How much have home prices gone down? That’s the big question right now, so let’s talk about it. But I want to highlight a pressing issue that’s been coming up about the stats. I hope this is helpful, whether you’re local or not.
UPCOMING (PUBLIC) SPEAKING GIGS:
1/12/23 McKissock Webinar (register here)
1/18/23 WCR Market Update in Cameron Park (register here)
1/19/23 Big market update at SAR on Zoom (register here)
1/23/23 Residential RoundUP on Zoom (register here (free))
2/8/23 SAFE Credit Union market update (details TBD)
3/10/23 PCAR Market Update Lunch & Learn (detailed TBD)
4/1/23 NAA Conference in Sacramento
5/22/23 Yolo YPN (details TBD)
BUYERS WENT FROM FOMO TO FOGS:
First, here’s a clever way to describe some buyers right now. Buyers went from the Fear of Missing Out (FOMO) to the Fear of Getting Stuck (FOGS). This obviously doesn’t describe everyone because lots of buyers simply cannot afford the market, so stepping back isn’t just about fear. But this concept resonated with me since some buyers have been really concerned about buying at a higher price only to see prices go down later. This concept came from David Osborn, and I made a meme out of it. And now let’s see what happens at the Fed meeting today. So many buyers are hungry for housing, but affordability has been the main roadblock. As I keep saying, we’ll get more buyers back as affordability improves. Bottom line.
NOT EVERY LOCATION IS THE SAME:
Home prices aren’t doing the same thing everywhere. Here’s an image from Lance Lambert of Fortune Magazine using data from the Black Knight Home Price Index (through October 2022). What do you see?
A PRICE MISTAKE IS HAPPENING:
This makes ALL the difference. Most local price metrics are down less than 2% from last November, so some people think, “Prices are barely down. Why is everyone making such a big deal about this?” But we have to look at price change from the spring too.
A HELPFUL METAPHOR:
How much do I weigh compared to one year ago? And how much do I weigh since the spring? Those could be two different answers, and that’s how real estate stats are working right now. Two very distinct numbers.
LAST YEAR vs MAY 2022:
When looking at the image below, do you see how there isn’t much change from one year ago? But there’s been a giant change from May. As I said last week, prices have dipped three times faster than the normal rate this year. But if we only focus on last year, price drops look modest. Friends, I had this conversation at least a dozen times this past week when sharing year-over-year stats, and lots of smart people were thinking prices weren’t down that much. This is an easy mistake to make.
Sacramento County looks similar.
Another way to look at it. The median price is down 1.6% compared to one year ago, but there’s been a hefty price change to get here.
ACTION STEP:
It’s key to get into the habit of looking at year-over-year stats AND recent stats. I think it’s been so long in real estate since we’ve thought about declining prices, so there is a learning curve to get back into the rhythm. Unfortunately, some people will focus on year-over-year stats, and they’re going to walk away with an incomplete picture or even perpetuate a false narrative.
I hope that 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.
Thanks for being here.
Questions: What stands out to you? Do you have a helpful analogy for the importance of looking at recent and older stats?
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The market is still moving, but lots of buyers are missing in action, prices have dropped faster than normal, and it’s taking much longer to sell. Sellers aren’t quite up to speed with proper pricing, but they’re offering credits to buyers more frequently, which shows they’re listening. Sellers haven’t been rushing to list as we’re still missing a few hundred listings from a normal trend.
