Home Appraiser

The housing market is slowing (but not slow)

July 12, 2021 By Ryan Lundquist 10 Comments

The housing market is slowing and today I want to share seven quick ways I’m seeing that. But here’s the thing. This market is still driving at warp speed. In short, the market is slowing, but it’s not slow.

Podcast with Golden 1 Credit Union: If you need some background noise, here’s a podcast I recorded recently. I had fun with this one. Listen here.

This post is designed to skim or digest slowly.

7 WAYS THE MARKET IS SLOWING:

The housing market is still so competitive, but there are subtle ways I’m seeing slowing. This is so important for sellers to understand – not to mention real estate professionals who are talking with clients and the public. If you’re not local, what are you seeing in your area?

1) Taking longer to sell: Last month on average it took 12 days to sell a home and 6 median days. Since June pendings have taken two extra days to get into contract. This is still lightning fast, but it’s slower than it was.

2) More homes are selling below the list price: There are slightly more homes selling at or below the list price right now. Here’s a visual to show what buyers are paying compared to the asking price. As you can see most categories slowed slightly last month, but not every category.

3) Fewer multiple offers: For two months in a row we’ve seen fewer multiple offers in the Sacramento region. Keep in mind the percentage of offers is still about as high as it’s ever been.

4) More listings are hitting the market: We still don’t have enough listings to satisfy demand, but there are now literally multiple hundreds of extra listings on any given day in the Sacramento region compared to a few months ago.

5) Slightly higher monthly inventory: We are seeing a slight uptick in monthly housing inventory. Very slight. It’s wild to say this when we basically still have half-a-month of homes for sale, but supply is up just a little in most counties from a few months ago. Of course now we are seeing mortgage rates at their lowest point in months, so we’ll see what happens to supply in coming time.

6) We hit the big home peak: The dark blue line represents the average home size in Sacramento and it goes up and down like clockwork each year. Do you see how size typically hits a seasonal peak during May or June (besides last year)? Anyway, the average size slumped in June, which is what we’d expect to see in a normal year. This goes to show we’re seeing some normal seasonality.

7) Word on the street: I’m hearing from lots of real estate agents, loan officers, and appraisers that they’ve seen a slightly slower vibe. I haven’t heard anyone say the market is slow, but there is lots of chatter about slowing. At the same time I’m hearing things like, “My listing had 23 offers” or “We got outbid again,” which speaks to how competitive it is right now.

8) Other: What is number eight?

Any thoughts?

3 WAYS THE MARKET IS NOT SLOWING:

1) Record prices: The market still has upward price pressure in lots of areas and each month we’re seeing old price records shattered (nominal prices not adjusted for inflation). See stats below for specific price metrics.

2) Buyers paying big money over asking: On average properties sold $25,865 above their original list price last month. This is a wild stat considering it represents over 2,800 sales. This figure is higher than any of the previous three months too, which shows the market is still bananas. By the way, the average amount clearly does not perfectly represent every individual escrow.

3) Record sales price to list price ratio: Last month properties on average sold 4.1% above their original list price. This might seem low, but it’s actually higher than it’s ever been. This is a good reminder that not every stat is showing slowness. In other words, when a market slows we don’t always see it in every single metric. Of course it’s good to keep in mind sales in June really represent pending contracts from May more than anything.

Okay, two last thoughts.

NOT CRASHING: The doom and gloom crowd loves to look at slowness and say the market is starting to crash, but that’s what they say every year when stats sag. Look, I’m not saying the market is perfect. I’m just saying stats right now don’t support a crash and burn narrative.

IT LOOKS SEASONAL EH: In a normal year we’d expect for the housing market to crest around this time and begin a seasonal descent for the rest of the year. So it’s no surprise to see the market slowing right now.

——————– BIG MARKET UPDATE ——————–

For those interested, here’s a big Sacramento market update:

THE SHORT VERSION:

Here is a highlight reel to talk through some of the bigger themes right now. In short, the stats are sensational and we are in the midst of an incredibly competitive market. But we’re also seeing some slowing. Both things are true at the same time.

THE LONG VERSION:

Stats are on steroids and we are still seeing one the wildest markets we’ve had. It’s just some metrics are showing some symptoms of what looks like seasonal slowing. Here are some of the bigger themes.

FORECLOSURES HAVE NOT INCREASED:

Some folks are talking about an increase of foreclosures, but that hasn’t been happening. What I mean is these properties are definitely not showing up on MLS. I keep hearing of a coming foreclosure wave also due to forbearance rates, but those keep going down.

MAY TO JUNE PRICE STATS INCREASED (NOT A SHOCKER):

How has the market changed recently? Take a look at May to June prices. In short, every metric in all surrounding counties showed an increase last month.

LAST YEAR VS THIS YEAR:

Last year the market was dull at the beginning of the pandemic, so this year versus last year gets a little weird for a comparison. My advice? Take these percentages with a grain of salt because they’re inflated due to sagging numbers last year. And remember these percentages DO NOT actually mean every house is worth that much more either.

