House Appraiser

Chuck Norris eats 8% rates for breakfast

September 27, 2023 By Ryan Lundquist 22 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)
11/30/23 Safe CU “Preparing for a Successful New Year”

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.

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Hot graph summer & Airbnb doom

June 28, 2023 By Ryan Lundquist 21 Comments

Let’s talk about housing doom. Particularly, I want to get into the viral idea about the demise of the Airbnb market. But first, I have a few visuals to kick off hot graph summer (sorry). I’d love to hear your take in the comments.

A meme I shared this week as I talked about the concept of a forever home. It’s a forever home until it’s not… This meme was born from conversation around the topic. Too real at the moment…

UPCOMING (PUBLIC) SPEAKING GIGS:
6/30/23 Halftime report with Ben Johnston 10am (Zoom)
7/20/23 SAR Market Update (in-person & livestream)
7/26/23 Fair Mortgage (details TBD)
8/18/23 Details TBD
10/23 SAR Think Like an Appraiser (TBD)

HOT GRAPH SUMMER

I’m excited to track stats this summer. The market has been a wild ride lately. Here are a few new visuals and thoughts in my brain right now. Or scroll down if you want some juicy Airbnb thoughts instead.

PRICES MEETING LATER IN THE YEAR FOR COFFEE

If we have a normal seasonal slowing ahead, it’s possible we could see the median price for 2023 meet up with 2022 and 2021 levels in the fall. Time will tell, so I’ll keep reporting on the black line. If this does occur, it will show 0% price change from the year before. I can hear it now, “Bro, the market is back. Prices are the same as last year.” However, this will NOT mean we are back to peak prices from May 2022 (gray line). It will simply mean prices in October 2023 are the same as October 2022. The market is in a weird place right now and anything can happen ahead, but a drop like the second half of 2022 seems unlikely unless something really alters the trend.

And a California visual in case that’s your thing. This one does not have preliminary data for June (dotted line).

HOW IS VOLUME REALLY DOING?

Here’s a new visual to help show what’s happening with volume in the Sacramento region. I know this is a hot mess, but I think it packs a punch. The orange line is sales volume in 2023, the black line is sales volume in 2022, and the green line is the pre-pandemic average (2016 to 2019). The percentages here show the difference between the past year and pre-pandemic monthly volume. This gives us a baseline for “normal” so to speak. The problem is comparing volume today to last year gets awkward since last year was starting to be lower. Ultimately, a visual like this gives us more context.

AIRBNB DOOM THOUGHTS

There’s a prominent narrative on social media about the Airbnb market imploding. In fact, this week there was a viral tweet from Nick Gerli about a massive drop in Airbnb income in various markets. This guy is pretty much the chief of the housing doom prophets. He has built a massive following. Today I want to talk about some of his thoughts. This isn’t about throwing shade or real estate gossip, but interacting with ideas that are becoming a part of the housing narrative. This is REALLY important to talk about.

THE DATA NEEDS TO BE QUESTIONED

One of the struggles with short-term rental data is it’s not easy to get unless you pay for the information. My sense is the Airbnb crash narrative sometimes relies on individual stories like, “My sister’s boyfriend’s uncle can’t find renters any longer, so the market is collapsing.” All I’m saying is it can be difficult to fact check the trend in light of a lack of publicly available information. However, here is some analysis from a different data source that some would call the definitive source for short-term rental data. As can be seen, there is a massive difference between the viral doom tweet and what AirDNA’s Chief Economist is saying. Anecdotally, the stories I’m hearing from Airbnb investors in Sacramento are lining up so far with the image below. There has been a hit to income for sure from last year, but it’s not 40%.

THE PREMISE IS OFF

The viral tweet goes on to talk about how scary it is for the United States housing market to have nearly one million Airbnb / VRBO rentals. The idea is it could be a big problem that there are nearly one million short-term rentals compared to only 570,000 homes for sale right now. Look, we need to pay attention to the short-term rental trend, and I expect for this submarket to take a hit if the economy sours. Bottom line. But it also feels a bit awkward to compare the number of short-term rental units with total active listings because the juxtaposition leads to sensationalism. Keep in mind if there was an Airbnb issue, these units would NOT all list at once. I recall Nick Gerli saying it could be a problem when Zillow failed as an iBuyer because those listings would flood the market. Yet, it wasn’t a problem and these listings didn’t hit at once either. Remember, many investors don’t just have one option. Economic pain or a change in short-term rental laws could lead to carnage, but some investors could still rent monthly instead of selling. Ironically, wouldn’t it be great to see some of these listings hit the market? We are starving for more.

