appraisers

The housing market feels like leftovers

November 15, 2023 By Ryan Lundquist 16 Comments

The housing market feels like leftovers right now. It’s that time of year where we see less new listings due to sellers hibernating for the holidays, and some of the existing inventory just feels as stale as Aunt Tina’s green bean casserole that nobody wants to see during Thanksgiving. Wait, did I say that out loud? Anyway, today let’s talk about credit card debt, the current market, and some NEW COUNTIES I’m starting to cover for stats.

UPCOMING (PUBLIC) SPEAKING GIGS:
11/16/23 Mega Agent Panel (register here)
11/30/23 Safe CU “Preparing for a Successful New Year”
12/08/23 Free Appraiser Q&A on Private Work (one hour here)
(Meeting ID: 832 2414 3890 Passcode: 007)
01/30/24 Joel Wright & Mike Gobbi Event 9am (on Zoom here)
3/11/24 Yolo Association of Realtors (details TBA)

FEELING THE STING OF INFLATION

I don’t know about you, but everything has felt so expensive lately in my household. Can you relate? Consumers are definitely feeling the sting of inflation, but they’re still buying stuff (just not real estate so much).

GETTING INTO CREDIT CARD TROUBLE

Credit card debt has been rising lately. It’s nowhere near 2007 levels, but let’s not ignore that people are starting to get into trouble (especially younger people). Source: NY Fed (PDF).

HOW I’M DESCRIBING THE MARKET

We’ve had a pretty normal fall dynamic in many ways, and it’s been very different from the sharp change last year. Prices have softened, it’s taking longer to sell, and we’re seeing less sales, which is all typical. But one thing that isn’t normal is active listings have increased over the past couple of months. At this time of year, we almost always see actives shrink, but not this year. What’s the cause? There have been fewer pending contracts lately, and that’s made the pile of active listings grow larger since properties are staying on the market (not caused by sellers rushing to list more). We’re only talking about a few hundred extra listings in the region, so let’s not sensationalize this, but obviously more listings can affect the real estate temperature. Oh, and let me clarify. We are nowhere close to a normal number of sales. It’s still been such a strange market with low volume and still low supply. By the way, here’s a thread I wrote about actives on Twitter in case there is interest.

THE RATE NARRATIVE CHANGED QUICKLY

Rates have dropped in the past two weeks, and the narrative has shifted. Many were preaching, “Rates at 8% for longer,” but now it’s, “Bro, 6% rates soon.” I get the logic of rates dropping ahead, but we also need to see what actually happens. I think it’s important to talk through all potential scenarios while remaining objective since there is still so much uncertainty.

NEW COUNTIES COVERED:

I’m taking some new counties for a test drive. If you want to see these on a consistent basis, please let me know. Also, smaller areas are in 60-day chunks since stats can be erratic with only 30 days (is that a good idea or not?).

NEW COLORS FOR THESE COUNTIES

I’m going through many visuals to update colors so there is consistency in branding. So, the colors below correspond to the colors in the stats above.

AND NOW DAYS ON MARKET WITH COLORS:

OTHER VISUALS:

I have many other visuals, but that’s it for now (besides these). Catch me on my socials every day for lots of perspective and stats that never make it here.

Thanks for being here.

Questions: How would you describe the market right now? What do you think about the new visuals? What would you like to see more of? I’d love to hear.

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

The housing market during a presidential election year

November 8, 2023 By Ryan Lundquist 24 Comments

What’s going to happen to the housing market with a presidential election year coming? There are so many ideas. I’ve heard stuff like, “Rates usually go down during a presidential year,” or “The market is likely going to be stronger because one party is trying to stay in power.” But are these things really true? Today I want to look at what happens to rates, prices, and volume during an election year. I’m going to speak about rates nationally, and then use Sacramento as a local example. Any thoughts?

A map of the United States with a flag imposed on the map. The caption above the image says, "The housing market during a presidential election year."

UPCOMING (PUBLIC) SPEAKING GIGS:
11/16/23 Mega Agent Panel (register here)
11/30/23 Safe CU “Preparing for a Successful New Year”
01/30/24 Joel Wright & Mike Gobbi Event 9am (on Zoom here)
3/11/24 Yolo Association of Realtors (details TBA)

A SUMMARY OF THIS POST:

1) Prices don’t just do one thing during a presidential election year.

