El Dorado County

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.

Saying goodbye to pandemic home price gains

November 8, 2022 By Ryan Lundquist 16 Comments

Sellers have been saying goodbye to some of the equity they gained during the past couple of years. In Sacramento, we’ve actually lost 40% of the pandemic gains since May. Today I want to talk about price trends, and I hope this is helpful – whether you’re local or not. Skim quickly or digest slowly.

White wood texture background with the title, "Saying goodbye to some home equity."

UPCOMING (PUBLIC) SPEAKING GIGS:
11/15/22 Sacramento Bee Q&A at 12pm (RSVP here)
11/17/22 Bias & Real Estate Lunch & Learn (RSVP here)
12/5/22 SAFE Credit Union market update on Zoom (register here (free))
1/18/23 WCR Market Update in Cameron Park (details TBD)
1/19/23 Big market update at SAR on Zoom (details TBD)
1/23/23 Residential RoundUP (register here (free))

A meme from Dumb and Dumber with Jim Carrey and two actors in the front seat of a truck. Carrye has his hands over his ears. The caption reads, "Sellers not listening to the market."

THE POSTER CHILD FOR CHANGE

The trend isn’t going to be the same in every location across the country, but I suggest paying attention to pockets like Sacramento, Boise, and Phoenix that all seems to be the poster child for quick market change.

40% OF PANDEMIC PRICE GAINS ARE GONE

We’ve seen sharp price declines over the past six months as the median price has dropped by $75,000 (or 12%) since May in the Sacramento region. This is about three times the normal speed for seasonal softening. This doesn’t mean every property is literally worth 12% less, but I have to say the change is sizeable when looking at neighborhood comps lately and hearing feedback from real estate agents. Sellers, did you hear that?

Change: The median price rose $185,000 from the beginning of the pandemic, and $75,000 of that increase has disappeared over the past six months. Or we could say the median price is still up $110,000 from March 2020.

A bar graph from early 2020 to October 2022 to show the median price in the Sacramento region (a huge uptick and a sizeable downturn lately).

THE MARKET IS NOT A PARKED CAR

I heard someone talk about the housing market as if it was a parked car, but I disagree with the analogy because the market hasn’t literally stopped. For instance, over the past two months in the region there were 1,800 fewer sales compared to last year, but there were nearly 3,400 sales that did happen. I find it’s easy to fixate on the glaring portion of the market that’s missing, but let’s not forget to see the part that is happening.

NEIGHBORHOOD TRENDS

It’s easy to fixate on the median price for the region, but when appraising in neighborhoods my trendlines are also showing a sharp change. Here’s an example with the 95747 ZIP code in Roseville. As I talked about recently, I am definitely selecting the “declining” box in my appraisal reports.

95747 ZIP Code market trends in Roseville (a yellow scatter graph to show the downward trendline lately)

NO PRICE RANGE IS IMMUNE

“My neighborhood is super special.” I know, it really is, and so are you. But all ships rise and fall with the tide. What I mean is every price range has seen an effect from higher mortgage rates. Keep in mind volume is down in every single price range in the region too, which reinforces this point. However, the bottom half of the market has seen the biggest change in volume, which suggests buyers who are more sensitive to rate changes are having a more difficult time.

A bar chart to show the median price in various countiees in Sacramento since May

FLIRTING WITH LAST YEAR

This is exactly what sellers need to hear right now. The median price in the Sacramento region is the same as it was last October. On one hand this feels like a big event, but it’s really not a shocker since prices have changed quickly to adapt to a dramatic shift in the monthly mortgage payment. In other words, a sharp change in rates has led to a sharp change in the stats.

A bar graph to show the median price is the same as last year in the Sacramento region

OPENDOOR IS GETTING BODY SLAMMED

This market hasn’t been easy for iBuyers. 76% of Opendoor‘s active listings are listed below their acquisition price. This is blatant carnage. Keep in mind Opendoor typically has a 5% credit from the seller, but even with that it’s not enough to be profitable in so many of these listings.

Redfin: It was announced this morning that Redfin is stopping their iBuyer business. Here are some Redfin stats I posted on Twitter.

A chart to compare Opendoor acquisistion prices with the current list price among active listings in the Sacramento region (a bar chart)

WAITING FOR AFFORDABILITY

Prices have dropped, but this hasn’t translated to more affordability since rates have continued to rise. Some people are predicting lower rates in 2023, but we’re going to have to wait to see what happens. Almost nobody gets their rate predictions right, and I don’t pretend to have a crystal ball.

DOUBLE-WHAMMY FOR SELLERS

The problem with overpricing is prices are going down, so the longer you’re on the market, the more you lose. Not only will you have to lower the price due to being overpriced from the beginning, but you now have to lower even more due to prices declining since you listed. It’s a double-whammy.

A table to show the percentage and number of properties with price reductions right now in the Sacramento region by county

LOSING 2.5% PER MONTH

For five months in a row the median price has dropped by about 2.5% each month, and this visual helps show the change. The red line is the pre-pandemic average so we can see what “normally” happens from month to month. For instance, from September to October the median price normally dips by -0.07% (red line), but this year in 2022 the dip was -2.65% (black line). Remember, this doesn’t mean every property has literally lost 2.5% in actual value. Moreover, not every county has shown the same loss either by the month.

