housing market in Sacramento

Have home prices started to crest this year?

July 26, 2021 By Ryan Lundquist 10 Comments

Are prices finally starting to slow? Can it really be happening? Have home prices likely started to crest for the year? The answer is YES. Here are two quick things on my mind. These trends are for the Sacramento region, but I suspect many markets across the country are starting to show similar stats (or will soon).

Glowing & slowing market update:

I’m doing a big market update for SAFE Credit Union in a few weeks. There is no cost. It’s totally free, but you have to register. It’ll be at 9am on Zoom on Wednesday August 18, 2021. It’ll be about an hour and packed with lots of stats and perspective. REGISTER HERE.

TWO THINGS ABOUT PRICES:

1) Prices have likely started to crest: This chart tracks prices by the week, so it gives a preview of trends before monthly stats come out. Check out the black line which represents the weekly median price in the Sacramento region. As you can see prices have started to dip over the past few weeks. This really isn’t surprising though because it’s been a pattern in recent years to see price changes around July (besides 2020). In short, unless something unexpected occurs to give another boost to the market, it looks like prices have started to crest for the year. In other words, it wouldn’t be surprising if regional prices hit their peak for the year. But here’s the thing. If 2020 has taught us anything, it’s impossible to predict the future. This is where we need time to see the trend.

Prices in the fall: Keep in mind not every fall season is exactly the same. Sometimes prices stay flat for a few months around July levels before dipping a bit more at the end of the year, and other times we see a more definitive slower season with a bigger dip. The future hasn’t happened yet, so we don’t really know what sort of fall we’re going to have.

2) Monthly prices: Now let me show you how normal it is for prices to tick down in July by focusing on monthly prices. Here’s a look at the preliminary median price this month (July in black). As we know July is not over yet, so we need another ten days for stats to be solidified. With that said, when looking at multiple years it’s obvious we usually see a dip in July. And as far as we can tell that looks to be happening this month too. Not a shocker.

A bigger dip? I wouldn’t make too much of a bigger dip this year because this is still preliminary data. Honestly, I’m a bit hesitant to push out early stats because this monthly figure could change over the next two weeks. But I think it’s valuable to show it’s not just weekly prices that are softening. Anyway, let’s wait to see how this number looks in about ten days before having too much conversation.

FOUR QUICK TAKEAWAYS:

1) Not the same: The temperature of the housing market is not the same in every price range and neighborhood. In other words, it’s possible for prices to be doing different things in different areas, so it would be a huge mistake to assume prices are dipping everywhere.

2) Not dull: The housing market is still moving very fast and it’s super competitive. In short, it’s still not easy to get into contract. Yet it is easier than it was three months ago.

3) Just say NO to rosy narratives: When a market starts to soften it’s tempting for some in real estate to avoid talking about slowing. Here is part of a talk I gave last week where I mentioned this reality (three minutes).

4) Doom and gloom: While some interpret prices softening to mean the market is starting to “pop” so to speak, it’s important to recognize a dip in prices is what normally happens this time of year. I don’t say this to sugarcoat the narrative. This is simply a fact. In my mind it’s premature to be saying the sky is falling because the stats right now don’t support that idea. My advice? Be really careful about painting what looks like a seasonal trend with a doom and gloom brush. Also, be patient for more data in coming weeks and months so we can get a fuller picture of the trend. We need time. And as we get more data we can absolutely adjust what we say about the market.

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 if anything strikes you above? I’d love to hear your take.

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Everything is selling $100K over the list price (not really)

June 1, 2021 By Ryan Lundquist 17 Comments

The market is nuts and everything is selling $100K over the list price!! We hear that quite a bit, but how true is it? Today I have some new visuals to help answer this question. If you’re not local, would your market look similar?

Two brand new visuals. What do you see?

Below the list price: This visual adds sales below the list price and at the list price. Remember, over 22% of sales sold either at or below their original list price last month. That’s actually an astounding number because it really should be about twice as high as that in a normal market. But here’s the big point. Not everything literally sells above the asking price – even in this crazy market.

Breaking down the numbers: I know it would be cool to see these types of stats throughout various price ranges. If someone hires me full-time to crunch numbers I promise I’ll share that stuff. For now here is a regional overview.

A property really sold $340K above the list price? Yes, a property in Granite Bay listed at $1,995,000 and closed at $2,335,000, which is a difference of $340,000. Most of the outliers paying hundreds of thousands over the asking price are in the luxury market. But remember, literally 0.77% of all sales went $200K above asking.

