Appraiser

Buyers are making less aggressive offers

August 1, 2022 By Ryan Lundquist 6 Comments

Good news. Buyers aren’t having to make aggressive offers like they used to (even when there are multiple offers). Let’s talk about this today. I suspect this is true in many areas across the country. I’d love to hear your take.

A green background with a wooden table at the bottom. The caption reads, "Buyers are making less aggressive offers."

UPCOMING (PUBLIC) SPEAKING GIGS:
8/11/22 Realtist Lunch & Learn (sign up here (open to anyone))
8/15/22 YouTube Live with Matt Gouge (details TBD)
8/25/22 State of Housing Brunch & Learn (sign up (for real estate community))

1) Buyers are finally getting in below the list price

On average properties sold about 2% below the original list price last month in the region, which means buyers are not having to endure insane bidding wars to get an offer accepted (most of the time). This is a far cry from last year when the average was 3% above the original list price. Keep in mind an average below doesn’t mean everything is selling below the list price.

The sales price to original list price percentage. A line graph of the Sacramento region from 2018 onward.

2) Bidding wars aren’t completely dead like some think

“Everything is selling below the list price.” That’s what some people think, but it’s not true. Seriously, there are still multiple offers in today’s changing market. In fact, 47.0% of sales last month had more than one offer in the Sacramento region per MLS stats.

A line graph to show the percentage of multiple offers in the Sacramento region since January 2017. The graph sort of goes up and down depending on the time of year.

3) Offers from buyers are becoming less aggressive

The table below studies sales that ONLY had multiple offers, and the big takeaway is that when multiple offers happen, properties aren’t getting bid up way beyond the list price like last year. I realize this isn’t a shocker, but seeing it in the stats is important. There are also more properties today that had multiple bids and still sold below the original list price. Sellers, did you hear that? It’s easy to think, “multiple offers = selling way above the list price.” Nope. Today you might get a few offers at best, but buyers are getting used to the idea of making less aggressive offers and expecting concessions too.

4) There are fewer properties getting bid up 10% and more

Here’s another way to see the difference between last year and this year. I know, there are way too many orange dots, but can you spot more sales last year going above the original list price (above the 0% line)? There were so many more properties last year that sold above 10% too. Also, there’s been a big drop in the number of sales this year (fewer dots).

A scatter graph to show the percentage of properties with multiple offers and how much they sold in relation to their original list price

A scatter graph to show the percentage of properties with multiple offers and how much they sold in relation to their original list price (2021 stats)

5) A spike in supply is giving buyers more control

We’ve seen a sharp uptick in available listings over the past few months, which means buyers are gaining power from sellers and having more time to make decisions. These stats below only represent listings on August 1st, which might seem like a strange thing to publish, but the monthly trend actually looks the same. Anyway, there are about 1,800 more listings than last year, which is also still a few hundred lower than the pre-pandemic normal. As I’ve been saying, a spike in inventory is NOT due to more sellers listing their homes. This is really about fewer pending contracts happening. In other words, the change in supply is due to a change in demand. Technically, the number of listings looks almost normal, but the abnormal thing happening right now is a 30%+ drop in pending volume (more on that soon).

This bar chart shows the number of active listings on August first each year in the Sacramento region

Check out the number of available listings in today’s market compared to last year at the same time. Keep in mind we saw massive price growth from one year ago, which explains more listings above $500K in particular.

This bar chart compares the number of active listings in the Sacramento region by price range (comparison of 2021 and 2022).

CapRadio Interview: Last week I did an interview with our local NPR station. We talked about housing demand, uncertainty salad, and lots of things. It’s about ten minutes. Check it out here if you wish.

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

Thanks for being here. I truly appreciate it.

Questions: What are you seeing happen with offers right now? What advice do you have for buyers or sellers? I’d love to hear your take.

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Spiking housing supply & fewer buyers

July 25, 2022 By Ryan Lundquist 36 Comments

Finally. We’ve seen a massive change with housing inventory. But is it because sellers are rushing to list their homes? Nope. That’s not the culprit. Let’s talk about supply and some things on my mind about today’s market.

A wood rustric table with a gray background. The caption reads "housing supply is spiking."

