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Buyers are making less aggressive offers

August 1, 2022 By Ryan Lundquist 6 Comments

Good news. Buyers aren’t having to make aggressive offers like they used to (even when there are multiple offers). Let’s talk about this today. I suspect this is true in many areas across the country. I’d love to hear your take.

A green background with a wooden table at the bottom. The caption reads, "Buyers are making less aggressive offers."

UPCOMING (PUBLIC) SPEAKING GIGS:
8/11/22 Realtist Lunch & Learn (sign up here (open to anyone))
8/15/22 YouTube Live with Matt Gouge (details TBD)
8/25/22 State of Housing Brunch & Learn (sign up (for real estate community))

1) Buyers are finally getting in below the list price

On average properties sold about 2% below the original list price last month in the region, which means buyers are not having to endure insane bidding wars to get an offer accepted (most of the time). This is a far cry from last year when the average was 3% above the original list price. Keep in mind an average below doesn’t mean everything is selling below the list price.

The sales price to original list price percentage. A line graph of the Sacramento region from 2018 onward.

2) Bidding wars aren’t completely dead like some think

“Everything is selling below the list price.” That’s what some people think, but it’s not true. Seriously, there are still multiple offers in today’s changing market. In fact, 47.0% of sales last month had more than one offer in the Sacramento region per MLS stats.

A line graph to show the percentage of multiple offers in the Sacramento region since January 2017. The graph sort of goes up and down depending on the time of year.

3) Offers from buyers are becoming less aggressive

The table below studies sales that ONLY had multiple offers, and the big takeaway is that when multiple offers happen, properties aren’t getting bid up way beyond the list price like last year. I realize this isn’t a shocker, but seeing it in the stats is important. There are also more properties today that had multiple bids and still sold below the original list price. Sellers, did you hear that? It’s easy to think, “multiple offers = selling way above the list price.” Nope. Today you might get a few offers at best, but buyers are getting used to the idea of making less aggressive offers and expecting concessions too.

4) There are fewer properties getting bid up 10% and more

Here’s another way to see the difference between last year and this year. I know, there are way too many orange dots, but can you spot more sales last year going above the original list price (above the 0% line)? There were so many more properties last year that sold above 10% too. Also, there’s been a big drop in the number of sales this year (fewer dots).

A scatter graph to show the percentage of properties with multiple offers and how much they sold in relation to their original list price

A scatter graph to show the percentage of properties with multiple offers and how much they sold in relation to their original list price (2021 stats)

5) A spike in supply is giving buyers more control

We’ve seen a sharp uptick in available listings over the past few months, which means buyers are gaining power from sellers and having more time to make decisions. These stats below only represent listings on August 1st, which might seem like a strange thing to publish, but the monthly trend actually looks the same. Anyway, there are about 1,800 more listings than last year, which is also still a few hundred lower than the pre-pandemic normal. As I’ve been saying, a spike in inventory is NOT due to more sellers listing their homes. This is really about fewer pending contracts happening. In other words, the change in supply is due to a change in demand. Technically, the number of listings looks almost normal, but the abnormal thing happening right now is a 30%+ drop in pending volume (more on that soon).

This bar chart shows the number of active listings on August first each year in the Sacramento region

Check out the number of available listings in today’s market compared to last year at the same time. Keep in mind we saw massive price growth from one year ago, which explains more listings above $500K in particular.

This bar chart compares the number of active listings in the Sacramento region by price range (comparison of 2021 and 2022).

CapRadio Interview: Last week I did an interview with our local NPR station. We talked about housing demand, uncertainty salad, and lots of things. It’s about ten minutes. Check it out here if you wish.

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 are you seeing happen with offers right now? What advice do you have for buyers or sellers? I’d love to hear your take.

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Buyers take power from sellers. It’s their turn.

July 18, 2022 By Ryan Lundquist 11 Comments

Finally. Buyers are gaining power. And sellers are losing it. I have some new visuals to show what the market is doing right now. These are for Sacramento, but I suspect many areas look similar.

The background is dark brown rustic boards and there is a heading that says, "Buyers are finally gaining power."

