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Chuck Norris eats 8% rates for breakfast

September 27, 2023 By Ryan Lundquist 18 Comments

Travis Kelce, Taylor Swift, and mortgage rates. So much drama this week. Let’s talk about it. Today I have some thoughts about believing the Fed, Chuck Norris, and building a bigger network. This post is all over the place, but hopefully something resonates.

UPCOMING (PUBLIC) SPEAKING GIGS:
9/28/23 Yuba City Big Market Update (in Yuba City (register here))
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)

BELIEVE THE FED ABOUT HIGHER FOR LONGER

This isn’t my meme, but I think it’s perfect when talking about the Fed Funds rate (I don’t remember where I saved it from). Look, nobody knows what will happen with rates exactly, but the Fed has been saying higher for longer, so I recommend believing the Fed. My advice? If you work in real estate, plan on low volume, low supply, and higher rates unless something changes the trajectory of the trend. I like the idea of being realistic by planning for the worst and rejoicing if something else happens. The MBA has an optimistic outlook that the 30-year fixed rate will be 6.3% in Q4 2023, and that’s the rosiest projection I’ve seen. Look, I don’t predict rates because almost nobody gets it right, but like body weight, it’s been much easier to go up instead of down, so I’m not quick to embrace this projection. Time will tell.

THE MARKET WILL FIGURE IT OUT

No matter what rates do in coming months, the truth is the market will figure it out. That’s what markets do. Sellers, if buyers continue to lose purchasing power though, it’s time to be quick to listen and adjust accordingly. Purchase applications have been at 1995 levels lately. If you don’t remember 1995, that’s when movies like Toy Story, Braveheart, Billy Madison, and Clueless were out. Sellers, there is a smaller pool of buyers out there, lower the price if you’re not getting offers, and be open to giving buyers concessions if needed. And remember, Chuck Norris eats 8% rates for breakfast, but ordinary buyers aren’t Chuck Norris.

Okay, a few other things on my mind.

IT’S EASY BEING AN EXPERT DURING GOOD TIMES

I’ve been thinking about expertise quite a bit lately. When a market is good, it’s easy to feel like an expert, but real expertise shows up most when things aren’t so good. Know what I’m saying?

STAYING AFLOAT

Scroll to the bottom for some thoughts on building a bigger network and staying afloat in today’s market.

MOVING FAST IF PRICED RIGHT

With so much talk about the housing market slowing, I think it’s important to recognize things have still been moving historically fast in Sacramento at least. It’s just not a 2021 speed. Keep in mind if rates start to spike, we could see a sharp change in days on market and lots of metrics. Remember, we see change first in active listings, mortgage applications, and the sentiment in the trenches of real estate. If we wait for closed sales before spotting a trend, we’re going to be way behind the market.

ALL SHIPS RISE AND FALL WITH THE TIDE

This week I’m speaking in Yuba City, which is a cool opportunity to pull some stats for an area I don’t normally cover. I love the idea of creating visuals that haven’t been seen before and hoping they resonate (fingers crossed). Anyway, Yuba and Sutter County are north of Sacramento, and the price trend is VERY similar (see black and green lines). Data from CAR.

HOLY BATMAN, LOOK AT SAN FRANCISCO

I made this visual a few days back, and it’s stunning to see how close the price trend in San Francisco used to be to California in the early 1990s, but then it pulled so far away. This just goes to show that some areas don’t have the same exact trend (even though all ships tend to rise and fall with the tide).

And some local counties with California.

Okay, other stuff on my mind.

GROW YOUR NETWORK TO STAY AFLOAT

In my talks lately I’m sharing stats of course, but I’m also talking about the importance of increasing the size of your network. This is something I work hard at personally, and every day I push out perspective on purpose in order to be a resource and build relationships with people. Anyway, in light of volume contracting so heavily this past year, it’s vital to cultivate a bigger network to sustain business since we’re in a market with less movement.

Some questions to brainstorm:

– How do you plan to increase the size of your network this year?
– Who do you need to get to know?
– Who are the gatekeepers to the types of work you want to do?
– Who do you need to get in front of this week?
– How do you need to diversify?
– What do people need from you right now?
– How are you going to build good relationships and show up for people in today’s market?

APPRAISER COLLEAGUES

I know it’s been tough on many appraisers lately, and there is no sugarcoating that. I only do private work, so if you ever have questions, please reach out. 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 just can’t pull that off this month, but November could work. I’m starting to get the itch to bring some colleagues together, so let me know if you’d be interested.

Thanks for being here. I hope this was helpful.