MORE PRICE VISUALS:

A few more visuals to show the insanity of price growth lately. Look how far disconnected 2021 prices are from previous years.

SALES VOLUME HAS BEEN STRONG:

For thirteen months in a row we’ve seen higher monthly sales volume compared to the previous year. This June was up from the previous two years and overall at a fairly normal level. Frankly it’s impressive to see this many sales in light of having such low supply. It just goes to show buyers have been getting it done. Keep in mind last year did have lower volume due to two lower months at the beginning of the pandemic, so that’s one reason why the percentages are up so much this year. But we’ve also seen increased migration this year too, particularly in El Dorado and Placer County.

Anyway, this is getting really long.

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 are you seeing out there in the market? What are you hearing buyers and sellers say? I’d love to hear your take.

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

Why your home isn’t worth 16% more today

November 4, 2020 By Ryan Lundquist 9 Comments

Home prices have been massive lately, but there is an asterisk. It’s easy to look at glowing stats and say, “Dude, prices are up 16%, so my house is worth 16% more.” But lofty county or regional price stats don’t always show up the same in a neighborhood. Let’s talk about this.

TWO REASONS WHY PRICES ARE SO HIGH ON PAPER:

1) The top & bottom: There have been more sales at the top of the market and fewer sales at the bottom. In fact, when comparing the past four months this year with last year, we’ve seen 20% fewer sales under $400,000 and 75% more sales above $750,000. Here is a brand new visual to show the change in various price ranges. If you’re not in Sacramento, is this happening in your area too?

The effect: Having a big change in volume at the lowest prices and a hefty change at the top has simply boosted price metrics. Thus on paper price stats are really high compared to last year, but when pulling comps in a neighborhood we don’t always see anywhere close to this sort of explosive growth.

Here’s another way to look at the same data:

2) Larger homes: I’ve mentioned this before and I’m not trying to beat the dead horse, but during the pandemic buyers have been purchasing noticeably larger homes over the past four months. Do you see the spike? In short, having larger homes has boosted price stats, so when talking about growth it’s good to remember that part of the reason for higher prices is due to larger homes selling more often.

The takeaway: There is no mistaking the market has increased in value quite a bit this year. I’m not saying it hasn’t. I’m just saying if we’re not careful it’s easy to get infatuated with lofty regional price stats which can sometimes blur our vision for a neighborhood market. My advice? Know why the numbers are the way they are and focus on comps instead of county or zip code stats. Moreover, don’t expect the market to be the same temperature with every location, price range, or property type.

I hope that was interesting or helpful.

Questions: Have you seen some neighborhoods where prices have risen greatly and others where growth is more subdued? Did I miss anything? Any stories to share?

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

Six things to remember about crazy home price growth

October 14, 2020 By Ryan Lundquist 18 Comments

Price growth has been unreal lately in many parts of the country, but here are some things to keep in mind before pricing for the moon…

Six things to keep in mind:

1) County stats don’t translate perfectly: It’s easy to look at county or zip code stats and think, “Dude, my home is worth 14% more now because the median price is up by 14%.” But the market isn’t that rigid where price growth for a larger area applies equally to every parcel.

2) Picking and choosing: If we’re not careful we can pick and choose stats that benefit us the most. For instance, someone in Placer County this month could be tempted to focus on the region at 14% instead of Placer data at 6.4%. My advice? Look at all the stats instead of fixating on glowing numbers.

3) Larger homes are padding the stats: During these past few months we’ve seen buyers focus on noticeably larger homes, so it’s important to take this into consideration when interpreting huge price growth. At the least larger homes represent some of the heightened price growth lately.

4) Not every property type has the same trend: The truth is not every type of property is going to be showing the same price growth. Thus price trends could be different for vacant land, entry-level homes, the million dollar market, attached homes, 55+ communities, 2-4 units, commercial units, etc…

5) Hot Pockets: The real estate 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 frozen. Like a Hot Pocket, we can say the real estate market is “hot” overall, but it’s definitely not the same temperature in every neighborhood or price range. For instance, the City of Davis seems to have very subdued price growth over the past couple of years, but East Sacramento has been a far different story with large increases. My advice? Price according to similar homes that are getting into contract rather than projecting zip code or county stats on a property.

6) It’s NOT all about prices: The question I get asked the most is, “What are prices doing?” I get it, but if we want to understand a real estate market it’s important to look to other metrics too like inventory, sales volume, days on market, SP/OLP ratio, etc.. Besides, sales are like historical artifacts that tell us what the market used to be like 30 to 60 days ago when these homes got into contract. If anything sales tell us more about the past than the present. If we want to understand the market right now it’s critical to see what’s happening with the listings and pendings (which will be future sales in about 30 to 60 days).

I hope that was helpful or interesting.

NEW VIDEO TUTORIAL: I made a graph last week to show the seasonal market and lots of people responded saying they’d like a tutorial. Here it is.

Thanks so much for reading my post today.

Any thoughts?

———————- (skim or digest slowly) ———————–

MARKET SUMMARY: For anyone interested, here are some tidbits for social media, newsletters, or in case you want to win the real estate category on Jeopardy.