By the way, if you really want to make a sensational graph, just tell people the housing market could crash if all investors listed their units. In California it’s said about 44% of all residents rent, which means we have a massive number of rentals. Imagine how a graph like that would look with the number of investor-owned properties compared to current active listings.

JUMPING FROM TOPIC TO TOPIC

A few months ago, I recall this same person talking about the problem of vacant houses in the United States, and how that could crash the market. Look, I don’t have an edge against this guy (really), but at some point, we have to question credibility if he keeps repackaging crash predictions like this. And on a serious note, nobody should be turning a blind eye to the struggle of affordability, inflated home prices, or potential red flags in the future. Ultimately, there is value in discussing topics, but it’s best done with objectivity rather than a paradigm that’s starved to invent new ways to say the sky is falling.

MARKETS GO UP AND DOWN

I’ve been writing for years about how normal it is for markets to go up and down. Housing markets are like my waist line. The numbers are constantly changing. Haha. In truth, prices don’t stay the same. On that note, a critique of a rosy real estate narrative is that things aren’t always super positive and glowing. That’s why I reject the rosy side of real estate too (I’m on team stats).

DOOM STARTER KIT LEXICON

If I were selling a doom lexicon starter kit, I’d include phrases like, “just wait,” “It’s coming,” and “It’s going to be delicious.” I can’t tell you how many times I’ve heard these things on Twitter especially. It’s like people are hungry for a crash, and that’s all they can see and talk about. Or maybe that’s just an image they’re projecting. I really don’t know.

GETTING RICH ON FEAR

The doom narrative has an obsession with fear, and the biggest voices are often earning serious money by sucking people into the narrative. Sometimes I wonder about mindset. Like, do they really believe what they’re saying? Is it just a social media persona to earn money? Or is it a big game?

ROOM FOR DIFFERENT OPINIONS

It’s okay if you think the market is going to implode. And it’s okay if you think prices are only going to rise. We should listen to data and let the stats form our narrative. I respect people on both sides of the aisle, though the truth is often found in the middle on so many issues. Yet, I don’t respect it when someone imposes a narrative on the stats. No thanks.

DOOM & MENTAL HEALTH

First, everyone is responsible for their own mental health, and we cannot blame other people for the way we think and feel. But I want to challenge those who perpetuate housing doom online because there are many people listening who might walk away thinking there is no hope in life, everything is going to collapse, all is lost, and there is only death and destruction ahead.

I talked with someone last year who was struggling with suicidal thoughts when the housing market saw a major shift. The sharp loss in value was a massive issue for this person. Look, this guy needed to talk to someone and work through some issues, and I tried to help. It certainly wasn’t the doom narrative’s fault here either, and I’m not implying that at all, so save your hate mail. However, listening to some doom voices on social media was taking a real toll on this guy’s mental health, so words and narratives do matter. If all people hear is, “We’re going crash hard,” it’s bound to have an effect.

Do you know what I rarely hear from anyone pushing out doom? Things like take care of yourself, step back if this is too much, or there are deals to be had in real estate in any market. Just in case you needed a reminder, it’s possible to have joy even in difficult economic times. It’s possible to be successful in real estate no matter what the market is doing. You are not your paycheck. You are not your Zestimate. Good markets don’t last forever, and neither do the bad ones.

In closing, take care of yourself. Cultivate peace in your life. When it comes to real estate data, listen to voices spewing objectivity rather than fear. And stop following real estate so closely if it’s too much for you (including my blog).

I hope this was helpful.

Questions: What do you think about the Airbnb market? What has been your experience with the doom or rosy perspective in real estate?

