The housing market went from an ice bath to a bloodbath. That’s a good way to describe the contrast between the dull fall season and the spring. In today’s post I want to highlight national vs local stats, a dead cat bounce, and dive deeply into local trends. I hope this is helpful.
Scroll by topic or digest slowly.
UPCOMING (PUBLIC) SPEAKING GIGS:
5/10/23 Empire Home Loans event TBA
5/22/23 Yolo YPN event (only for YAR members)
6/1/23 DJ Lenth Event TBA
6/07/23 SAFE Credit Union event for agents (register here)
6/08/23 Made 4 More event TBA
7/20/23 SAR Market Update (in-person & livestream)
HOT NATIONAL STATS & CAPPUCCINOS PER CAPITA
Before getting into the blazing spring, here’s something on my mind… I like to hear what’s happening with national real estate stats, but numbers on the bigger level might not mean anything at all for the local market. It’s sort of like national stats for cappuccinos per capita. That could be interesting, but also totally meaningless locally.
A NATIONAL PREDICTION I’M SEEING SOME TALK ABOUT
Over the past month I’ve kept hearing about 117 housing experts who say prices are going to climb in 2024. After seeing this a few times on social media, I wanted to find the source of the information, which ended up being a poll by Zillow. Here’s the gist. A poll from December 2022 interviewed 117 housing market experts and economists, and they basically predicted a lackluster 2023 and a rebound in 2024 for the national market.
I LIKE POLLS, BUT WHAT WOULD 117 BARISTAS SAY?
I’m intrigued with polls, and I use them in my own practice, but I’m also aware that 117 people looking into the future may not have it right either. I am not diminishing the expertise of anyone polled, but the future hasn’t happened either. I always wonder what these same people predicted last year and what they’ll say one year from now. Moreover, what type of results would we get if we polled 117 surfers, baristas, or teachers? Somebody please do this.
THE NATIONAL MARKET COULD BE DIFFERENT
Okay, back to the national vs local issue. This Zillow poll focuses on the national market, which is not always the same as the local trend. For instance, the Sacramento market had definitive price declines in the early 1990s, but Zillow’s press release described the national trend as “relatively stable from 1987 to 1999.”
THE BIG TAKEAWAY
I’m not trying to be a killjoy, but let’s be careful about forming a local housing outlook from national stats or what experts think might happen nationally. I’m not trying to throw shade on this poll either. It’s interesting. But it might not be meaningful at all for the local market.
——————— big market update below ———————
7% MEDIAN PRICE GROWTH THROUGH APRIL
The spring started out more subdued, but it’s really become competitive. When looking at median price change from January to April, we’ve seen about 7% growth so far in the region. This is pretty decent for the time of year (slightly lower than normal). Based on what I’m seeing in the pendings, we should see some standard if not strong growth ahead in May closed sales. Keep in mind this does NOT mean prices are up 7% for every property. Please look to the comps. The median price does NOT translate rigidly to every parcel or area.
NOTE: Prices rise in the spring almost every year (even in a declining cycle).
And here’s Sacramento County, which is more subdued. Keep in mind the median price was a little higher than usual in January, which is maybe causing the trend to look minimal. I know it sounds like I’m trying to be ultra-positive about prices, but I’m not. I’m only trying to explain why this stat is a bit more subdued.
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IS THIS A DEAD CAT BOUNCE?
A dead cat bounce is a temporary or short-lived recovery in the price of a declining stock (Wikipedia). The idea is even a dead cat would bounce if you thew it off a building. Sorry, I know that’s graphic. Please send your hate mail to whoever invented the phrase. In real estate we had a dead cat bounce in 2009 when the federal tax credit was introduced. The housing market was declining at the time, but then it got really hot while the tax credit was here. Yet, as soon as the credit ended, we saw prices continue to decline in Sacramento. Well, in today’s market, some onlookers are wondering if the spring season is a dead cat bounce. In other words, the idea is we’re in a declining cycle, and this spring is simply an expected seasonal uptick, and we’ll see declines persist after the hot season subsides. On the positive narrative side of things, some would say this is NOT a dead cat bounce at all. The idea is we’ve bottomed out and we’re going to increase from here on out. Look, I wish I could tell you what will happen, but here’s what I know. The market is not affordable in Sacramento for many people. During a declining cycle we normally see prices drop for 5 to 6 years. Keep in mind what happened in the past isn’t automatically the new template for the future though. Moreover, we’re in a weird spot with sellers sitting, and what happens with inflation, mortgage rates, the economy, and Fed policy can change the feel of things. On a practical note, I’m way more interested in the second half of 2023 after we get through the glowing spring. I do want to say I’m not a fan of saying the market has recovered in Sacramento. That’s the wrong sentiment in my opinion. I think it’s best to say we are seeing a decent to strong spring seasonal market in 2023, and we need to keep watching to understand how the market is going to unfold.
