days on market

Torturing housing stats & recapping 2022

January 11, 2023 By Ryan Lundquist 28 Comments

If you torture the stats long enough, they’ll confess to anything. Have you heard that before? Well, it’s true in real estate. If we’re not careful, we can make numbers say anything, whether for a glowing or doom narrative. Today, I want to talk about the danger of annual stats right now, and then I have a massive market update to share. This post is designed to skim by topic or digest slowly. I hope you get some value here, whether you’re local or not.

dark brown rustic aged barn wood planks background. A black font against a white label says, "making housing stats say what we want."

UPCOMING (PUBLIC) SPEAKING GIGS:
1/12/23 McKissock / Appraisal Buzz 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)
1/20/23 NARPM Luncheon
1/23/23 Residential RoundUP on Zoom (register here (free))
1/27/23 Q&A Appraiser Marketing (free Zoom webinar) (sign up here)
2/8/23 SAFE Credit Union “Snacks & Facts” (for RE) (register here)
3/10/23 PCAR Market Update Lunch & Learn (detailed TBD)
3/28/23 Downtown Regional MLS meeting
4/1/23 NAA Conference in Sacramento

IT’S EASY TO ABUSE ANNUAL NUMBERS RIGHT NOW

Last year had two parts. It was super-hot at first, and then it got really dull, and this makes for a weird combination when putting these parts together.

A) HIDING THE TREND WITH ANNUAL STATS

Check out this visual. When comparing all sales from 2021 with 2022, the median price technically went up 7%. This is statistically true because there was so much growth during the first part of the year, BUT focusing on annual stats hides the huge shift in recent months.

A table to show price change in the Sacramento region (year over year, May 2022 to current, and annual change).

CLARIFYING ANNUAL STATS: Annual means we’re comparing ALL of 2021 with ALL of 2022. So this is where we’re comparing the median price of 28,000 sales in 2021 with 22,000 in 2022. So we are literally looking at the entire year and comparing it to another year. It’s actually a cool way to see the market and gauge appreciation over time. In a normal year, I would be a fan of sharing annual appreciation rates, but this year I think it hides the real trend happening in the market. So if I were to only focus on the annual difference this year and say, “The median went up 7%,” it’s just not telling the full story of what is happening. I think looking at year-over-year stats (December 2021 vs December 2022) and month-to-month stats (May to December) really helps us see the market trend. I think it’s fine to share annual stats, but it can quickly become misleading or stink of greasy salesperson vibes.

If annual vs current stats were a meme…

B) FALSE NARRATIVES FROM ANNUAL STATS

The danger of focusing on annual stats right now is annual numbers look far sexier than the current market, so it’s easy to hide the real trend by looking to older figures. It would be like looking at the average price of bitcoin over the past two years instead of the price right now.

ANNUAL VS. THE REAL TREND:

Annual volume was down about 20%.
Volume lately has been down over 40%.

It took an average of 25 days to sell last year.
Last month it took an average of 49 days to sell.

The median price rose 7% annually last year.
The median price declined 15% since May.

A meme of an older man holding a coffee cup. The meme says at the top, "looking at annual stats," and then the bottom picture with the man looking at the camera says, "But not getting stuck on them."

C) GAINING & LOSING CREDIBILITY WITH ANNUAL STATS

Some real estate professionals are going to gain credibility this year and others will lose it. My advice? Be transparent with the stats and DO NOT create a narrative that obscures the real trend. Likewise, don’t impose a doom narrative on the market either. I wrote more about this last week. Look, we all have ideas about the future, but let’s be real about the market that actually exists.

Thanks for being here.

—–——– DEEP LOCAL MARKET UPDATE ———––

We are in a market of change, and change continued last month.

Scroll quickly or digest slowly.

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.

VOLUME WILL IMPROVE AS AFFORDABILITY GETS BETTER:

We are in a valley right now where we’re missing about 40% of the market. There is no sugarcoating this. The reality is lots of prospective buyers are on the sidelines due to the struggle to afford current prices. With that said, more than half of buyers are present and shopping, so the market is still moving.