UPCOMING (PUBLIC) SPEAKING GIGS:
7/26/22 Navigating the Shift (sign up here (for real estate community))
8/11/22 Realtist meeting (sign up here starting 7/27/22)
8/15/22 YouTube Live with Matt Gouge (details TBD)
8/25/22 State of Housing Brunch & Learn (sign up (for real estate community))

FIVE THINGS ABOUT TODAY’S HOUSING MARKET

1) The spike in housing supply is NOT due to sellers:

In a short period of time, we went from having three weeks of supply in the Sacramento region to ten weeks. What is causing this change? It’s easy to pin this on sellers rushing to list, but that’s NOT the case. This is actually about fewer buyers getting into contract. We’ve seen close to two thousand fewer sales since May, which means listings that normally would’ve sold are still on the market. In other words, the spike in supply came from weakening demand rather than more listings hitting the market.

SUPPLY PROJECTION: 2.5 months of supply is a projection based on what volume looks like it will be by the end of July. This means the number will be more solid in two weeks once most sales for the month have closed in MLS. A range would be 2.2 months to 2.5 months if we wanted to go wider. I pulled these stats yesterday, and today my projection is 2.38 months for the region. Just a heads-up.

A line graph to show monthly housing supply since 2014 (and a quick spike lately).

Not kidding about fewer listings: Since the pandemic we’ve been seeing a subdued number of new listings, and there has NOT been a spike lately either (see blue line).

A line graph to show new listings since 2017 in the Sacramento region

Seriously, this is about buyers: If you don’t believe me about fewer sales, take a look at the black line (2022). Sales volume has taken a nosedive over the past few months, which has been the x-factor in adding to the pile of available listings. Remember, housing supply can grow from sellers listing more often or even buyers purchasing fewer homes.

A line graph to show 2022 volume through July (it's really down compared to other years).

2) Dating advice or real estate advice?

It seems like lots of housing advice sounds like dating advice lately.

– Be patient.
– Be realistic.
– You have one shot to make a first impression.
– Go all out with your best foot forward.
– It’s tough out there right now.
– It’s different today. Not like what it used to be.
– It can take time to find the right person.

Sorry if that was cringe. Here are price drops to make up for it.

Price drops in the Sacramento region. This table shows the percentage of listings with a price drop (47.22% in the entire region)

3) Buyers aren’t getting appraisal waivers very often:

Getting an appraisal waiver from the lender during a purchase probably isn’t going to happen. It’s just not that common for lenders to let the purchase go through without an appraisal. It looks like fewer than ten percent of purchase loans are getting an appraisal waiver. Please note a lender’s appraisal waiver is not the same thing as a buyer removing the appraisal contingency.

Data to show how often appraisal waivers are happening for Freddie Mac and Fannie Mae.

4) New construction volume is doing the limbo:

June was a brutal month for new construction sales in the Sacramento region. Per North State BIA data, volume was down 58% from last June and more akin to 2014 levels. This is a bigger hit than the resale market, which was down closer to 25% in volume last month.

a bar graph to show sales in the sacramento region of newly constructed homes in the month of june

5) No price range is immune from the trend:

No price point is immune from the sting of higher mortgage rates. Stats from the California Association of Realtors show all price ranges in June in the state saw fewer pending contracts. Of course, not all neighborhoods and property types are going to have the exact same temperature, but there is no mistaking an impact throughout the entire market. Or like the saying goes, all ships rise and fall with the tide.

A line graph to show pending volume has shrunk in every single price range in California

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. I truly appreciate it.

Questions: What stood out most to you? Any advice you would add to the list? I’d love to hear your take.

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

Is the housing market getting back to normal?

July 11, 2022 By Ryan Lundquist 18 Comments

“The housing market is getting back to normal.” I hear that quite a bit, but is it true? Well, yes and no. Let me explain.

UPCOMING (PUBLIC) SPEAKING GIGS:
7/15/2022 Lunch & Learn Market Update (sign up (for real estate agents))
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7/26/2022 Navigating the Shift (sign up here (for real estate community))

THE VERDICT: NORMAL OR NOT?