Questions: What do you think of Taylor and Travis? Or what about anything I talked about in the post? I’d love to hear your take.

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

A Weird Housing Market: High Prices & Depressed Volume

August 16, 2023 By Ryan Lundquist 12 Comments

Weird. That’s a good way to describe today’s housing market. On one hand prices are still pretty high, but volume has fallen off a cliff. This week I was talking with a broker who has been in business since the 1970s, and he told me he’s never seen a market like today. Exactly. This is new territory. Anyway, below I want to unpack some trends, show a seasonal peak has occurred, and talk about a big stat mistake right now. I know I’m unpacking Sacramento, but many areas across the country are showing a similar dynamic. I’d love to hear your take in the comments.

Scroll quickly by topic or digest slowly.

Old wooden table near wall. shallow depth of field. There is a white rectangle with black font that says, "A Weird Housing Market."

UPCOMING (PUBLIC) SPEAKING GIGS:
8/18/23 Market & Mimosas (register here)
8/29/23 Elk Grove Regional MLS Meeting
9/26/23 Orangevale MLS Meeting
10/4/23 KW Sac Metro Big Market Update (register here)
10/6/23 SAR Think Like an Appraiser (TBD)
10/27/23 AI Fall Conference (San Francisco)

I GUESS IT’S HARD TO PREDICT RATES…

In the beginning of the year there was so much optimism about mortgage rates going down, but that hasn’t panned out. It’s a good reminder that nobody can predict the future with certainty. Be careful about promising the future.

PRICES AREN’T DOWN ALL THAT MUCH

I’m not sugarcoating to say prices aren’t down that much from May 2022 because that’s what the stats are showing. I’ve been seeing this dynamic when pulling county stats, but I’m also seeing it when pulling comps lately in my appraisal reports. I’ve yet to see a neighborhood where prices are higher than the peak, but some agents swear that’s the case. I just haven’t personally seen it in the stats or in appraisals on my desk.

PRICES ARE SIMILAR TO ONE YEAR AGO (BUT STILL DOWN)

Prices are similar to where they were one year ago, but they are still down from the peak in May 2022. I suspect some people will look at year-over-year prices and say, “Bro, we’re back to peak prices,” but that’s going to be a stat mistake.

NOTE: These price metrics don’t translate rigidly to every property, so it would be a mistake to say “prices in the neighborhood are down 5-6%.” Maybe. Maybe not. Look to the comps.

DID PRICES PEAK FOR THE YEAR OR NOT?

Normally the median price peaks in June for the year, but it’s more likely that it will peak in July this year unless a wave of sales close higher in August. It would be weird to see price growth extend another month, so we’ll see. But let’s not get too stuck on the median because it looks like the average sales price and average price per square foot peaked in June as expected.

WEEKLY PRICES SHOW FLATTENING

Okay, it’s a couple of days too early to share this because we need more sales to close, but I want to show you the weekly median and weekly average price in 2023 in black. Do you see how it’s flirting with last year and sort of leveling off too? This most recent week looks to have dipped as it should for the time of year. But time will tell. Like I said, it’s slightly early to share last week’s data.

VOLUME IS STILL REALLY DEPRESSED

Prices are sort of glowing, but volume is depressed. I saw a post this week where someone said sales volume has been normal lately in Sacramento, but that is completely false. I’m not being negative here. I’m simply describing the market that actually exists (which is the market that buyers are sellers need to navigate).

A FEW IMAGES

This visual has over two decades of monthly volume, and it’s sobering. What do you notice about 2023 volume? It’s basically been the worst year ever, and it’s currently flirting with 2007 volume levels.

Here’s a different way to look at the trend. The green line is the pre-2020 normal, and the orange line (2023) is way below the normal trend.

And here’s a cool but chaotic way to see the trend. The percentages below show how much lower 2023 is compared to the pre-2020 normal. Basically, volume in July was down about 37% from the pre-2020 normal in the region.

DON’T MAKE THIS BIG MISTAKE

Let me highlight a big mistake that’s going to be pretty easy to make for the rest of this year. If you work in real estate, my strong advice is to pay attention to stuff like this so you tell a credible story of the market.

When we compare last year with this year, it looks like volume is only down 16%. Is the market back baby? Is volume normal again? I wish I could say it was, but the problem is we’re now comparing today with a slumping year in 2022, and that makes the numbers look much sexier today.

Here’s a better way to look at the trend. When we compare 2023 with the pre-2020 normal, it helps us see that volume is down closer to 38% over the past sixty days instead of just 16%.