I can’t emphasize enough the importance of looking to neighborhood comps to understand the market. In other words, DO NOT automatically impose a downward 2.5% regional metric on a property (big mistake). But don’t take these stats lightly either. If anything, these numbers can be a cold shower to wake sellers up. There is a smaller pool of buyers right now, so price it right to meet buyers where they are at.

A line graph to help show monthly median price change in the Sacramento region. There is a red line to show what normal looks like and then a black line to show 2022. In short, the black line is way below the red line lately.

YEAR OVER YEAR STATS:

Here’s a look at stats compared to last year. Remember, closed sales in October really tell us what the market used to be like in September when the bulk of these properties got into contract.

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).

OTHER PRICE 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 prices right now? I’d love to hear your take.

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

Buyers & sellers feeling stuck in the housing market

September 8, 2022 By Ryan Lundquist 16 Comments

I love the original Back to the Future movie. Do you too? Well, I can’t help but think of today’s housing market compared to the film. Sellers have tended to be stuck in the past expecting the market to be hotter than it actually is right now. And some buyers are stuck in the future, anticipating lower prices ahead, and therefore expecting to score a deal below what the market will allow.

Back to the future meme with Michael J Fox (it says sellers stuck in the past) and Doc (it says buyer stuck in the future)

Tension is real: The tension between buyers and sellers is real, but the remedy is simple. Pay attention to stats and let the numbers form your perception. It’s key for buyers and sellers to be realistic about the market that actually exists. Staying connected to the present is the goal here instead of fixating on a hot past or a colder future. Ultimately, sellers need to listen to buyers, be open to the idea of offering credits, and recognize there’s a really good chance the property is going to sell below the list price. And buyers can take more time shopping, but also recognize it’s not January 2008 when properties on average sold a whopping 13% below their original list price in the region.

Thanks for being here. What are you seeing in your area?

UPCOMING (PUBLIC) SPEAKING GIGS:
9/08/22 SAFE CU “Stats & Mimosas” (sold out)
10/07/22 Market update with SAR (Sign up here – On Zoom)
10/13/22 Market update in Midtown (details TBD)

—–——– DEEP MARKET UPDATE (FOR THOSE INTERESTED) ———––

Here are some quick thoughts about the latest stats. There is so much to talk about. 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.

HOW I’M DESCRIBING THE MARKET RIGHT NOW

THE QUICK VERSION:

1) Buyers are gaining power.
2) Sellers are losing power.
3) The sharp change in recent months has begun to level.
4) Seasonal price declines have been more pronounced.
5) 25% of the market is missing right now.
6) Lots of stats are now softer than pre-pandemic normal levels.
7) Uncertainty remains present in light of rates above 6%.

THE LONGER VERSION:

1) Buyers are gaining power:

Last year buyers had to basically bend to the will of sellers, but now they are able to take more time shopping, they’re getting in below the list price in many cases, and credits from sellers are on the rise. About 40% of sales last month included concessions in Sacramento County, and that’s a sharp change from previous months. I expect this percentage to increase through the fall season.

A line graph to show the percentage of sales with concessions in Sacramento County over recent years.
2) Sellers are losing power.

Sellers used to have the luxury of reviewing eight offers from the weekend, but that ship has sailed. About half of all active listings have had a price reduction from the original list price. Even though sellers are starting to listen more to buyers, they are still behind the ball because of how many price reductions we’re continuing to see.

A table to show price drops by the county in the sacramento region

3) The sharp change in recent months has begun to level.

The market showed a sharp change with sales volume, but over the past month or so we’ve started to see the numbers go sideways a bit. This means instead of showing yet another month of massive change, the market has sort of stabilized. Granted, volume is still down 25% or so from last year, but the market has seemed to find a little more balance lately. Of course, this could change with mortgage rates shooting up again. All I’m saying is a number of stats have gone more horizontal lately, so the sharp change from May onward looks to be subsiding (well, besides prices). And the real culprit for change has been seeing fewer new listings hit the market since June. That’s given some breathing room for sellers and buyers to figure out the new market.

Inventory didn’t spike: By the way, inventory actually dropped last month too. Monthly supply saw a huge uptick in recent months, but that spike didn’t continue last month. Scroll below for an image.

4) Seasonal price declines have been more pronounced.

It’s normal for prices to drop at this time of year as the hot spring market fades away. But price declines have been much more pronounced this year. In other words, we’re seeing easily about twice as much price deceleration compared to normal. We still need time to understand the long-term trend, but for the time being prices have seen a more dramatic dip lately. The median price is down about 7% since May in the region, which is about $45,000. Keep in mind this doesn’t mean every property has gone down by that much, so please look to neighborhood comps to understand neighborhood dynamics.

NOTE: Prices this year crested in May, so it makes for an awkward comparison when we analyze May to August this year with previous years. Prices normally crest in June, so that’s why I’m making charts to show change from June onward too (as well as May).

5) 25% of the market is missing right now.