NORMAL:

Lots of metrics are technically getting closer to normal pre-pandemic levels. We’re seeing price growth at 6-7% instead of 15-20%, monthly supply has ticked up, properties aren’t getting bid up like they used to, and it’s starting to take longer to sell. Technically, many housing metrics are flirting with normalcy. However, there are also some abnormal things happening.

NORMAL (EXAMPLE 1):

Bidding wars have calmed down. What I mean is the number of properties selling below the original list price is starting to approach normal levels. The black dotted line shows July sales so far, and we are pretty close to normal.

NORMAL (EXAMPLE 2):

Finally, properties are starting to take longer to sell. We aren’t back to normal levels quite yet (red line), but we’re getting much closer. This black will be a whole lot higher in coming months.

NOT NORMAL:

A sharp rise in inventory
Sales volume last month was down about 25% from June 2021
Pending contract volume was down over 25% from June 2021
Price reductions have seen a sharp increase

NOT NORMAL (EXAMPLE 1):

Sales volume in Sacramento County had another really low month. It was one of the lowest months in the past twenty years.

NOT NORMAL (EXAMPLE 2):

The number of pending contracts is down in most counties by about 25% or slightly more. The number of pendings at this time of year is clearly below a normal trend (see black line). The future hasn’t happened, so we’ll see what this line does, but we’re poised to see pendings continue to dip in volume unless something happens to interrupt the trend.

CLOSING THOUGHTS:

In short, many metrics are hovering around normal or almost normal levels for the time being, so I can understand when people say the housing market is normalizing or trying to find balance. It’s like we were on a honeymoon for two years, and now it’s real life instead of an endless mai tai vacation vibe.

But here’s the bigger truth. We are in the midst of change due to dropping buyer demand and increasing supply. Simply put, a sharp change in mortgage rates is driving a wider gap between supply and demand, which is changing the housing temperature by the week.

We need time and objectivity to see the long-term trend, but for now it’s apparent we’ve seen a blatant shift from a really aggressive trend to more buyers struggling to afford higher prices. There are certainly still deals happening as 75% of pending volume was present last month and 40% of pendings in July have had multiple offers. But understanding the housing market isn’t just about the deals happening. It’s also about the ones that aren’t happening. Let’s keep an eye on both.

My advice? Be careful not to impose a doom or rosy narrative on the numbers. Also, I recommend paying attention to lots of metrics – not just the ones that fit a certain narrative. The key here is to continue to identify what is normal and what is not normal.

What are you seeing in the trenches? I’d love to hear.

—–——– MORE VISUALS FOR THOSE INTERESTED ———––

I’m maxed out, so I don’t have much time to give commentary to the market, but here are some quick thoughts and stats to unpack June 2022.

A QUICK RISE IN SUPPLY:

We’ve seen a sharp uptick in supply over the past few months. It’s not that so many more sellers have listed their homes. The real culprit is fewer pending contracts, which has caused the pile of available listings to grow exponentially. Monthly supply at 1.74 isn’t historically high, but it’s high enough to help change the feel of the market. Some people say things like, “Bro, five months of supply is normal, so it’s a joke to make a big deal out of less than two months.” I get it, but five months is NOT normal for Sacramento. In short, we are basically at the lower end of a normal range of housing supply right now. With that said, there is still some shock happening where people are freaking out to see so many listings and that it’s taking more than a weekend to sell.

One more thing. We typically start to see fewer listings hit the market around this time of year, so it’s possible the sharp supply uptick could subside slightly due to normal seasonal slowing. But let’s see if we get more FOMO sellers listing their homes (FOMO = Fear of Missing Out). I haven’t noticed a big uptick with these sellers, but it’s on my radar. And most importantly, let’s consider the number of pendings, which has made the most difference thus far.

PRICE REDUCTIONS:

I’m working hard to figure out ways to show price reductions. I hope to roll out some new stuff soon. I actually had big plans today, but that didn’t pan out. For now, here are a few images.

NOTE: There was an error in my bar graph below. My bad. Basically, the stats weren’t sorting correctly, so the categories were off by one bar. In technical terms, this was histogram sin. But the good news is that it’s been corrected. Basically, this means there are fewer properties getting into contract when reducing the list price by less than $10K (but we knew that).