– We have 20 days of housing supply in the region

– There were 41% more multiple offers this September compared to last year

– Monthly inventory is lower than it’s been in 15+ years

– There are 53% fewer listings in the region right now (not a typo)

– Sac, Placer, Yolo, and El Dorado counties all have less than one month of housing supply. Each respective county is lower than it’s been in 15+ years.

– We saw the highest number of sales for September in Sacramento County in 11 years (since 2009).

– The million dollar market has grown this year in the region. 3.3% of homes have been above one million in 2020 compared to 2.5% last year.

– It took 9 fewer days to sell this September in the region compared to last year at the same time.

– Demand has increased dramatically lately from local buyers as well as Bay Area buyers. This is part of why we’ve seen heightened pending contracts, higher prices, lower inventory, more multiple offers…

– Normally the market at this time of year would be cooling more substantially by now, but the spring buying season has been sort of extended. Yet before saying it’s simply buyers making up for the sluggish pandemic market in the spring, let’s not ignore the power of low mortgage rates. It’s no coincidence we’re seeing a hyper-competitive market over the past 90 days as mortgage rates have gone below 3%.

– In the background it looks like sales volume and pending contracts are starting to flatten. I talked about this last week. Normally during the fall season we see a dip in all metrics. That really hasn’t been the case so far, but seeing volume flatten could lead to other metrics dipping at some point.

– So far this fall season reminds me of 2012 where the market was incredibly aggressive. Prices kept going up that fall, yet there was a hint of a normal seasonal trend too as there was a dip in sales volume. We’ll see what this fall holds. For now it’s anything but cold.

WAY TOO MANY VISUALS:

You are welcome to use these in newsletters and social media with proper attribution. Scroll quickly or digest slowly.

SACRAMENTO COUNTY:

EL DORADO COUNTY:

PLACER COUNTY:

SACRAMENTO REGION:

I hope that was interesting or helpful. Thanks for being here.

Questions: What are you seeing out there right now? Anything else to add about prices?

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

The aggressive & slowing housing market

October 6, 2020 By Ryan Lundquist 25 Comments

Insane. Crazy. Irrational. The housing market has been described this way in many places around the country lately. But in the midst of freakishly high demand there is still a seasonal rhythm to see in the background. Let’s talk about that.

Today’s post seems long, but it’s mostly images.

BIG POINT: Understanding what the market normally does throughout the year helps us give good advice, make plans, do a better job with valuations, and spot when something abnormal is happening.

WHAT DOES THE MARKET DO DURING THE YEAR?

Seven years in one graph? Yep. This visual looks at the average of seven years worth of sales for each month, so even though there is just one line we end up with a solid visual of how the market behaves throughout the year. This is so important because being a real estate expert involves lots of things, but one big factor is understanding how the market moves.

Tutorial: I’m actually game to do a video tutorial on how to make this visual. If I get a number of people interested I’d be glad to do that. Let me know.

Here is 2020 showing an abnormal trend…

UPDATE: I think some people are caught on my title instead of what I am communicating in the body of this post. Look, the market is not soft. Prices have continued to rise and we’re having an abnormal fall season so far in many ways. Frankly, this fall is far more aggressive than it should be for the time of year. Yet sales volume is starting to flatten too, which is a sign of some slowing. That’s what the stats and visuals are indicating right now, so that’s the story we ought to understand and tell. When saying this though I think some people hear, “The market is dull,” but that’s not what I am communicating. The market is always changing and doing different things. Why can we not clearly and confidently say, “The market is white hot, but we’re also seeing sales volume slow down”?

NOT THE SAME:

Many markets have a similar pattern to the one above, but others look totally different because of weather, being a vacation destination, etc…

MARKET UPDATE VIDEO: Here are a few things on my mind right now.

ANOTHER VISUAL:

Here’s a different way to look at sales volume. Check out this year in black compared to previous years. What is volume doing?

THE TAKEAWAY:

The black line shows sales volume looks like it hit its peak for the year a couple months ago, so even though we are calling this market white hot, we can still see a slowing trend creeping in the background. This doesn’t mean the market is dull (I didn’t say that). In short, this year we’re beginning to see a change in volume, but overall the fall season hasn’t been normal because by now prices are usually cooling off and it should be taking longer to sell rather than fewer days.

Okay, two more counties…

PLACER COUNTY & EL DORADO COUNTY

Check out the rhythm of the market in these two counties. This is a really good picture for how the market tends to behave through the year.

Now check out the black line. Do you see the increase lately? Like I said a few weeks back we’ve seen a huge influx of buyers in Placer & El Dorado County. In other words, the black line shows an abnormal amount of buyers lately. Also, we see what looks like a seasonal slowing of volume as the black line looks to be curving down.

Anyway, I hope this was helpful or interesting.

Thank you again for all of your support in my life these past months. I am fully back to work and doing my best to pace myself.

Questions: Do you think this fall we’re going to see a big slowing or barely any slowing? What are you seeing out there? I’d love to hear your take.

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

Home Appraiser

Share:

Share:

Share:

Share: