lookout for a seasonal peak because that’s typically what happens around this time of year. Leading indicators will be the percentage of multiple offers, the number of pending contracts, open house traffic, and the word on the street from real estate professionals. Of course, one thing to watch is whether the peak changes this year in light of sellers sitting out of the market.

HOUSINGWIRE PODCAST:

If you need some background noise, here’s a podcast I did with HousingWire last week to talk about the spring market.

HALF THE PRICE GROWTH CAME IN APRIL

Prices felt a bit flat for the first couple months of the year, but March to April was strong. I like this visual because it helps show change over the past two decades. It’s striking to see a higher percentage this year, but it makes sense since the market hit an inflection point in mid-March. This isn’t just about the Dream For All program, but that’s part of it. My sense is we hit a point where supply was so anemic that it changed the feel of the market. Imagine how different the housing market would feel if we weren’t missing 4,400+ new listings over the past few months.

LIFESTYLE IS WHAT MATTERS

Lifestyle. That’s what today’s market is about. Lots of people are sitting and cannot move, but who has incentive to buy and sell regardless of what prices and rates are doing? That’s the question that matters for real estate professionals. My advice? Buckle up, cut expenses, put people first, diversify the types of business you focus on, get in front of people every week, increase the size of your network, add new skills through education, put out helpful content, and focus heavily on people who have  incentive to buy and sell due to lifestyle changes. Moving up, moving down, inheriting a property, having a change in family status, letting go of a second home, financial hardship, selling an investment, buying from a landlord, looking for acreage, buying a first home, etc… I know this market has been brutal. Stay focused. Expect to hear NO more than YES. And don’t lose hope. Keep moving forward. One step at a time.

GAINING BACK SOME OF THE LOST GROUND

We are NOT back to peak levels from 2022, but prices in some counties are flirting with late 2021 or very early January 2022 generally. Remember, the trend could be different in each neighborhood, so look to the comps.

IT’S NOT JUST ABOUT PRICES

If we obsess too heavily about prices, we’re going to miss a significant issue in real estate. Volume. Like I keep saying, volume is what pays the bills for real estate professionals – not prices. How many transactions are happening? Typically, we see the number of sales rise between March and April, but that didn’t happen this year. Other than 2020, lower volume in April happened a few times during the prior decade, but it hasn’t happened since 2012 locally. Before calling this a trend, let’s watch the next couple of months.

EXPLAINING WHY VOLUME IS LOW:

The market has felt like a bloodbath in terms of competition, but it’s been really weak in terms of volume. One thing on my radar is whether we start to see more subdued volume because of a lack of listings (or maybe we’re already there). The main culprit with lower volume for so many months has been buyers stepping back due to affordability struggles (rates rising), but if we start to see even more subdued volume ahead, we’ll have to ask if it’s also about a lack of listings. The temptation for some is to blame it all on a lack of listings, but that glosses over the affordability issue. But we may not be able to blame it all on affordability either. Time will tell. 

WE’RE MISSING 3,000 SALES THIS YEAR

I keep saying the market feels like 2020 in terms of competition, but it’s 2007 vibes in terms of the number of sales happening. We’re missing about 3,000 sales from the pre-pandemic normal in the region so far in 2023. In Sacramento County, monthly levels have actually been worse than 2007 levels for six months in a row. On the positive side, there have been over 4,900 closed sales in 2023. My advice for real estate friends? Know the stats better than anyone, and focus on the part of the market that is happening.

THE TREND ISN’T THE SAME EVERYWHERE

The market isn’t the same in every price range and neighborhood. Case-in-point. Check out volume by county in March and April. These images compare 2023 with the pre-pandemic average.

Okay, this post is getting long. Some recap visuals.

YEAR-OVER-YEAR

 

MONTH-TO-MONTH

OTHER VISUALS:

I hope this was helpful.

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

SHARING POLICY: I welcome you to share some of these images on your social channels or in a newsletter. In case it helps, here are 6 ways to share my content (not copy verbatim). Thanks.