UPCOMING (PUBLIC) SPEAKING GIGS:
7/20/22 Beer & Stats at Out of Bounds (sign up (for real estate agents))
7/26/22 Navigating the Shift (sign up here (for real estate community))
8/11/22 Realtist meeting (details TBD)
8/15/22 YouTube Live with Matt Gouge (details TBD)
8/25/22 State of Housing Brunch & Learn (sign up (for real estate community))

Three ways we are seeing a power exchange:

1) MORE BUYERS ARE GETTING INTO CONTRACT BELOW LIST

It’s been rare to get into contract below the asking price, but we’re finally starting to see that change. Buyers can now actually get an offer accepted and take more time to shop too. Sellers would be wise to recognize buyers are pickier about getting into contract (and staying in contract). The black line represents 2022, and there has been a sharp shift away from the insanity of last year. These stats are technically looking normal at the moment, but let’s not ignore abnormal things (dropping volume).

Figuring out normal: The red line in visuals below is the pre-pandemic average so we can compare today with then. The goal is to create a benchmark to show what “normal” looked like before things got crazy.

2) BIDDING WARS ARE LESS COMMON

There are fewer bidding wars. You don’t have to offer your firstborn child to the seller. And you probably don’t need to waive all your contingencies. These visuals show a sharp transition downward where we are seeing fewer properties sell above the original list price.

Big Point: It’s important to recognize nearly 40% of sales in July (so far) have sold above the original list price. The narrative is that “everything is selling for a discount way below the asking price.” I get it. And I’m not sugarcoating here. I’m just saying every escrow is NOT experiencing the same exact trend.

3) HOMES DON’T SELL AT THE LIST PRICE VERY OFTEN

We’re seeing more homes sell at their original asking price. I mean, the number is only around 12% of sales, but it’s on the rise. Here’s the massive takeaway though. Nearly 85% of homes regularly do NOT sell at the exact list price. This tells us it is normal in real estate to negotiate up or down, or even reduce the price if needed. In other words, the list price is NOT holy and irreversible. Sellers, did you hear that? Don’t get stuck on the list price.

IF YOU HATED THE GRAPHS, YOU MIGHT LIKE THIS INSTEAD

If you’re offended over line graphs, here’s a table instead. I find some people love line graphs and others resonate with tables. Pick your poison.

ON THE NEWS: I shared some thoughts with four news stations this week on the state of the market. Busy week. Here are two of the pieces. 1) Real estate reality check: ‘The honeymoon is over’ says California housing analyst 2) Red-hot Sacramento housing market shows signs of slowing

SPEAKING: I have lots of speaking gigs coming up. Most of them are private events in offices or bigger venues for real estate professionals. Hopefully something will happen soon where I can invite the public. Here’s an image from last Friday’s event. Anyway, if you’re looking for a speaker, hit me up. I do charge for market updates because of the time involved, and I love interacting with groups of all sizes on Zoom and in person. No pressure at all.

Ryan Lundquist - Sacramento Appraisal Blog - Speaking at Event in July 2022

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. I truly appreciate it.

Questions: What are you seeing happen with properties right now? Selling above or below list price? I’d love to hear your take.

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

A sharp change in the housing market

July 6, 2022 By Ryan Lundquist 24 Comments

A quick change in rates has led to a quick change in the housing market. We didn’t see much difference right away in the stats, but we are finally getting some good numbers now. Let me show you what I mean.

A blue background with today's blog title about sharp change. And there is also a wooden table on the lower 1/3 of the image.

UPCOMING (PUBLIC) SPEAKING GIGS:
7/15/2022 Lunch & Learn Market Update (sign up (for real estate agents))
7/20/2022 Beer & Stats at Out of Bounds (sign up (for real estate agents))
7/26/2022 Navigating the Shift (sign up here (for real estate community))

BEER NEWS:

I just finished two years without alcohol. I gave up alcohol for health reasons, and it’s been a good experience. I’ll be adding another year now, so if anyone wants to join, let me know.

FIVE THINGS TO WATCH IN TODAY’S MARKET:

We’ve seen quick change in the stats lately. Check out how steep the line is between May and June in some of the visuals below. This is what I mean by “sharp” change. Let’s keep watching while staying objective.