This week I talked with someone who is actively hunting for homes with an agent, but he is still hesitant. He said it’s nice to maybe get tens of thousands off the list price, but he is still concerned about the lofty monthly mortgage payment. Look, sharp price declines have been helpful for affordability, but rates above 6% are still making it tough to make things work. Anyway, the market will figure this out, and more buyers will come back as affordability improves. That’s the truth.

DECEMBER VOLUME WAS NOT PRETTY:

December had the lowest volume in Sacramento County over the past 20 years, and the region is basically tied with 2007. There are two stats here. There are over 800 missing sales from the pre-pandemic normal, but there were nearly 1,300 sales that happened. I recommend for real estate friends to know all the numbers, but in terms of business, focus on the part of the market that is happening rather than the part that isn’t.

NOTE: Placer County has experienced massive growth this past decade, so a comparison to the previous decade looks different than Sacramento County. Still, it was a really dull month of closed sales.

PRICE STATS ARE DOWN ABOUT 4-5% FROM ONE YEAR AGO:

Here’s a look at stats compared to last year. Remember, closed sales in December really tell us what the market used to be like in November when the bulk of these properties got into contract. In a normal year we tend to see price metrics dip from December to January, so let’s see what happens ahead.

PRICE STATS ARE DOWN CLOSER TO 15% FROM MAY:

We’ve seen significant change since May, but the market still doesn’t feel affordable to lots of people. I’m not trying to be negative. This is just how it is, and we’ll see more buyers come back to the market as affordability improves. Keep in mind median price change doesn’t necessarily mean value is actually down by that amount. This is why I advise looking to neighborhood comps rather than imposing a county or ZIP code price metric on a neighborhood.

PRICES WENT DOWN FROM NOVEMBER TO DECEMBER:

Looking at sequential months is key so we don’t just get stuck or hyper-focused on last year (the past). Like I said above, it’s easy to hide behind older stats if we’re not careful.

OTHER PRICE VISUALS:

These visuals help show that prices are a bit lower than last year, but check out the sharp change in order to get here.

TAKING ABOUT A WEEK LONGER TO SELL:

It took about a week longer to sell last month in Sacramento County compared to the pre-pandemic normal (red line). I’ll push out other county visuals soon too (especially during my presentations coming up). However, this is over twice the time it took last year, so it feels dramatic to see 45 days lately. Historically this isn’t all that high, but it’s been a real adjustment to get used to a market where not everything is selling in the first weekend. However, keep in mind these figures only represent properties that closed escrow, and there are lots of listings that didn’t close (key point).

NEW LISTINGS ARE COMING:

We’re seeing more listings hit the market, but it’s very normal for new listings to not hit their stride until March or so. Buyers are waking up for the year though and they’re hungry for quality listings after a stale fall season of overpriced leftovers. And yes, serious buyers are shopping – even in the rain. I’ll push out some inventory images soon, but on paper things are pretty normal in terms of the months of housing supply. We technically really don’t have many listings on the market, but like I keep saying, it doesn’t matter about technicalities right now. The market has been declining despite low supply since affordability is the bigger issue. Now let’s see what 2023 brings. As I said last week, we can expect more attention on the market during the spring.

ANNUAL RECAP:

Okay, here are some annual recap images organized by county. These visuals include every single sale for the entire year, so it’s a weird combination of a blazing hot market and a dull market. I deliberately didn’t include price stats on most recap visuals because I honestly think it would lead to confusion (and some might even think it was misleading).

2021 comparison: 2021 did have slightly higher volume, so the ideal is to compare the pre-pandemic average to 2022, and I’ll roll out some stats soon to show you what I mean. But it’s still a legit comparison to compare the past two years. For instance, volume was down 22% from last year, but it was down 19% from the pre-pandemic average. Yes, there is a clear difference, but we’re not talking about twice as many sales last year. Granted, new construction numbers were truly sensational in 2021, so it’s honestly a mistake to only focus on 2021 vs 2022 numbers for that niche. More on that eventually.