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

A tale of two markets & pivoting when the housing market changes

May 17, 2023 By Ryan Lundquist 9 Comments

Builders are having a moment. New home sales are glowing right now in the midst of depressed volume in the resale market. It’s like there are two different markets happening at the same time. Today I want to share some stats for new construction, but let’s also talk about pivoting.

UPCOMING (PUBLIC) SPEAKING GIGS:
5/22/23 Yolo YPN event (only for YAR members)
5/25/23 TBD
6/1/23 DJ Lenth Event TBA
6/07/23 SAFE Credit Union event for agents (sold out)
6/08/23 Made 4 More event TBA
7/20/23 SAR Market Update (in-person & livestream)

NEW HOMES REBOUND

The past three months have shown a rebound of new home sales in the Sacramento region, and this dynamic is starting to show up in many markets across the country. Anyway, after a sharp downward change in volume for the second half of 2022, this year is starting out strong. It was the second-highest March since 2005 and second-highest April since 2006. These stats ONLY show brand new homes (data from North State BIA).

And here’s a chart to show builder confidence from NAHB. The increase we’ve seen lately shows the market has been improving. Let’s keep watching.

THE REST OF THE MARKET ISN’T GLOWING

Now let’s look at the resale market (older existing homes). The trend is completely different as we’ve basically seen the lowest volume ever. This is a great reminder that the market isn’t the same in every segment. Or a fancier way of saying it is we have a bifurcated market.

Granted, the new home market is so much smaller, but still, it’s a stark contrast to compare new vs existing homes. In recent years we’ve had anywhere from 4,200 to 5,300 annual new home sales in the wider region, but in 2020 and 2021 there were 7,000+ sales. In contrast, the resale market locally tends to have somewhere around 28,000 or so sales in a normal year (not including condos).

BUYERS PUMPED THE BRAKES LAST YEAR

Buyers backed off the new home market last year when mortgage rates changed (see yellow line). For many months in a row contract volume was basically cut in half from the previous year. To be fair, the previous year was a freakishly strong year, but still, the contrast was really sharp.

THE X-FACTOR

Why are builders rebounding? The x-factor is offering concessions to buyers. Credits for closing costs (or upgrades) and rate buydowns have been a tractor beam for buyers. Also, sellers are NOT coming to the market lately as we’ve seen about 40% fewer new listings in 2023. This helps shift the focus for buyers on where homes are popping up – new construction.

By the way, would these properties padded with concessions be selling for that amount without the concessions? This is where appraisers are going to have to carefully analyze the market. The truth is concessions can inflate prices, which is something to watch.

THIS ISN’T THE BEST VOLUME EVER

Is new home volume today outpacing what we saw in 2005? Nope. New home construction was expanding rapidly during that time, and we’re not seeing volume on those levels today. And for the record, new home volume is sorely needed right now in light of sellers sitting, but we have a labor shortage, so builders can’t build fast enough to make up for sellers not listing.

IT’S TIME TO PIVOT

Builders are pivoting at the moment. They’ve basically changed their strategy to stay alive. I realize not everyone can do what builders are doing with offering rate buydowns and credits, but shifting strategy is still key in the resale market. If you are a real estate professional, what do you need to do to pivot in the midst of depressed resale volume? What can you do differently today? What segments of the market do you need to start focusing on? How can you increase the size of your network right now? Who do you need to start getting in front of? What relationships do you need to build? What knowledge do you need to gain? Who are the gatekeepers to getting more business? If you’ve only been focused on attracting one type of business, what other avenues can you focus on? (vacant land, 2-4 units, investors, probate, divorce, second homes, first-time buyers, acreage, leaving California, moving up, moving down, retiring from the state, financial hardship, etc…).

IS OPENDOOR PIVOTING?

Right now Opendoor owns 63 units in the Sacramento region. Before the market shifted last year, Opendoor had about 300 to 330 units, so there has been a significant change. Some think Opendoor is heading toward failure, but for now they are still acquiring properties (7 since April). If anything, it looks like they’re pivoting to survive. Will they be successful? Only time will tell.

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.

Questions: What are you seeing builders offer consumers? What are you seeing them do with their prices?

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

House Appraiser

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