2) Rates don’t always go down during a presidential year.

3) Sales volume has been stronger in Sacramento County on average during a presidential year, but there’s more to consider about that.

PRICES DURING A PRESIDENTIAL YEAR:

An election year doesn’t alter the price trend that is already happening in the market. When looking at the median price in Sacramento from 1990 onward (presidential election years in green), the trend is all over the place. Sometimes prices have been up, and other times they’ve been down. No matter what, an election year doesn’t come along and change the trajectory of what has already been taking place.

But what about before the 90s? I’m glad you asked. Let’s look at the Freddie Mac Price Index in Sacramento from 1975 through 2022 (haven’t added 2023 yet). The green bars are presidential election years, and whether we’re looking at the first graph (nominal prices) or the second one (adjusted for inflation), the trend is truly hit and miss. Like I said, an election year doesn’t come along and alter the direction of prices.

MORTGAGE RATES DURING AN ELECTION YEAR:

Some people swear mortgage rates go down before or during an election year, but it’s really hit and miss when looking at the past thirteen elections. These visuals show the 30-year fixed rate since 1971 (FRED St Louis).

ADDED NEW IMAGE

Thanks to Bruce in the comments for asking about the Federal Funds rate. Does the Fed not raise or lower rates during an election year? Here’s a look at 1954 onward. What do you think?

And two images with a closer view. What do you see?

SALES VOLUME DURING AN ELECTION YEAR:

In Sacramento County we’ve actually tended to see stronger sales volume during a presidential year. Unfortunately, I only have access to sales volume data for a couple of decades, so I can’t run stats like this for the 70s through the 90s. Anyway, when looking at 2004, 2008, 2012, 2016, and 2020, these years have clearly tended to experience above average volume. However, there was also some really strong demand during years like 2004, 2008, and 2012 especially (more on that below). Ultimately, it wasn’t just a presidential election causing more buyers to participate in the market during those years.

Here’s a different way to look at presidential volume. As can be seen, presidential years have tended to be some of the strongest years we’ve seen.

VOLUME: FIRST PART VS LAST PART

When considering the last five presidential election years in Sacramento, the last few months of the year tended to be stronger than the first two-thirds of the year. However, I’m prone to say this extra volume during presidential years was more about what the market was doing at the time rather than residents voting for a president. I could be wrong, so let me know what you think.

Higher volume during presidential years:

2004: Huge demand in 2004 before the market peak in 2005
2008: A flood of foreclosures were purchased
2012: Higher demand as prices bottomed (investment funds buying too)
2016: Not much to say about this year
2020: 3% rates created abnormally high demand (second half)

NOTE: In case any nerds want to know, I also pulled stats from September to November only, and the graph looked just the same as September to December. The benefit of using through November is those sales mostly all got into contract before the election.

CLOSING THOUGHTS:

Part of me feels like I just wrote an anti-climactic post to say, “Bro, we don’t see one consistent trend during a presidential year.” Yet, this is actually really important to understand so we can have informed conversations. In real estate it seems like people make claims all the time about what prices, rates, and volume do during a presidential election year, but do stats actually support the narrative? I hope today I’ve given a few things to think about when these conversations come up. I’d love to hear if you have any different insights regarding Sacramento or your home market.

2024 EXPECTATIONS

It’s challenging to predict what prices are going to do in 2024 because the future price trend is hyper-sensitive to what happens with mortgage rates. Lots of people are predicting lower rates ahead, but only time will tell. In terms of volume, it’s hard to imagine a strong year if affordability remains such a challenge. Therefore, a presidential election year ahead isn’t poised to magically trump the trend of low volume that exists today. Yet, if mortgage rates drop, we should see more volume in 2024 than 2023. It’s just hard to imagine anywhere close to normal volume without a massive change to affordability and sellers thawing out more to list their homes. My advice all along has been this. Plan for low volume unless something alters the trend. Lastly, let’s watch consumer sentiment in 2024 as there seems to be a buffet of uncertainty at the moment for most facets of life.

Thanks for being here.

Questions: What have you seen happen during a presidential election year? What do you tend to hear from consumers? I’d love to hear.

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

Are we finally starting to see more listings?