Here’s a good way to see what I’m talking about. Placer County in 2023 has a nearly identical level of volume to 2022 (black and gray line). It would be easy to walk away and say, “Bro, we’re back!!!” But the real trend is seen when comparing the black line with the green line (pre-2020 average). I know this is nerdy, but improper comparisons are going to fuel real estate narratives ahead, and this is how people lose credibility.

BIG POINT:

Some of the year-over-year stats are going to get really weird ahead, so be prepared to talk about stuff like this.

DID THE HOUSING MARKET PEAK FOR THE YEAR?

Yes, the market did peak. I want to show you what I mean in the stats. But I’ll say it’s also been more competitive than usual still, and it looks like the spring season has been extended into the summer. As I wrote recently, it’s either a bidding war or crickets, so the dynamic is interesting out there. If you aren’t priced right, you’re going to sit on the market. If you are priced reasonably, it’s go time for buyers. Time will tell what happens ahead, but check out the visuals below to see what I mean about a peak.

It’s starting to take longer to sell:

Fewer homes sold above their original list price:

More properties sold below their original list price:

The percentage of multiple offers has been subsiding since May:

We’re seeing price growth slow (normal for time of year):

New listings likely hit their seasonal peak for the year (Redfin data):

Pendings have been flat lately. Something to watch:

It looks like volume has begun to crest for the year (orange line):

IT’S STILL MORE COMPETITIVE THAN USUAL

Last month properties on average sold about half-a-percent below their original list price, and that’s a more aggressive number for the time of year compared to the pre-2020 average. It’s wild to see stats like this in the midst of a market with low volume and a struggle to afford, but this is the dynamic we have today. In fact, many stats right now are more competitive than normal. Anyway, price stats and the sales price to original list price have been a little stronger than usual for the time of year, which shows we haven’t seen a sharp price change like we did last year. Could rates going higher cool the market? Sure. I’m just saying so far it hasn’t been a sharp seasonal change reminiscent of 2022 vibes. If anything, it seems like the spring market has been a little more extended so far, which makes me eager to see how the stats evolve ahead.

RECAP STATS

And some recap visuals. Please use these on your socials as you see fit (with credit and without alteration). Thanks.

ANNUAL STATS

Remember, some annual stats like volume get a little weird, but this is still a valid comparison we want to know and understand.

MONTH TO MONTH:

I hope this was helpful.

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.

Thanks for being here.

Questions: What are you seeing out there in the market? What stands out to you above? I’d love to hear your take.

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

A hot & cold housing market

August 9, 2023 By Ryan Lundquist 5 Comments

New construction has been on fire, but the resale market has been cold. It’s been stunning to see the difference in volume between both markets. Let’s talk about the trend and look deeply into what’s going on with concessions.

Scroll quickly by topic or digest slowly.

Brown wooden background with black font on top of a white rectangle. The font says, "A hot & cold housing market."

UPCOMING (PUBLIC) SPEAKING GIGS:
8/18/23 Market & Mimosas (register here)
8/29/23 Elk Grove Regional MLS Meeting
10/4/23 KW Sac Metro Big Market Update (register here)
10/23 SAR Think Like an Appraiser (TBD)
10/26/23 Orangevale MLS Meeting

THE MARKET DID PEAK IN JUNE, BUT PRICES…

I’ll have my July recap stats out next week. I want to wait a couple more days before pushing out the numbers. I would have maybe published tomorrow, but I’m going to a Foo Fighters concert… Anyway, the problem is we’re having low volume, so the stats can be off if we pull them too early. Ultimately, despite metrics showing we hit a seasonal peak in June, it looks like July squeezed out a little more price growth. Normally prices peak in June, but if the stats hold, our price peak will likely be July. I’ll talk about that next week. My advice? Don’t get so stuck on prices that you’re not seeing other stats that show a June peak.

NEW CONSTRUCTION HAS BEEN ON FIRE

The first seven months of the year have been really strong for new construction in the Sacramento region. In fact, the only other higher year over the past decade was 2021. Words like “strong” and “growing” haven’t been used to describe the resale market, but new construction has been experiencing a different trend.

BUT CONCESSIONS FROM BUILDERS ARE A HUGE FACTOR

Volume has been glowing from builders, but one of the reasons we’re seeing more sales is builders are offering concessions to buyers. It’s true buyers are looking more to new construction since sellers have been sitting out, but builders are also enticing consumers with rate buydowns and credits for closing costs. In short, these glowing volume numbers wouldn’t be happening without concessions.