Thanks for being here.

Questions: Do you think this is a dead cat bounce? Or have we bottomed out? What are you seeing right now in the trenches of escrow?

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

Sellers sitting out of the housing market & buyers getting concessions

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Sellers have been sitting out of the housing market, and it’s made a massive difference in 2023 so far. Today I want to show what’s happening with new listings and talk about concessions. I hope this is useful, whether you’re local or not. Scroll by topic or digest slowly.

UPCOMING (PUBLIC) SPEAKING GIGS:
5/4/23 Housing Market Q&A 12-2pm
5/10/23 Empire Home Loans event TBA
5/18/23 SAFE Credit Union event TBA
5/22/23 Yolo YPN event (only for YAR members)
6/1/23 DJ Lenth Event TBA
7/20/23 SAR Market Update (in-person & livestream)

I’M A BROKEN RECORD

Inventory is low. It’s tight out there. Buyers have few options. Blah, blah, blah. We’ve heard it all before. But that’s where we’re at, so let’s talk about it.

NEW LISTINGS HAVE LEFT THE BUILDING

A lack of new listings in 2023 has altered the feel of the market in many locations around the country. In the Sacramento region we’re missing about 4,400 new listings from last year (and last year was already lower).

The good news is we’re seeing a seasonal uptick in new listings so far in 2023, but the bad news is the number of listings is really low.

April was even lower than 2020 during the thick of the market stalling during the beginning of the pandemic. Do you remember how the market paused during that time? Well, it’s been worse than that lately.

LOW SUPPLY MEETS LOW DEMAND

I added this portion after publication because I’m getting a few comments about demand. Yes, demand is still low. We have a weird dynamic right now where low supply has now met low demand. This is why the market is so competitive. It is  NOT that we have a normal number of buyers.

STATS > SENSATIONAL HOUSING NARRATIVES

We have to keep letting the stats form our perception of the market. My advice? Be intentional about cultivating objectivity by being open to the stats, and letting the numbers shape what you say about the market.

WILL WE HIT A SEASONAL PEAK SOON?

I’ve been starting to hear a few agents tell me they’re seeing slightly less traffic at open houses lately. I’m careful with what I hear because a few stories don’t mean it’s a trend. However, the word on the street in real estate is so important because the stories of today become the stats of tomorrow. Thus, it’s key to listen to what market participants are saying (while sifting subjectivity). This is why I did a poll on my Instagram stories the other day. Look, I’m not putting all my perception of the market on this one poll, but the results are lining up with what I’m hearing from agents overall. Traffic is steady and the market is hot, but some agents are starting to report a bit less traffic. We’ll see if this holds. Keep in mind the market normally hits a peak in demand in the region in April with the percentage of multiple offers, so it’s not a shocker to see demand start to pull back around this time. Also, this doesn’t mean the market isn’t ultra-competitive or that some open houses aren’t packed, so thanks for saving your hate mail.

MULTIPLE OFFERS NORMALLY PEAK IN APRIL OR MAY

Just for context. The percentage of multiple offers typically peaks in April or May each year. However, these are for closed sales, which tells us the hottest time for multiple offers technically peaks about one month earlier in March or April each year. Prices typically peak around June in the region, which reminds us pendings are at their high in April or May before closing in June.

HOT MARKET = CONCESSIONS DECLINING

It’s normal to see concessions go down in the spring as the market heats up, but it’s also been a sharper change over the past few months in light of the housing temperature changing so much. Keep in mind it’s normal for concessions to rise in the second half of the year as the market softens.

NEW CONSTRUCTION IS A DIFFERENT ANIMAL

Here’s a local builder ad I saw last week where the builder was advertising buying down the mortgage rate and assistance for closing costs. Builders have had two months of volume rebounds, which is not the trend happening in the resale market. In short, offering concessions is a massive factor in luring buyers back into the game. Of course, we have to ask, would these properties padded with concessions be selling for that amount without the concessions? This is where appraisers are going to have to carefully analyze the market. The truth is concessions can inflate prices, which is something to watch.