October 9, 2023 By Ryan Lundquist 9 Comments

Are we finally starting to see more listings? Yes and no. Today I want to talk about a change we’re seeing with listings both nationally and locally. This is a really important topic, and some of it feels a bit technical because it’s about understanding new listings vs active listings. Anyway, let’s be on the cutting edge of the market by talking about stuff like this. Any thoughts?

UPCOMING (PUBLIC) SPEAKING GIGS:
10/27/23 AI Fall Conference (San Francisco) (register here)
11/30/23 Safe CU “Preparing for a Successful New Year”

NEW MEME:

It’s been a wild ride to watch mortgage rates basically do the opposite of what so many predicted this year.

TOO LONG DIDN’T READ:

1) No big change with new listings. Sellers are still sitting.
2) There’s been an increase in active listings due to fewer sales happening.
3) 8% rates can create more actives.

1) NEW LISTINGS HAVEN’T BEEN RISING:

Sometimes the narrative is we’re seeing an increase in active listings because there are more sellers, but that’s not what stats are showing.

NATIONAL NEW LISTINGS SHOW SEASONAL DECLINE:

Lance Lambert of Fortune Magazine put out this image a few days ago based on Realtor.com data, and new listings look like they’re following a pretty typical seasonal pattern across the country (see black line).

LOCAL NEW LISTINGS HAVE A SIMILAR VIBE:

Here’s a similar graph for Sacramento to show new listings in 2023 (orange) are showing a downtrend for the fall. In other words, there hasn’t been any notable change with more sellers coming to the market.

FEWER IN SEPTEMBER IS NORMAL:

Here’s a new visual to show what tends to happen with new listings between August and September. There’s only been one year since 2007 when new listings increased, so being down 11% this year is pretty normal.

2) ACTIVE LISTINGS ARE RISING:

Okay, let’s talk about where we are seeing change. There has been an uptick in the number of active listings both nationally and locally. The x-factor looks to be higher rates causing fewer buyers getting into contract.

NATIONAL ACTIVES SHOW A SLIGHT INCREASE:

Stats from Realtor.com show a slight uptick between August and September. This isn’t a massive change, but it’s something to watch. Altos Research has also been reporting an uptick lately, so we have two credible national sources reporting an increase. We need time to see the trend, so let’s keep watching over the next few months.

LOCAL ACTIVES HAVE ALSO INCREASED:

In Sacramento there’s also been a slight uptick in active listings over the past month (orange line). It’s nothing major, but it is noticeable when pulling comps and running stats. When I log into MLS, I’m tending to see 100+ more actives on any given day. This hasn’t been a dramatic change, but if rates persist to rise, we’ll likely see a bigger increase.

5.8% MORE ACTIVES IN SEPTEMBER:

It’s actually not common to see an uptick of active listings between August and September. At least, it hasn’t happened for a decade. When looking at the past sixteen years, there was an increase in active listings only 25% of the time between August and September. With that said, whenever we see a small change, we want to watch closely to see where it goes. No matter what, let’s keep our market antennas up.

BRO, DON’T HYPE THIS SMALL CHANGE:

It’s easy to blow this up and say, “Actives increased by 6% last month. The crash is happening. We’re all going to die.” But this is only 141 extra actives. Let’s remember when we’re dealing with a small number, it’s easy for a modest change to sound huge when talking about a percentage. And remember, it’s quick to spin a narrative, but it takes time to see a trend.

A NOTHING BURGER OR A TREND?

Look, this change has been slight, so we need to be really careful about giving it too much hype. But if rates keep increasing, I wouldn’t be surprised at all to see more actives. What happens with mortgage rates for the rest of the year will be the x-factor in propelling or cooling this trend. Bottom line.

BLAME BUYERS INSTEAD OF SELLERS:

Some people are going to see more listings and conclude sellers are rushing the market, but it’s actually buyers causing the issue (a lack of buyers, that is). Remember, we could have a low number of new listings, but if we see fewer pendings, it means the pile of actives can grow without sellers actually listing more homes. It’s basically an increase in supply due to waning demand. In other words, when pendings don’t happen, that helps the pile of active listings grow higher. And that’s exactly what we’ve seen lately. It’s not a huge change, but it is a change.

LIFE-CHANGING NEW VISUALS:

Okay, maybe these aren’t life-altering, but it’s fascinating to see how the gap between sales and new listings has changed. In 2008, between January and September there were just over 40,000 new listings to date, and today it’s been closer to 17,000. Is it 2007 again? Well, volume feels very similar, but we haven’t seen an explosion of listings today.