PRICES ARE SOFTENING:

No matter what the metric, prices are softening. This should be happening around the time of year, but the market crested at least one month early this year, so the timeline for softening feels out of the ordinary. Let’s keep watching this. And as I always say, prices are the last place a trend shows up. If we want to see what a market is doing, look to the listings and pendings first before they become closed sales…

YEAR OVER YEAR:

Annual stats are important to digest, but don’t forget to look at month to month stats. And remember, sales in June really tell us what the market used to be like in May when the bulk of these properties got into contract. Also, not every location and price range have the same trend (big point).

MONTH TO MONTH:

Looking at sequential months is key too so we don’t just get stuck or hyper-focused on last year (the past).

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 are you seeing out there in the market? What did I miss? I’d love to hear your take.

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

A spike in listings & sitting on the market

June 20, 2022 By Ryan Lundquist 21 Comments

The pile of listings is growing, and it’s taking longer to sell. That’s what so many housing markets across the country are experiencing right now. We’re on the cusp of seeing some real change in the stats over the next few months. Here are some things on my mind. Anything to add?

wooden house with a red arrow up. The captionn is the blog post title.

Why have we seen a spike in listings?

We have almost 3,400 active listings today in the Sacramento region. This is actually still lower than a normal level, but over the past two months there has been a dramatic uptick. What is causing this change? It’s not that sellers have rushed to list, but rather we’re seeing fewer buyers. Since April we’ve easily had over one thousand fewer pendings in the region. Instead of getting into contract, these properties have essentially stayed active. In short, we’ve seen a rise in listings due to a fall in demand.

It’s taking longer to sell (check out the actives):

I think this is a helpful way to show market change. Sales in June have gone quickly, it’s taking longer for pendings to get into contract in recent weeks, and active listings are really starting to sit. And when actives close eventually, that’ll really affect the stats. Do you like this visual?

A data table to show days on market trends for varioius areas of Sacramento. It basically shows sales in June, pendings since June, and current actives. Here's the trend. It's take longer to sell.

NOTE: Sales in June got into contract in May, so they really tell us more about what the market was like in May.

The stats are hot, but that’ll change more in July:

The market has been changing, but we haven’t seen too much change in actual sales stats yet. The truth is it takes time for temperature change to show up in the numbers. This dotted line projects days on market through July based on pendings so far in June. The black line (2022) is going to get a whole lot closer to the red line (pre-pandemic average). We are still not back to a normal days on market, but that can happen quickly. As I’ve said, we’ve waived goodbye to the most aggressive market ever. This is key to recognize since it’s simply going to take longer to sell today.

Duh, it should be taking longer:

Some of what we are seeing is seasonal because it should take longer to sell at this time of year, but we’ve also experienced a market shift since affordability has been given a severe beating in recent months. So, what we are seeing isn’t just seasonal. This is about a bigger change where buyers are struggling to afford and stay in the game.

I’m exhausted and out of quarantine:

I just got out of quarantine. Covid finally got me after all this time. My family actually had to cancel a New York vacation last week because of this, so that was a real bummer. I honestly so needed a vacation, but that’s water under the bridge now. Anyway, I’m grateful for health, and I’m also really tired, so I’ll be inching back to work and trying to pace myself.

Thanks for being here.

—–——– MORE VISUALS FOR THOSE INTERESTED ———––

GLOWING AND SLOWING:

There are two housing markets right now. Glowing sales stats from May. And slowing stats in June. This is important to recognize because we want to understand sales from the past while not ignoring listings and pendings today. The stats from May are still quite elevated in that properties sold a few percent above the list price on average. On one hand this reflects a market that is still statistically above the normal trend, but on the other hand let’s remember sales in May really tell us more about pending contracts in April (that closed in May). My advice? Recognize hot stats from previous months, but don’t ignore slower metrics right now with fewer offers, increasing days on market, dropping sales volume, more price reductions, etc….

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.

Some visuals…

YEAR OVER YEAR:

Annual stats are important to digest, but don’t forget to look at month to month stats. But remember, sales in May really tell us what the market used to be like in April when these properties got into contract. Also, not every location and price range have the same trend.