CONCESSIONS AREN’T THE SAME BY PRICE RANGE

This is a new graph. Is it a keeper or not? Let me know. Basically, we tend to see more concessions at lower prices, and most concessions are under 3% too (topping out at 6%). Concessions are less common at higher prices, and they’re also lower in the amount.

And if you wanted to see the dollar amount instead… What I like about this is we can see the vast bulk of concessions are under $10-15K.

BRO, WHAT ABOUT MULTIPLE OFFERS?

What about properties with multiple offers? Does the seller still have to give concessions? In April, 56% of properties with multiple offers had concessions to the buyer. This is good for sellers to keep in mind. The bulk of these properties were under $550K though, which tells us sellers at the lower half of the market should still be ready to meet buyers with credits if needed.

THE MARKET OR THE MARKETING?

There are some really lopsided stories right now about properties going above the asking price, but the market isn’t always the culprit. Sometimes it’s the marketing. In short, if a seller prices 5-10% below market value, a property will naturally get bid up. This week someone asked me how much she might need to offer above the asking price, but that’s a hard question to answer because it really depends on the reasonableness of the original price. Look, lots of stuff at the lower half of the market is legitimately getting bid up because there are so many buyers competing, but some of it has to do with pricing too.

FLIRTING WITH A NORMAL RED LINE

It’s still early to pull monthly stats, but I want to give a preview. In April, 41.2% of sales sold above the original list price. The black line shows the trend in 2023, and it’s basically now flirting with normal levels (red line). Some people are saying it’s 2021 in the stats (orange line), but that’s not what the numbers are showing. But next month should be more aggressive as pendings from April start closing, so I expect the black line to go above the normal trend (which is bonkers to see in a market that is struggling with affordability).

And here are properties that sold below the original list price (black line). It’s a similar trend where stats are flirting with the pre-pandemic normal.

NOT EVERYTHING IS SELLING ABOVE

I know this is a hot mess, but I love this visual because it helps show how every property sold compared to its original list price. Look, the market is ultra hot right now, but that doesn’t mean everything is selling above either. Let’s look to the stats to help form our narrative. What we don’t want to do is impose one narrative on the market, whether that’s doom and gloom or glowing.

I hope this was helpful.

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Questions: What are you seeing right now in the trenches of escrow? What are you seeing with concessions? I’d love to hear your take.

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

Leaving California. Some fresh migration stats.

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Leaving California. That’s a buzzworthy topic. Let’s talk about migration today. I have lots of visuals and a few resources to share in case you’re in a different state and looking for data. I’d love to hear your take in the comments.

UPCOMING (PUBLIC) SPEAKING GIGS:
5/4/23 Housing Market Q&A 12-2pm
5/10/23 Empire Home Loans event TBA
5/18/23 SAFE Credit Union event TBA
5/22/23 Yolo YPN event (only for YAR members)
6/1/23 DJ Lenth Event TBA
7/20/23 SAR Market Update (in-person & livestream)

SOME LISTINGS DUE TO MIGRATION

Right now, it’s very difficult for many homeowners to list their homes because the price to replace a home is so much higher compared to the current monthly payment with a sub-3% rate. But there are still many owners who are going to list for lots of reasons including inheriting property, a change in family status, moving up, moving down, selling an investment, job change, economic pain, etc… And leaving the state is also a lifestyle category that we want to watch. In other words, outbound migration is a viable reason that some people today will sell as lifestyle needs and wants collide with market conditions. To be fair, not everyone who leaves the state is a homeowner, and not everyone who exits will sell their property either. Real estate friends, are you seeing listings due to migration? Do tell.

POPULATION CHANGE IN SACRAMENTO REGION

How has population changed locally? According to the latest U.S. Census Bureau stats, Placer County is clearly the big winner with the highest population growth, and Sacramento County lost population over the past couple of years. For real estate professionals, think about areas where people are buying and selling as you consider where to focus your business. By the way, I pulled the following stats here in case you want to make a table like this. There are stats available for every state.