SACRAMENTO REGION:

SACRAMENTO COUNTY:

PLACER COUNTY:

EL DORADO COUNTY:

YOLO COUNTY:

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.

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.

Questions: What stands out to you above? What are you seeing happen 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.

Getting high on housing hope

December 6, 2022 By Ryan Lundquist 22 Comments

Be an optimist in life. Be full of hope. And let nothing shake you. But when it comes to housing stats, be realistic about the market that actually exists. Today, let’s talk about getting high on housing hope (and unpack fresh stats).

UPCOMING (PUBLIC) SPEAKING GIGS:
1/18/23 WCR Market Update in Cameron Park (register here)
1/19/23 Big market update at SAR on Zoom (details TBD)
1/23/23 Residential RoundUP on Zoom (register here (free))
3/10/23 PCAR Market Update (detailed TBD)
5/22/23 Yolo YPN (details TBD)

A FEW THINGS ABOUT HOUSING HOPE:

1) Hope vs glaring stats:

Over the past week, I’ve had quite a few conversations with people who think the market is going to rebound in 2023 since they say rates are poised to decline ahead. I suspect purchase applications being up slightly over the past few weeks and mortgage rates dipping has birthed some enthusiasm. Look, it’s fine if that happens, and it’s nice to hear excitement about the future, but let’s be sure to embrace the market that’s actually here at the moment too.

2) Modest rate changes won’t alter the trend:

Modest rate declines aren’t going to be an instant reset button to bring missing buyers back to the market. We’re missing about 40% of buyers right now locally, so affordability is still a massive issue. That’s what I tried to communicate last week when talking about the market getting worse before it gets better. The idea is we won’t see volume get back to normal until affordability improves. And like I said, we don’t know how long volume will be subdued, and obviously rate declines can help boost affordability.

3) The housing narrative is like a ping pong game:

The housing narrative seems like a game of ping pong where glowing and dark outlooks are rallying back and forth. Some say the market is going to rebound, but then there’s concern about recent jobs numbers. Or in one breath some think rates will go down, but in the next there’s uncertainty about the Fed meeting next week. Or people are pumped about conforming loan limits increasing, but affording the market is still not doable for many buyers.

4) Nobody knows the future:

The truth is nobody can predict the future of the housing market with certainty. Everyone has ideas, but nobody knows for sure what will happen. This doesn’t mean we ought to be naive about trends or the future because we’re clearly in the midst of a market with depressed volume and dropping prices. The bottom line is housing needs to become more affordable. Keep in mind lots of predictions are based on rates at 6%+, so predictions will be amended if rates change. Ultimately, let’s keep watching and cultivating objectivity by embracing perspective formed by the numbers.

I hope this was hopeful. Thanks for being here.

———–——– DEEP LOCAL MARKET UPDATE ———––——

Scroll quickly or digest slowly.

HOW I’M DESCRIBING THE MARKET:

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.

SELLERS ARE STARTING TO LISTEN:

This is good to see. 49.4% of closed sales in Sacramento County had concessions last month. This means nearly half of all sales had some sort of credit for repairs, closing costs, rate buydown, etc..

PRICES HAVE DECLINED 3X FASTER THAN USUAL:

There are two stats to look at here. How much has the market gone down in recent months, and much is it still up?

One thing to note is prices dropped a little less in November compared to previous months, but I wouldn’t write home over that. I’m anxious to see how the stats unfold in December. So far, a reading of pending properties suggests a definitive price drop for December. We’ll see.

NOTE: Placer stats bounce around more since there aren’t as many sales, so take the median price with a grain of salt.

SOME OF THE MARKET IS MISSING IN ACTION:

It’s easy to focus on prices, but I think volume is the bigger story because it shows how many buyers are actually participating in the market.

1) Past 7 Months: Since May we’ve seen over 5,000 fewer sales in the Sacramento region compared to last year. In other words, volume is down by 29% compared to last year. But, about 13,000 sales have happened, which shows the market hasn’t stopped.

2) Past 60 Days: But now let’s look at volume over the past 60 days to get a better idea of the trend. When we look at more recent history, it’s clear volume has dropped lately by nearly 43% (not just 29%).

3) The historic average: Lots of people ask if the comparison to 2021 is bad since volume was higher that year. Well, it makes a little bit of a difference, but not much. Here’s a look at pre-pandemic average volume, which shows the region is down 40% instead of 43%. But look at Sacramento County being down 45%, which is hardly different than the image directly above.

PRICES ARE OFFICIALLY DOWN FROM LAST YEAR:

It’s been a long time since we’ve seen year-over-year price declines, but that’s the market we’re in right now. This is exactly what should be happening since affordability has taken such a huge hit lately. Remember, closed sales in November really tell us what the market used to be like in October when the bulk of these properties got into contract.

MONTH TO MONTH CHANGE:

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

NOTE: Take Placer with a grain of salt (not many sales).

OTHER PRICE VISUALS:

OTHER VISUALS:

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.

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.

Questions: What stands out to you above? What are you seeing happen with 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.

Advice for buyers & sellers in today’s housing market

August 8, 2022 By Ryan Lundquist 25 Comments

The housing market has shifted, and today I have some practical advice for buyers and sellers. This is coming from hundreds of conversations every month as well as stats I’m pulling. Some new memes too. Enjoy if you wish.

Weathered wooden background with the title, "Advice for buyers and sellers" in a white block in the middle of the image

UPCOMING (PUBLIC) SPEAKING GIGS:
8/11/22 Realtist Lunch & Learn (sign up here (open to anyone))
8/15/22 YouTube Live with Matt Gouge at 3pm PST (watch here)
8/25/22 State of Housing Brunch & Learn (sign up (for real estate community))
9/08/22 SAFE Credit Union Market Update (details TBD)

ADVICE FOR BUYERS:

Don’t lowball like it’s 2008: It’s not a name-your-price market, so you still have to make reasonable offers instead of way below market value. I find some buyers think it’s 2008, and that’s not the vibe right now. For instance, a property was priced well at $450,000 and a buyer offered $320,000 (final closed price was $455,000). If you get lucky at a low level, great. I’m just saying, being reasonable rather than lowballing is likely a better strategy.

Be patient: Instead of selling in hours or days, properties are spending weeks or longer on the market. This is a real advantage for buyers, so you can take more time to shop. Yet, if you find something perfect, be swift since properties that check all the boxes are going quickly with multiple bids.

Ask for credits (if you can): We’re tending to see more buyers asking for credits to help with closing costs or repairs, so talk with your agent about whether asking for credits is something the market will allow (big point). Remember, this isn’t going to work in every price range or situation.

Buy down the rate if possible: Talk to your loan officer about what it would take to buy down the mortgage rate. This means you can pay more to get a lower rate. Or better yet, if you’re in a situation where the seller is going to offer a credit, consider using that credit to buy down the rate. Getting your monthly payment lower can be a massive financial win.

Target overpriced listings: Overpriced homes represent opportunities for buyers, so go after them. Of course, some sellers are stubborn about accepting offers below their unrealistic list price.

Don’t overpay: On one hand it’s unwise to lowball as a strategy, but still try to get the price lower if possible. Local stats show even when properties get multiple offers today, they aren’t tending to get bid up to the crazy levels we saw last year. Generally speaking, you probably don’t need to offer as aggressively high as you might have two quarters ago. In Sacramento last month we saw buyers on average pay about 2% below the original list price (which is about $12,000 below). This is the average though, so it would be a colossal mistake to automatically offer $12,000 below whatever the asking price is (seriously). Remember, there are many examples of offers still going above the list price, so don’t impose an average on every escrow. All that said, try to get in below the list price if you can because that’s becoming more common. But recognize this is a case-by-case situation that depends heavily on what the property is actually worth and how close pricing was to market value.