IT’S NORMAL TO SEE VOLUME DIP IN JULY

Volume ticked down between June and July, and that’s normal for new construction. Here’s a crazy way to see what 2023 volume looks like in the midst of two decades of sales. Do you see how volume typically slides down for the rest of the year? That’s what normal seasonality looks like.

TOP TEN CITIES FOR NEW CONSTRUCTION

Roseville is yet again top dog. Here are the top ten cities for new home sales in July per North State BIA data.

NEW HOMES ARE A BIGGER CHUNK OF THE MARKET

New construction has been a bigger chunk of the total market lately. For instance, nearly 29% of all sales in the region this year have been brand new homes. The blue portion represents existing sales and the black portion is new construction. The percentage is brand new homes compared to the entire market.

NOTE: Even though new construction has been a larger chunk, it’s still much smaller compared to the existing market for older homes.

THE EXISTING MARKET HAS COLD VOLUME

New construction volume has been hot and growing, but the existing market for older homes has been cold all year. It’s sobering to be missing almost 6,000 sales from the pre-2020 normal in the Sacramento region. Of course, the good news is over 10,000 sales have happened, so we don’t want to neglect seeing the market that is here by fixating too much on the missing portion.

BUT THE MARKET DOESN’T FEEL COLD

Save your hate mail people. I’m not saying competition is cold. It’s not. What I’m saying is volume is cold since the number of sales has been so depressed lately. In terms of what the market feels like, competition can be fierce today. The wild part about today’s housing market is volume feels like low 2007 numbers, but competition feels more like 2020. We have a situation where low supply and low demand have met. Yet, like I talked about two weeks ago, it’s either bidding wars or crickets.

YES, VOLUME PEAKED FOR THE SEASON

The orange line below shows volume dipped between June and July, and that’s normal for the time of year. Like I said, stats are showing we hit our seasonal peak in June (even though prices ticked up in July). In a normal year we should see volume slide down through December, and that’s what I expect to see unless mortgage rates drop substantially.

EVERYTHING YOU DIDN’T WANT TO KNOW ABOUT CONCESSIONS

Let’s look at what’s been happening with concessions lately. This information is for the resale market (not brand-new homes).

CONCESSIONS BY PRICE RANGE

This is a brand new visual. Do you like it? I dig it. The only problem is some categories don’t have many sales, so the numbers can be a bit wonky. But generally speaking, there are more concessions at lower prices – especially between $400-$500K. Keep in mind there is typically more cash under $400K, so it’s not a shocker to see lower concessions in that price category. Concessions still exist at the highest prices, but not as much. I did double-check data above $1M in Sacramento County, and it’s accurate. However, there were only about forty sales, so take that figure with a grain of salt.

TEAM BAR CHART OR TEAM LINE GRAPH?

Here’s a way to look at the same data from the chart as a line graph. Are you team bar chart or team line graph?

CONCESSIONS INCREASE DURING THE SECOND HALF

During the second half of the year, we typically see more concessions. Part of this is demand softening for the rest of the year, which means sellers have to be ready to meet buyers where they are at. But it’s also about smaller homes selling between July and December. The size factor is important because smaller homes tend to have lower prices, and there are more concessions at lower prices. Do you see how concessions have ticked up over the past month on the right side of the chart? That’s normal for the time of year. Of course, what happens with mortgage rates for the rest of the year will play an enormous role with what we see with concessions.

HOW MUCH ARE BUYERS GETTING FROM SELLERS?

Here are some scatter graphs to show concessions in four local counties. The goal is to see what is happening by price range. Generally speaking, there are more concessions at lower prices, which reminds us the market isn’t the same in every price tier. Basically, buyers at lower price points are getting more assistance from sellers (not a shocker). But keep in mind it’s not just one amount buyers are getting. As the graphs show, it’s rare to get more than 3%, and there are many situations where a dollar amount of $5,000 or $10,000 seems to be a threshold. Personally, I like seeing both the dollar amount and percentage number. Some people want to cage fight me over percentage graphs being better, but I like both.

SACRAMENTO COUNTY

PLACER COUNTY

EL DORADO COUNTY

YOLO COUNTY

Thanks for being here.

Questions: What are you seeing happen with new construction or concessions? I’d love to hear your take.

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

It’s either a bidding war or crickets

July 26, 2023 By Ryan Lundquist 16 Comments

It’s either hot or cold. A bidding war or crickets. That’s what I’ve been hearing from real estate agents about their listings. Today I want to talk briefly about the word on the street, hot pockets, and I have some really cool stats to share. Skim quickly or digest slowly by topic.