PEOPLE ARE LEAVING CALIFORNIA (AND COMING)

When listening to media narratives, one might think people are ONLY leaving the state, but that’s not true. During the pandemic we saw a clear increase in migration out of California, but let’s not forget people who are entering the state too. When looking at data from the California Policy Lab during 2020 and 2021, about 1.92M residents moved out of California and 1.37M residents moved into California. This is based on credit card data for people who changed locations (interesting way to think about migration, right?). Anyway, here’s a visual from the California Policy Lab that shows exits (blue) and entrances (yellow). This data only goes through the end of 2021 unfortunately, but migration data takes a long time to publish. I’m interested to see where these lines go as we get more data.

MOVING BACK

People do actually move to California as the image above shows, and part of this stat is people moving back. Typically the number one destination for Californians is Texas, and often the number one sender of residents to California is Texas too. The joke is that it’s people who are simply moving back, but I haven’t seen stats to substantiate that exactly. I may push out some fresh stats soon to help show who is moving to California. Stay tuned.

THE CENSUS FLOWS MAPPER (A TOOL TO USE)

The Census Flows Mapper is a cool tool where you can pull up any county in the United States and track inbound or outbound migration. This data is based on the American Community Survey. The bummer is the latest stats only go through 2020, but I’m still excited that they finally added 2020 into the mix. Anyway, check out Placer County. Many counties send residents to Placer County, but Sacramento County is the number one sender.  

MIGRATION STATS FROM PUBLIC POLICY INSTITUTE OF CA

Okay, some fresh stats. Who is leaving California? The Public Policy Institute of California has some stellar visuals they recently published. Having more residents leave the state than coming to the state really isn’t anything new as it’s been happening for decades (see first visual), but a declining population lately is a big deal since there has been a difference in other factors that affect population. Remember, population isn’t just about exits, but it’s also about entrances to the state, births, deaths, and international immigration. Thus, when only focusing on exits, we’re missing other components of population. But backing up, there has been an increase in higher-income residents leaving lately. Well, and residents of all income levels.

STATS FROM PATRICK CARLISLE

Patrick Carlisle is the chief market analyst with Compass in the Bay Area, and he put together this chart for Sacramento. This considers data from 2016 to 2020. For locals, I recommend following Patrick on LinkedIn because he puts out great charts. It’s important to stay in touch with Bay Area trends if you are working in Sacramento because there is a real estate relationship between the Bay and Sacramento (even though there is some tension right now between Kings and Warriors fans).

LINKEDIN MEMBERS CHANGING LOCATIONS

This is an interesting way to think about migration. While it’s only limited to people with a LinkedIn profile who moved locations, it’s pretty cool to consider. Check out other cities here from LinkedIn if you wish. Keep in mind Sacramento always has a relationship with San Francisco, so it’s not a surprise to see Sacramento higher on the list. I personally think migration has slowed, which I’ll talk about below, but Sacramento is still receiving residents from the Bay Area. 

HOME SIZE IS A TELLING TREND

During the pandemic there was a spike in home size as buyers targeted larger and more expensive homes. Part of this was clearly Bay Area buyers moving to Sacramento during 2020 and 2021, but this could’ve also been buyers moving up to purchase their ideal home, so I wouldn’t say this was just the Bay Area. I don’t have deep migration stats to perfectly unpack this trend, but I can say the home size spike coincided with many stories from the real estate community about increased Bay Area migration. And we’ve seen this spike subside since the spring of 2021, which also lines up very well with the stories from the trenches of real estate regarding Bay Area activity.

THE WORD ON THE STREET

Today I’m NOT hearing anyone say things like, “All the buyers are from the Bay Area.” I used to hear that quite a bit in recent years, but that’s just not the case. This is only anecdotal, but there is something to it. I even spoke at the office of a big local builder a few months ago, and they echoed a change in the buyer demographic in that there have been fewer Bay Area buyers lately. In short, it looks like the pandemic migration bump has faded. At some point we will get some robust stats to potentially back this up, but for now all we have are stories from escrows. We’ll see what the numbers say eventually.

