The housing market has likely peaked for the year. Today I’d like to show some ways I’m seeing this in the stats. I’m focused on Sacramento, but this is likely showing up in many markets. Skim by topic or digest slowly.
PRICES HAVE LIKELY PEAKED FOR THE YEAR
It’s normal to see prices peak around June. Sometimes it happens in May. I can’t say with absolute certainty that prices have peaked, but weekly regional metrics have started to go flat, so it seems very likely. This is the median price, and the average price looks similar.
Here’s a monthly view, and in a normal year we should see the trend turn down around this time. By the way, do you see how much closer we are to the peak from last year now? I’m seeing that when pulling comps too.
MULTIPLE OFFERS HAVE PLATEAUED
It looks like the percentage of multiple offers peaked in May, which is normal. June was actually a little lower than May, which is also normal. Since July about 55% of pendings have multiple offers, which shows the percentage has gone down more. The wild part is the percentage right now is actually higher than a normal year, which means it’s really competitive out there. We should see this percentage decrease ahead unless demand unexpectedly changes for some reason (lower rates).
DEAR SELLERS, WE MISS YOU
We’ve had over 6,000 fewer new listings this year in the Sacramento region compared to last year, and it’s been the x-factor in changing the feel of the housing market lately. We went from an ice bath last year to what’s felt like a bloodbath at times these past few months. It’s not that the market is normal, but we have a situation where low supply and low demand have met.
NOTE: Nearly 11,000 sellers have listed their homes in 2023, so it’s not like nobody is listing, but the missing portion is glaring.
HOUSTON, THIS IS NOT NORMAL
Here’s a snapshot of active listings on July 1st each year in Sacramento, and in a normal year before 2020, we’d have more than two thousand additional active listings. I know this is only one day, but the monthly trend looks similar.
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VOLUME HAS BEEN DOING THE LIMBO
Sales volume has been low all year, and it’s not just because of listings being down. Granted, if we had more listings, we would have more sales. But let’s not ignore the elephant in the room, which is affordability. The most significant reason we’ve seen lower volume stems from buyers backing off the market after mortgage rates shot up. June volume was down 39% from the pre-2020 normal. Here are a few ways to look at what’s happening.
NOTE: Volume typically peaks around June each year
MISSING ALMOST 5,000 SALES THIS YEAR
There have been 4,873 sales missing this year from the pre-2020 average. It’s been stunning to see buyers on pause. Yet, there have been nearly 8,600 sales through June that happened, and sometimes that’s getting lost in the conversation.
IF YOU WORK IN REAL ESTATE:
If you work in real estate, I suggest keeping your focus on the part of the market that IS happening rather than the part that isn’t. It’s glaring to see about 36% of buyers missing in Sacramento, but 64% of the market is happening. What do you need to do to position yourself to work with buyers and sellers who are here today? Who do you need to get in front of? What type of content do you need to put out? What skills do you need to add? What expenses do you need to cut? How can you increase the size of your network?
NEW CONSTRUCTION IS GLOWING
The resale market for existing homes has been struggling, but new construction has been raging. New homes growth has been vibrant this year so far. Let’s remember a big part of this has to do with builders buying down the rate and offering credits.
FOCUSING ON THE MEDIAN PRICE IS NOT A SCARE TACTIC
This week I heard someone say a focus on the median price is a scare tactic used by the media, but that’s silly. There is nothing sensational about talking about price metrics – including the median. Granted, we don’t want to obsess over the median and treat it like it applies rigidly to every neighborhood and property. That would be a mistake. But ironically, the average sales price and average price per sq ft are showing the same trend as the median. Should we throw out those metrics too? I say NO. The key here is to understand the strengths and weakness of each metric and what makes each of them change too. That’s what real estate expertise looks like.
PRICE GROWTH HAS BEEN PRETTY NORMAL THIS YEAR
The median price is up 10.6% in the region between January and June, and that’s a pretty normal number overall. Keep in mind this does NOT mean every property increased in value by 10.6%. The median price does NOT translate rigidly to every property and area. Keep in mind Sacramento County is up 6%, so not every county is going to show 10%. When pulling comps, I’m noticing prices are still down from the peak in 2022 in most areas, but prices have been getting really close again.
TODAY FEELS SENSATIONAL NEXT TO AN ICE BATH
After the ice bath fall season from 2022, it’s felt remarkable to see the market do what it’s done this spring. While the growth has technically been pretty normal, being next to a dull market last year is what makes these stats feel stunning. In short, we’ve had a definitive spring uptick.
APPRAISERS: For my appraiser colleagues, how did we do at capturing spring appreciation in reports and adjustments?
SELLING ABOVE IS STARTING TO FLATTEN
The housing market looks to have peaked for the year, but we don’t have a dull market right now. In fact, it’s been more competitive than normal lately. I know there is so much to unpack in these images, but the black lines represent 2023 and they’ve been more aggressive than normal levels lately (red lines). For instance, in a normal year we might see 42% of sales in June sell above the original list price, but this year it was 52% (still nothing like 76% in 2021). I wanted to mention this because sometimes when we talk about seasonal slowing, people assume it’s slow. I sometimes get people arguing with me at this time of year also about the trend. Friends, let’s look to the stats and realize multiple things can be true at the same time. The market can be slowing for the season AND be more competitive than usual.
NOTE: Do you see how the black lines have started to flatten? This is a sign of seasonal slowing.
SELLING OVER LIST PRICE STARTING TO FLATTEN
On average properties in the region sold 1% below the original list price last month. This is normal for the time of year as a percentage, and it’s way lower than 2021 when properties sold 4% above their original price on average. Do you see how it looks like this percentage has flattened? That’s typically what happens around this time of year (another sign of a seasonal peak).
UNDER 500K: Properties under $500K sold an average of 1% above the original list price last month in the region, and that reminds us the trend isn’t the same in every price range. And it was 2% over in Sacramento County.
Here’s another way to look at it. All the orange dots above the 0% line went above the original list price, and the dots below sold below. This is a good reminder that the story isn’t the same for every escrow. Remember, 1% below is the average, and that doesn’t perfectly describe all properties. Some units last month sold 20% above and other sold 25% below. But the average of everything together is still 1% below.
RATES MATTER FOR THE SECOND HALF
What happens with mortgage rates matters greatly for the second half of the year. If they go up, it’ll take demand out of the market, and if they go down, it’ll bring more demand into the market. I know, that’s obvious, but it’s important to consider as we look ahead.
Okay, this is getting long.
I hope this was helpful.
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Thanks for being here.
Questions: Are you seeing any seasonal slowing? Or is it getting worse out there? I’d love to hear your take.