1) PRICE GROWTH IS SLOWING

Price stats aren’t as sexy as they used to be. This visual doesn’t necessarily look sensational, but instead of being up 15-20% from last year, prices in most counties are now “only” up about 6-7% instead. In short, we are seeing price growth slow down. Right now, the growth actually looks somewhat normal at 6-7%, but let’s keep watching this line to get a sense of the direction of prices. In a normal year we should see prices soften for the next few months and then flatten out for the rest of the year.

This chart shows the median price from 2016 onward from January to December each year. This year the median price has started to crest about one month early.

2) BUYERS ARE FINALLY PAYING BELOW THE LIST PRICE

For seventeen months in a row buyers paid at or above the list price on average. This is profoundly atypical, but it’s been our normal for so long that I think we’ve gotten used to it. This visual shows buyers in June 2022 on average paid about one percent below the original list price (or $7,254 less on average). Look at how sharp the change was from the previous month. For now, the stat is actually very normal compared to 2018 and 2019, but let’s keep watching to see where the line goes in months ahead.

A line graph to show the dollar amount buyers are paying in relation to the original list price in the Sacramento region from 2018 onward. This line goes up and down depending on the time of year. Right now it's going down due to softening demand.

3) FEWER PENDING CONTRACTS ARE HAPPENING

One of the bigger ways we are seeing a shift in the market is with the number of pending contracts dipping for three months in a row. In most local counties in June, we were down a whopping 25% in volume from last year at the same time. On the positive side, this means 75% of pendings are still happening, but there is no ignoring the reality that we had over 1,600 fewer pending contracts over the past few months compared to last year. The black line below represents 2022, and this June was the lowest year in recent time. This isn’t a big surprise because mortgage rates doubling in a short period of time has given affordability a beatdown. This means fewer buyers are able or willing to play the game right now.

A line graph to show pending contracts from January to December each year from 2016. The line for 2022 is way below other years, which shows there has been a drop in pending contracts.

4) A SHARP INCREASE IN LISTINGS

Here’s the number of active listings on July 1st each year in the Sacramento region. I know this is only one day, but the monthly trend actually looks very similar. We’ve seen a quick rise in the number of available listings lately. We’re much higher than last year, but still lower than normal. We are missing about 800 listings from the normal trend. This rise in listings here isn’t so much about sellers choosing to list their homes. The real culprit has to do with fewer pendings, which means the pile of active listings has grown quickly.

A bar chart to show July listings in the Sacramento region from 2014 onward

5) LOTS OF PROPERTIES STILL SELL ABOVE THE LIST PRICE:

It’s easy to say everything is selling below the list price, but that’s fiction. In truth, almost 53% of sales last month sold above the list price, so it’s safe to say about half the market went above the original list price. Of course, this is a sharp change from last year when 76% of sales sold above the list price, so we’ve clearly moved beyond that honeymoon market. And I know, it would be helpful to have more years on this visual, but I don’t have that (yet).

A line graph to show the percentage of homes that sold above the list price in the Sacramento region from November 2020 through today. This line goes up and down depending on the season of the year.

6) OTHER VISUALS:

Okay, here are some other visuals in case that’s your thing. The stats are finally showing some bigger changes. I remember someone arguing with me in April that the market hadn’t shown much of a temperature change. The truth is the market did change, but we didn’t see change in the stats…. yet.

A line graph to show pending contracts from January to December each year from 2016. The line for 2022 is way below other years, which shows there has been a drop in pending contracts.

OKAY, ONE MORE:

May to June median price change: This last visual shows median price change from May to June from 2004 onward. This is a bit geeky, but it’s atypical to see the median price dip between May and June. I mean, it happens, but typically this takes place when the market is declining or in a year where there was dullness in the marketplace. For this year, keep in mind the 2022 real estate season crested early, so we are now comparing subdued stats today to heightened stats last year. I’m not sugarcoating at all here. It’s just key to know what we are comparing and how that makes a difference with the numbers.

On a related noted, for many in real estate prices are sacred, but I don’t take that view. Markets go up and down. That’s just what happens. Thus, my role here is to tell the story of the market without any bias. I’m not here to protect prices or promote doom. I want to sling the straight dope and help convey what is happening.

Anyway, I hope my explanation for May to June change makes sense. I’m happy to talk about that more in the comments. We need a few more months to understand price trends more definitively.

A bar chart to show May to June growth in the Sacramento region

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 the most above? What did I miss? Anything else to add?

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.