Realize there is still competition: About 37% of homes last month in the Sacramento region sold above the original list price, so not everything is selling below like some are talking about. Remember, selling above or below the list price isn’t just about the market. It’s about how the property was priced.

Don’t string sellers along: An agent friend told me about a situation where the buyer was in contract for 40 days and then backed out. Look, it happens, and buyers should back out as needed, so I’m not saying to stay. Do what you need to do. All I’m saying is if you’re on the fence, find a way to be decisive so you can give the seller more space to find another buyer. In a market with quick change, idling buyers can cost the seller money.

ADVICE FOR SELLERS:

Don’t expect to call the shots: Sellers are no longer getting to dictate all the terms, so be careful about expecting buyers to bend to your will.

Be ready to negotiate: You’ve lost power and you need to be prepared to offer credits to buyers and negotiate as needed. Look, your net profit will be lower if you reduce the price or offer a credit, but focus on the bigger issue of how much money you’re making with historically high prices.

Plan for fewer offers: Don’t expect multiple bids, but if it happens, great. The truth is you might only get one offer. I’ve heard a number of sellers holding out for more offers, which is bold move today.

Realize demand has truly shifted: In the Sacramento region there were 30%+ fewer buyers last month compared to one year ago. This has caused supply to shoot up very quickly, which means buyers have more options. The good news is about 70% of the market is still active, but it’s no joke to see a sizeable chunk of buyers sitting on the sidelines.

Forget about hot headlines from the past: The market has changed. We’re not blazing like we were six months ago. My advice? Scrap hot headlines and get familiar with the housing temperature today. It doesn’t matter what cryptocurrency sold for in March. The only thing that matters is what it’s selling for today. It’s the same in real estate. What is competitive to your house and getting into contract right now? That’s the key for pricing.

Don’t get offended over requests for credits: Buyers are forking over big bucks to purchase a home right now due to higher prices and a spike in rates. This means some buyers are going to want help with closing costs or repairs. A seller recently got bent out of shape with a buyer asking for a credit, and to me that showed the seller was simply out of touch with today’s trends.

Prepare your house like it was a first date: If you can, take care of basic cosmetic repairs prior to listing. It’s like going on a date. You want to impress and put your best foot forward. Buyers today have more space to scrutinize details, so tightening up details gives buyers fewer reasons to say NO.

Help the escrow be fast: Buyers are pickier about staying in contract, so do all you can to help the escrow be smooth and quick. An escrow with fewer surprises and hurdles is a good thing right now. The last thing you want is for buyers to be stuck waiting while uncertainty is growing. On that note, it might not be a bad idea to take care of Section 1 damage prior to listing (or get a pest report so the buyer is informed prior to making an offer).

Don’t get stuck on the original list price: There is nothing holy about the list price, so don’t get stuck there. If the market isn’t biting, it’s time to reduce the price. In the Sacramento region we historically only see about 14% of properties sell at the original list price, so 86% of the time the price is literally going either higher or lower. And in today’s market, there is a better chance of going lower rather than higher.

Stop believing in unicorns: Look, everyone hopes for a mythical buyer to swoop in and pay more. In Sacramento, it’s a Bay Area buyer, and I suspect in many other states it’s a cash buyer from California. Keep in mind only about 15% of the local market has been cash, so it seems wise to price for 85% of transactions that are financed. Don’t price for the unicorn!!!

Be in tune with picky buyers: Buyers are pickier about condition, location, and price. Buyers can be this way for two reasons: 1) It’s more difficult to afford a house with today’s prices and higher rates; and 2) There is more supply, so there are more options.

Buying down the rate is NOT your silver bullet: I’m hearing lots of people talk about keeping the price high and giving a credit to the buyer to buy down the rate. I get the sentiment because a lower rate helps the buyer, but this is ultimately a seller-oriented narrative. It’s especially common to hear this from builders with new construction. The truth is some buyers are going to want a price reduction as well as a credit. As a seller, you’re going to have to see what the market allows you to do rather than dictating the terms.

I hope this was helpful.

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 resonated with you the most? What did I miss?

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.