BRO, A BAY AREA UNICORN WILL BUY MY HOUSE

The danger about narratives is they can affect perception. So, if all sellers hear about is Bay Area buyers, they begin to expect a unicorn buyer to swoop in and drop fat stacks of cash on a house. My advice? Price for the market. Not the unicorn. If you get lucky with a lofty price, that’s a bonus. But don’t expect someone to overpay. And in today’s market, it just doesn’t feel like we’re getting the same migration.

WHEN MIGRATION DATA ISN’T MIGRATION DATA

I love Redfin as a data source. They put out incredible data. In fact, if you aren’t following their weekly trends, why not? All that said, I’m not a fan of the way their search queries stats are being used. To be fair, the misuse is often the media and real estate community, so this isn’t a Redfin issue per se. Anyway, here’s the issue. Sacramento has tended to make the top of the list for locations buyers are targeting based on search queries on Redfin’s website. Yet, we’ve literally had our worst volume ever while simultaneously making the top of the list for places buyers want to move. Thus, there is a disconnect between people who are searching for Sacramento on Redfin’s website and what is actually happening. Ultimately, this tells us search queries are NOT always actual buyers (not yet at least). Granted, this data is super interesting and we should be talking about it, but it can also create a false narrative when the media and real estate community conflate “queries” with “buyers.” I know, I’m such a killjoy. Again, nothing but love for Redfin for their data. And shoutout to Taylor Marr, Redfin’s Deputy Chief Economist (follow his weekly Substack).

I hope this was helpful.

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Questions: What are you seeing right now in the trenches of escrow with migration? Do you know people who are leaving the state or coming to the state? I’d love to hear your take.

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

Rising spring prices and appraisers checking the “declining” box

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The housing market has really started to heat up lately, and today I want to talk about how I’m thinking about prices right now. I also have some thoughts about checking the “declining” box. Scroll by topic or digest slowly.

UPCOMING (PUBLIC) SPEAKING GIGS:
5/4/23 Housing Market Q&A 12-2pm
5/10/23 Empire Home Loans event TBA
5/18/23 SAFE Credit Union event TBA
5/22/23 Yolo YPN event TBA
6/1/23 DJ Lenth Event TBA
7/20/23 SAR Market Update (in-person & livestream)

THE DANGER OF GENERALIZING ABOUT PRICES

I’m not a fan of saying the market is doing just one thing because the trend might not be the same in every neighborhood and price range. I will say we’d been seeing a modest spring price bump this year in the region, but we hit an inflection point in mid-March where things started to get really hot. I wrote about that last week. Some of this change was from the Dream For All loan, but the inflection point started almost two weeks prior to the loan being available.

THE WORD ON THE STREET

This isn’t a scientific poll, but I asked people on my Instagram stories a few days ago what prices are doing, and here’s what they said. The bulk of votes are from people who work in real estate locally. I think it’s striking that few people said prices are going down. But it’s also clearly a mixed bag (a good way to describe the market). I did a poll like this one month ago, and at the time 17% of people said prices were going down and 14% said they were going up.

IT’S GETTING REALLY TIGHT IN HERE

The market is really feeling a lack of new listings, which has started to create an aggressive trend again. It’s freakish to see more pendings than actives right now in the region as that is NOT a normal trend (but it did happen in portions of 2020 through early 2022). Since the Dream For All loan ended, there are maybe slightly more listings available, but it’s still slim. And this is why I’m hearing more about appraisal gaps being written into contracts. The wild part here is we’re still struggling with affordability. It’s a weird dynamic to feel this competitive in the midst of so many buyers not being able to participate.

NOTE: There are still overpriced listings out there, so buyers won’t pay literally any price. Sellers, did you hear that?

WEEKLY PRICES HAVE BEEN RISING

The weekly median sales price and weekly average sales price have been increasing lately (black lines). So far, the monthly median for April is up compared to March also, which shows a seasonal price bump at the least. Let’s remember the latest week of closed sales really reflects properties that got into contract about one month ago.