We’ve seen about a 25% dip in volume over the past few months, so on the negative side, one quarter of the market is missing. And on the positive side, about 75% of the market is still happening. Both things are true.

6) Lots of stats are now softer than pre-pandemic normal levels.

We saw a really sharp change toward normalcy in recent months, but some of the stats are now going above “normal” levels. For instance, on average it takes 29 days to get into contract in September, but this year it looks like the number will be 32 days. Or 34% of sales typically sell above the list price in a normal August, but that number was 25% last month.

Normal: When I say “normal,” I’m referring to the pre-pandemic average of 2016 to 2019. Sometimes people get bent out of shape about this word, but this is a solid stat to consider.

7) Uncertainty remains present in light of rates above 6%.

The market has sort of been leveling in quite a few ways lately, but mortgage rates are now above six percent again, so we have to watch the stats to understand the trend over time. But it’s really a simple thing. When rates go up, it takes demand out of the market. Bottom line.

YEAR OVER YEAR STATS:

Annual stats are important to digest, but don’t forget to look at month to month stats. And remember, closed sales in August really tell us what the market used to be like in July 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).

OTHER VISUALS:

Here are lots of visuals. Probably more than you wanted. Enjoy if you wish though, and let me know what you like best.

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 out there in the market? I’d love to hear your take.

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

Changing housing temperature

August 29, 2022 By Ryan Lundquist 26 Comments

The housing market went from steaming to stagnant a few months ago, and now it seems to be slowing down a bit. Now that some time has passed, we’re getting more stats, so let’s crunch some numbers to show what’s happening with sales volume. By the way, I have a free download if you want to make charts like this.

dark brown rustic aged barn wood planks background. There is a white rectangle in the middle of the image with black text that reads, "Changing housing temperature."

UPCOMING (PUBLIC) SPEAKING GIGS:
9/08/22 SAFE CU “Stats & Mimosas” (sold out)
9/15/22 Market update in Midtown (details TBD)
10/07/22 Market update with SAR (Sign up here – On Zoom)

FREE TEMPLATE DOWNLOAD:

If you like the tables below, click here to download an Excel template to make visuals like this for your area. Just plug in the information from your MLS and the template will do the math for you. I included a longer table and a shorter one. Maybe focus on local cities or ZIP codes, or surrounding counties. Make sure you have enough data to be meaningful. I hope this helps.

A NEW MEME:

Sellers, it’s a much different market today…

A meme with a car making a fast right turn. The left turn says "2021 and the right turn says "negotiate." Then above the car it says "2022." The idea is it's a much different market today where sellers have to negotiate.

SLUMPING SALES VOLUME IS THE BIG TREND:

It’s not a shocker that buyers started to back off the market when mortgage rates shot up earlier in the year. And now that we have a few months of sales under our belt, let’s take a look at actual numbers comparing May to August this year with last year. In short, most areas easily saw 20-30% fewer sales, though the trend isn’t the same everywhere. Keep in mind the numbers can be wonky when there aren’t many sales (so take some areas with a grain of salt).

NOTE: Thank you to those who asked for various areas on my social channels last week. I think I got to mostly everything. I can try to get to a few others in the comments, so don’t be afraid to ask.

SACRAMENTO COUNTY:

A table to show sales volume in Sacramento County between May and August 2021 and the same time period this year (listed by cities and CDPs).

A table with Sacramento County volume changes from May to June 2022 (neighborhoods and a few ZIP codes)

PLACER COUNTY:

A table to show Placer County volume this year compared to last year (May to August)

EL DORADO COUNTY:

A table to show El Dorado County volume last year compared to this year (May to August)

YOLO COUNTY:

A table to show Yolo County sales volume between May to August (last year compared to this year)

WE NEED TIME TO SEE THE TREND:

As time goes by it’ll become more apparent how various price ranges and locations are faring in today’s market. But for now, I hope these stats will at least give a small window into demand, and maybe clues about some different price points. Or maybe they’ll prod us to investigate some areas more.

IS THE MARKET STARTING TO LEVEL OFF?

Since June we’ve seen fewer new listings in the Sacramento area, and that seems to be giving a bit of space for buyers and sellers to adjust to change. It’s as if some stats are starting to go slightly more horizontal lately instead of showing the really sharp change we saw from May to June. In other words, a sharp drop isn’t going to show up in the numbers every single month. For instance, the number of pending contracts has been somewhat flat for the past month or so instead of seeing the same steep May to June decline. Granted, we’re still WAY down from last year, but the May to June rate of change didn’t persist in August. Also, price reductions have been somewhat flat over the past few weeks. I mean, half of actives have had a price drop, so clearly, we have an overpriced market. All I’m saying is it looks like we’re starting to see price reduction growth slowing down or leveling off. Ultimately, we need time to see the trend, so let’s keep watching. Keep in mind that not all stats are leveling off. I’m just saying some of them appear to have flattened. And lastly, if rates shoot up in coming weeks, all bets are off because that could change the dynamic…

Let’s keep watching.

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 stands out to you most? Are you seeing any differences in the market depending on price point or location? I’d love to hear your take.

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

El Dorado County

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