Remember, not everything that lists ends up selling. Do you see how this year doesn’t have as much space between the number of sales and new listings? Having fewer new listings has made the market more competitive.

ADVICE FOR SELLERS:

Sellers, my biggest message right now is to respect the pendings. Rates are flirting with 8%, and this makes it more difficult for buyers to afford a home today. Demand is still here, but higher rates will reduce the buyer pool even more. It’s easy to get stuck on sales from the past, but what are buyers willing to pay right now? We see that in current pending contracts. We also see what buyers aren’t willing to pay with overpriced listings (don’t price to those).

LET’S KEEP WATCHING:

Let’s watching by the week and comparing notes. Please keep sharing what you’re seeing in the trenches too.

Thanks for being here. I hope this was helpful.

Questions: What are you seeing happen with active listings? Are they taking longer to sell? What is open house traffic like? I’d love to hear.

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

2007 had ten times more housing supply than today

October 4, 2023 By Ryan Lundquist 17 Comments

Ten times more housing supply!!! That’s what 2007 had compared to right now. Today I want to share a stunning supply visual for Sacramento, and talk briefly about what’s happening with sellers and prices. Enjoy if you wish.

UPCOMING (PUBLIC) SPEAKING GIGS:
10/4/23 KW Sac Metro Big Market Update (register here)
10/6/23 How to Think Like an Appraiser at SAR (register here)
10/27/23 AI Fall Conference (San Francisco) (register here)
11/30/23 Safe CU “Preparing for a Successful New Year”

TWO NEW MEMES

A couple new memes to show the sting of rising rates and how wrong so many predictions have been this year.

TEN TIMES MORE SUPPLY IN 2007

In September 2007 we reached the peak of housing supply in Sacramento County at 14.3 months. This means if nothing else came to the market, there would have been enough listings to satisfy demand for over fourteen months. In contrast, today we have about 1.4 months of supply. As I said a couple weeks ago when comparing 2007 and 2023, volume today feels very similar to 2007, but today inventory hasn’t been building like it did back then. That’s something that could change in the future, but it’s not the vibe right now.

SELLERS HAVE BEEN SITTING

We’ve had about 8,000 fewer new listings compared to last year (a low year), and about 13,000 fewer compared to the pre-2020 normal. Lots of people online are talking about supply building, but that hasn’t been the case in Sacramento.

17,000 SELLERS HAVE LISTED SO FAR

About 17,000 sellers have listed this year (and closer to 18,200 if we add in condos). This number would be closer to 30,000 in a normal year, but normal isn’t what we have right now. It’s a market where many sellers and buyers are sitting. Yet, not everyone is sitting, and I have 17,000 data points to prove it.

ONE THING TO WATCH WITH 8% RATES

Rates are flirting with 8% right now, and one thing we could see is the pile of active listings grow if rates keep going up. Keep in mind this wouldn’t be growth in supply due to more sellers listing their homes. This would be the stack of active listings getting higher if buyers back off the market. In other words, an increase in supply by waning demand (fewer pendings). This is what happened during the second half of 2022, and it’s something we need to watch closely in coming weeks. We’ll know soon if 8% rates are an inflection point for buyer demand.

PRICES HAVE BEEN FLATTENING

Last year we saw sharp downward price change, and it felt like the oxygen masks dropped from the ceiling during a crash landing. Today has felt more like a normal seasonal descent in terms of prices softening. That could change if rates keep spiking, but sharp change hasn’t been the description for 2023. We are starting to see prices higher than one year ago too.

WEEKLY PRICES

I like watching weekly prices because we get clues into what the monthly metric will look like. Do you see the flattening black line in 2023?

MONTHLY PRICES

It’s honestly a few days too early to share monthly prices, but I wanted to give a preview of the trend. Between August and September, prices were more flatter than not. Definitely not the sharp change we saw last year.

APPRAISER COLLEAGUES (ASKING AGAIN)

Earlier this year, I did a free webinar thingy on Zoom to talk about private work, and I’d be open to that again if there is demand. I’m starting to get the itch to bring some colleagues together, so let me know if you’d be interested. I got some good feedback last week, and I’d like to hear from some more too. This would be free. I’m not looking to make money on this.

Thanks for being here. I hope this was helpful.

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

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

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