WE’RE AROUND MID-2021 PRICE LEVELS

A Fair Oaks home sold for $531K in April 2021 and it sold again in the same condition for $543K in April 2023. In the graph below I’ve highlighted red bars to signify when this property got into contract during each sale. In short, the sale of this property ended up lining up really well with the county trend. This doesn’t always happen, but sometimes it does. The median for April is not listed yet, but it’s around $515,000 for now, which is somewhere around mid-2021 (though technically fall 2021 was pretty similar to mid-2021 also). 

WE HAVE TO LOOK TO NEIGHBORHOOD TRENDS

It’s a mistake to impose county or ZIP code price trends on a neighborhood, so we have to look to the comps to understand the market. Are prices going up? Well, if they are, we’re probably seeing upward pressure in the pendings through higher prices, multiple offers, maybe less credits, etc… In many areas right now in my appraisals I am seeing some upward pressure, but sometimes it still feels a little flat. But I have NOT been seeing a hardcore declining market like we had during the second half of 2022. Anyway, the neighborhood graph below isn’t a perfect way to see the trend, but check out pendings in black and actives in yellow. This is only a snapshot, but pendings are clearly NOT at the lowest price points. I know, this could be due to size or other aspects, but I’m seeing this dynamic consistently in many areas where properties are no longer competing at the lowest prices.

IT’S NOT JUST ABOUT PRICES

Many people only focus on prices in real estate, but I think volume tells the bigger story. If we see higher prices with paltry closed sales, then prices aren’t the real story. And in real estate, volume pays the bills. Not prices.

CHECKING THE “DECLINING” BOX

There isn’t one right box to check, and I defer to appraisers to figure it out. If you didn’t know, in the appraisal report appraisers are asked to say whether prices are rising, stable, or declining. For me, I have not been checking the declining box in my appraisal reports lately like I was in later 2022 since we’ve been seeing a seasonal price bump locally. I’ve found myself gravitating toward stable and maybe increasing depending on the neighborhood. I also find myself adjusting older comparable sales up since the market is willing to pay more lately. In my market description I’m talking about a massive decline last year and prices leveling off or showing an uptick this year so far. This doesn’t mean we’ve bottomed out and prices will only rise ahead. All I’m saying is the market was an ice bath from mid-2022 through December 2022, but that’s not what it’s like right now.

To my colleagues, I don’t care which box you check. Seriously. No pressure from me. Do your thing. I would only say our duty is to support the trends we say exist, and nailing the trend makes all the difference in our appraisals. However, if you are saying prices are declining, but that’s not what we’re seeing in neighborhood stats when comparing pendings and recent sales, county stats, and what we’re hearing in the trenches of escrows, that’s something to consider.

Here’s my thing. We have to be able to see the market before the sales start closing in the future. This is why we need to give strong weight to what we’re seeing in current pendings and actives. Sales tell us what the market used to be like when these properties got into contract maybe months ago. Look, I’m not going to base my perception of the market on one lone-ranger pending. I’m just saying if we only recognize a price bump or decline once properties have actually closed, then we’re lagging the trend. Check out the image below that shows the preliminary median price for April. Here’s the question. If prices have gone up this spring, is that being reflected in how I describe the market and adjustments I give? That’s the key.

One more thing. I will NEVER be an appraiser who gives in to pressure to check the stable box because it’s easier for a client to do a loan. I recall being young in the profession and hearing older appraisers jokingly say things like, “The market was stable on the day in 2007, so that’s the box I checked.” Sorry, that’s not okay on so many levels. We have to reflect the market that exists, whether it’s declining, stable, or increasing. If we only check one box and it’s always that one thing, we have to ask if we’re doing our job or not…

Let’s talk more in the comments if you want.

Here’s an example of some language I used to describe the market about one month ago. I shared this at the ACTS conference recently. Just in case it’s helpful to see what one dude is saying.

I hope this was helpful.

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

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

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