Okay, here’s an awkward analogy. Honestly though, I think it’s perfect.
STILL SEEING FREAKISHLY LOW LISTINGS
We still have more pendings than listings in the region and Sacramento County. This is a lopsided dynamic as a normal market should have a much higher selection of actives. It’s been so tight out there lately, and I feel for buyers. It’s basically a situation where we’ve seen low demand meet low supply. It’s not that we’ve returned to normal.
WATCH FOR THE SEASONAL PEAK
Normally prices peak in June, which really means there was a peak in late April or May (and those pendings close in June). In short, be on the lookout for a seasonal peak because that’s typically what happens around this time of year. Leading indicators will be the percentage of multiple offers, the number of pending contracts, open house traffic, and the word on the street from real estate professionals. Of course, one thing to watch is whether the peak changes this year in light of sellers sitting out of the market.
If you need some background noise, here’s a podcast I did with HousingWire last week to talk about the spring market.
HALF THE PRICE GROWTH CAME IN APRIL
Prices felt a bit flat for the first couple months of the year, but March to April was strong. I like this visual because it helps show change over the past two decades. It’s striking to see a higher percentage this year, but it makes sense since the market hit an inflection point in mid-March. This isn’t just about the Dream For All program, but that’s part of it. My sense is we hit a point where supply was so anemic that it changed the feel of the market. Imagine how different the housing market would feel if we weren’t missing 4,400+ new listings over the past few months.
LIFESTYLE IS WHAT MATTERS
Lifestyle. That’s what today’s market is about. Lots of people are sitting and cannot move, but who has incentive to buy and sell regardless of what prices and rates are doing? That’s the question that matters for real estate professionals. My advice? Buckle up, cut expenses, put people first, diversify the types of business you focus on, get in front of people every week, increase the size of your network, add new skills through education, put out helpful content, and focus heavily on people who have incentive to buy and sell due to lifestyle changes. Moving up, moving down, inheriting a property, having a change in family status, letting go of a second home, financial hardship, selling an investment, buying from a landlord, looking for acreage, buying a first home, etc… I know this market has been brutal. Stay focused. Expect to hear NO more than YES. And don’t lose hope. Keep moving forward. One step at a time.
GAINING BACK SOME OF THE LOST GROUND
We are NOT back to peak levels from 2022, but prices in some counties are flirting with late 2021 or very early January 2022 generally. Remember, the trend could be different in each neighborhood, so look to the comps.
IT’S NOT JUST ABOUT PRICES
If we obsess too heavily about prices, we’re going to miss a significant issue in real estate. Volume. Like I keep saying, volume is what pays the bills for real estate professionals – not prices. How many transactions are happening? Typically, we see the number of sales rise between March and April, but that didn’t happen this year. Other than 2020, lower volume in April happened a few times during the prior decade, but it hasn’t happened since 2012 locally. Before calling this a trend, let’s watch the next couple of months.
EXPLAINING WHY VOLUME IS LOW:
The market has felt like a bloodbath in terms of competition, but it’s been really weak in terms of volume. One thing on my radar is whether we start to see more subdued volume because of a lack of listings (or maybe we’re already there). The main culprit with lower volume for so many months has been buyers stepping back due to affordability struggles (rates rising), but if we start to see even more subdued volume ahead, we’ll have to ask if it’s also about a lack of listings. The temptation for some is to blame it all on a lack of listings, but that glosses over the affordability issue. But we may not be able to blame it all on affordability either. Time will tell.
WE’RE MISSING 3,000 SALES THIS YEAR
I keep saying the market feels like 2020 in terms of competition, but it’s 2007 vibes in terms of the number of sales happening. We’re missing about 3,000 sales from the pre-pandemic normal in the region so far in 2023. In Sacramento County, monthly levels have actually been worse than 2007 levels for six months in a row. On the positive side, there have been over 4,900 closed sales in 2023. My advice for real estate friends? Know the stats better than anyone, and focus on the part of the market that is happening.
THE TREND ISN’T THE SAME EVERYWHERE
The market isn’t the same in every price range and neighborhood. Case-in-point. Check out volume by county in March and April. These images compare 2023 with the pre-pandemic average.
Okay, this post is getting long. Some recap visuals.
I hope this was helpful.
MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.
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: Do you think this is a dead cat bounce? Or have we bottomed out? What are you seeing right now in the trenches of escrow?
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