UPCOMING (PUBLIC) SPEAKING GIGS:
7/26/23 Fairway Mortgage (free and limited space)
8/18/23 Details TBD
8/29/23 Elk Grove Regional MLS Meeting
10/23 SAR Think Like an Appraiser (TBD)
10/26/23 Orangevale MLS Meeting

WHAT ARE PEOPLE SAYING ABOUT THE MARKET?

I run stats galore, but what people say about the market is important since the stories of today turn into the stats of tomorrow. Yet, I’m careful about stories because they’re subjective. I find some people are more in touch with the market than others too. Anyway, here’s a tweet I shared. Also, thanks to Amy Winslow for the title of my blog today.

IT’S A HOT POCKETS MARKET

The housing market is like a hot pocket taken out of the microwave a tad too early. Some portions are blazing hot while others are only warm (or cold). What I mean is not all neighborhoods and price ranges have the same temperature. Moreover, we’ve hit a seasonal peak, so the hot spring temperature is cooling. I first shared this analogy in 2016 and it seems fitting today.

WHAT’S HAPPENING RIGHT NOW?

We hit a seasonal peak in June in Sacramento like we normally do, and we’re undeniably seeing a slower market. But mortgage rates are also hovering around 7%, and that can have a chilling effect on buyers. So far, I’m not seeing any sensational changes in the stats, but there are about five hundred more active listings than pendings right now. This really isn’t a high number, and it’s normal to see more new listings hit the market around this time of year, but compared to April when there were more pendings than actives, it feels way different. This is something I’ll watch closely ahead, but for now the stats look mostly like they should for the time of year with all of the metrics slowing. With that said, I’m finding some of the stories from the trenches are more inflamed than the stats, so I’m paying attention to that.

HEY SELLERS

We have a price-sensitive market where so many buyers are struggling to afford historically high prices at 7% rates. At the very least, the market peaking for the year needs to motivate sellers to price reasonably, reduce the price if needed, and offer concessions to buyers if required.

WHAT TO EXPECT FOR THE REST OF THE YEAR

It’s hard to predict the second half of 2023 because what happens with mortgage rates and inflation are such big factors. The housing market could be really dull if rates increase, but it could be more competitive if rates go down. Here’s what normal looks like for the second half of the year:

– more price reductions
– lower demand
– fewer multiple offers
– more concessions to buyers
– softening prices
– longer days on market
– lower SP/OLP%
– lower sales volume
– fewer new listings
– new listings tend to have smaller square footage
– one last dash to the market in the fall before the holidays
– other (add in comments)

BUT SERIOUSLY, THE MARKET ISN’T THE SAME

I’m excited for these new stats. Do you see how the market isn’t the same by price range? If you like these images, please use them on your socials unaltered with credit of course. Thanks.

NOTE: Smaller counties tend to be all over the place since there aren’t as many data points. I recommend giving more weight to the region and Sac County.

And by special request (just once):

DON’T GET SUCKED INTO SENSATIONALISM

For anyone who wants to be a real estate expert, now is your time to shine. Understanding the seasonal trend is a huge part of being on top of the market, and my sense is every year some people freak out about the market changing because they aren’t anchored to the stats. My advice?

1) Know the season: Know how the seasonal market normally changes so you can give good advice and spot anything abnormal.

2) Paint the trend: Be careful about painting the entire market trend based on your personal experience. The properties on your desk or what you’ve looked at may or may not line up with the stats.

3) Cultivate objectivity: Get to know the numbers and cultivate objectivity. My sense is objectivity does NOT happen by accident. It’s something that has to be cultivated by knowing the stats and sticking to them when people misinterpret the trend. The market should be slowing at this time of year, and that’s something to embrace. Granted, if the market does something more than just slowing, we’ll be able to catch that by watching lots of metrics like the number of pendings, number of actives, price reductions…

4) Slowing vs crashing: I find it’s easy for the real estate doom narrative to interpret slowing as crashing. It happens every single year. Maybe it’s intentional to get clicks (gross), or maybe doom prophets are naive about the seasonal trend. Look, if prices go down and the market shows a huge dip this fall, that wouldn’t be a bad thing because we need more affordability. But let’s not look at a change in days on market or softer prices and call it a crash unless that’s what the stats are collectively showing. In real estate it’s dangerous to impose a narrative on the numbers. Not a fan of agendas.

Thanks for being here.

Questions: What stands out to you about the stats? Has it been a bidding war or crickets for you lately? I’d love to hear your take.

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

Home Appraiser

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