It’s a bump. Do you feel it? The housing market has been waking up in 2023, and we’re starting to see an uptick in lots of different stats. Let’s talk about it. This post is designed to skim quickly or digest slowly.
UPCOMING (PUBLIC) SPEAKING GIGS:
3/10/23 PCAR Market Update Lunch & Learn
3/24/23 How to Think Like an Appraiser (at SAR)
3/28/23 Downtown Regional MLS meeting
4/1/23 NAA Conference in Sacramento
4/13/23 Realtist Meeting
5/4/23 Event with UWL TBA
A SPRING BUMP IS UPON US
It’s normal to see more attention on the housing market in the spring – even during a downward year. I have lots of price recap images to share below, but check out these two (weekly and monthly). Not every local county looks like this, but the region did show a price bump from January to February.
BUT NOW RATES ARE 7%
Lots of stats from February reflect properties that got into contract in January when rates were 6%. Thus, the real tell for the spring trend will be stats ahead over the next two months that show what 7% rates do to the market.
DOOM VS ROSY
These days many people embrace either a housing doom narrative or a rosy one, but let’s try to let the stats form our understanding instead of imposing one big idea on the market. Ultimately, housing stats are like life. Not everything fits into one neat little box or ideology. Moreover, markets are often a mixture of lots of different trends, so not everything is going to be totally dark or glowing.
HOT POCKET VIBES
Sales volume is ticking up right now for the spring, but it’s also subdued from a normal level. This is why I’m describing the market as heating up for the spring, but still frozen (like a hot pocket taken out of the microwave too early).
MISSING 40% OF BUYERS STILL
Over the past 90 days, there were about 2,200 fewer sales compared to last year and even the pre-pandemic normal. The truth is we’ve seen some of the worst volume on record lately. It’s no joke. Let’s not forget over 3,300 sales closed though. I think sometimes the part of the market that is happening gets lost or ignored in the midst of sensational stats.
GET READY FOR SUPER SENSATIONAL STATS
Some of the stats look bonkers right now. Days on market was freakishly low last year, and now it’s basically a bit above the normal trend, which ends up creating a sensational comparison. I can picture it now, “Dude, the median days on market grew by 428%.” Okay, technically true, but very sensational.
IT’S GETTING TIGHT (ESPECIALLY AT THE BOTTOM HALF)
In January and February there were about 2,000 fewer new listings compared to last year (and 2,500 from the pre-pandemic normal). In short, the market is starting to feel tight because we’ve seen sellers sitting out to a greater extent these past few months. Here’s a look at listings and sales to give some clues into what competition feels like at various price ranges. It’s true that we don’t need a huge amount of supply to see the market decline, but having anemic new listings certainly makes things more competitive. Imagine what the market would feel like right now with 2,000 more active listings…
MULTIPLE OFFERS ARE GROWING
It’s not a shocker to see more multiple offers in both recent sales and current pendings. It’s still nowhere close to the same level of competition in early 2022 though. Do you see that uptick lately? That’s what early spring should look like. Remember, it’s normal to see multiple offers, but not normal to see the freakish levels from 2021 and 2022.
BUYERS ARE GETTING CONCESSIONS:
49% of transactions in Sacramento County last month had some form of a concession to the buyer (credit for repairs, credit for closing costs, rate buydowns, etc…). Placer County was more like 43%. This is good news for buyers, and it also speaks to sellers doing a better job listening.
DON’T GET CARRIED AWAY WITH A HOT NARRATIVE:
There are many metrics that show the market is heating up for the spring, but the trend right now is nothing like 2021 or 2022. In short, whenever someone says, “It’s 2021 all over again,” a puppy dies. Okay, that’s probably not true, but all I’m saying is statistically speaking it’s not 2021.
BUT SERIOUSLY, PROPERTIES ARE STARTING TO GO QUICKLY:
Half the pendings over the past two weeks went in fifteen days or fewer. These stats will eventually show up in closed sales in March and April.
IT’S ALL ABOUT THE FIRST WEEK
Properties that sold above their original list price tended to get bid up during the first week. Not a huge shocker. Of course, some properties are being priced too low to generate interest, so don’t think of this as buyers paying 10% over market value. Nope. But if you price 10% too low, you’ll likely get bid up. By the way, whenever I hear about properties with 15 offers, the price is almost always somewhere around $450,000 (and likely priced low).
BRO, REDUCE THE PRICE ALREADY
The market isn’t so overpriced like it was during the fall, but there is still a need for price reductions. Here’s a look at price drops among recent pending contracts. This is proof price reductions work. The real takeaway is to see a good chunk of price drops below $500,000. While this is an incredibly hot price range, it’s also proof buyers won’t pay any amount.
Okay, I’ve said enough. Probably too much. A few last recap images for anyone interested.
MARKET RECAP VISUALS
Year-over-year stats don’t tell the full story of the market right now. Someone might say, “No biggie, we’re down 8% from last year.” That’s technically true, but it fails to recognize that eight percent from one year ago is NOT the same thing as eight percent from the height of spring in 2022.
I hope this was helpful.
Questions: What are you seeing right now in the trenches of escrow? I’d love to hear your take.