The big takeaway: It’s shocking to see nearly one out of every three sales go fifty thousand or more above the original asking price. That’s a sensational stat and clearly a symptom of a lopsided market. But let’s get technical. About two-thirds of all sales are not selling $50K above the list price and selling $100K above is such a small sliver of the market. I’m not trying to minimize how competitive it is. I’m just saying only 6.3% of the market was able to sell $100K above the list price, which means 93.7% of the market didn’t do that.

Closing advice: Let the stats form your narrative and always be careful about letting sensational sales form your perception of the market. And sellers, don’t aim for a unicorn situation that only happens in a handful of transactions.

Thanks for being here.

SHARING POLICY: You can share my stats and visuals above, but please attribute the source. Here are 6 ways to share my content (not copy verbatim).

Questions: What stands out to you or surprises you above the stats above? What are you seeing out there in the trenches?

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Overpricing, multiple offers, & hot ranges

November 10, 2020 By Ryan Lundquist 10 Comments

The market is hot. But it’s not so hot that you can command any price you want. Today I have a quick post to show a few trends. These are brand new visuals with some great takeaways (I think). Enjoy if you wish.

1) MULTIPLE OFFERS

Huge change this year: There were 39.3% more multiple offers this October compared to last year at the same time. This speaks to how much more competitive the market has been lately. While we are experiencing a slight seasonal slowing right now, the market is far more competitive than it should be for the time of year.

Not everything: Last month 32% of listings had price reductions. In short, even though the market is super aggressive it doesn’t mean everything is selling above the list price.

10-20 Offers: This year we’ve seen substantially more properties with 10-20 offers compared to last year. The highest number of offers last month was 37 too (just in case you want to sound super smart).

Here’s a look at 5-10 offers too. What a difference!!

NOTE: Our MLS has two fields called “multiple offers” and “number of offers.” This is how I’m extracting the data.

2) THE MOST AGGRESSIVE PRICE RANGES:

This is geeky stuff, but it’s so important for understanding the market isn’t the same in every price range or neighborhood.

The most aggressive: The most aggressive price range in the Sacramento region is between $300,000 to $400,000 (not a shocker). The sales price to original list price ratio is 101.65%, which basically means properties in this range sold on average 1.65% above the original price. In short, the lower the price, the more aggressive the market is. Keep in mind there are few sales below $300,000, so don’t write home over that lower stat.

The most overpriced range: This year we’ve had explosive growth with the number of million dollar sales as there have literally been twice as many over the past four months compared to last year. But this price range is also the most overpriced. On average sales above one million dollars last month closed about six percent lower than their original list price. At times million dollar listings are literally priced hundreds of thousands of dollars too high (or even millions).

And one more visual to show last year vs this year…

Market update: In this market update video I talk quickly through eleven trends. I hope you walk away with some insight. Enjoy if you wish.

Free webinar next week: I’m doing a big market update next week for SAFE Credit Union on November 19th from 9-10am PST. It’s free to anyone and it’ll hopefully be some good background noise while working. Register here.

QUICK CLOSING ADVICE:

1) Price reasonably and you should be able to get at least a few offers.

2) Price too high and you’ll likely get zero offers (seriously).

3) Sellers, you don’t need to aim to get twenty offers. I suggest aiming for a few solid offers. My stats even show you don’t need 20 offers to get the highest price.

4) Sellers, aim for the market instead of that mythical unicorn Bay Area buyer who will mysteriously overpay for some reason.

5) Buyers, study your competition in your price range and offer accordingly. There is a good chance you may need to offer above list and have cash to pay any difference between the contract price and a lower appraisal. This is not easy on buyers, but it’s the dynamic out there right now.

6) Buyers, start looking at properties that have been on the market for 30 days or more. These ones are likely overpriced and it may be easier to get into contract on something like that.

7) Other. What else?

I hope this was interesting or helpful.

Questions: What are you seeing in various price ranges? I’d love to hear your take from your vantage point in the trenches.

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Crazy contracts & condos are less popular

September 22, 2020 By Ryan Lundquist 17 Comments

I have two things on my mind today. Let’s talk about condos and then some of the crazy contracts we’re seeing happen right now. Then I have lots of visuals for those who are interested.

CONDOS ARE NOT ALL THE RAGE:

It looks like condos aren’t so popular these days. During the pandemic buyers have been saying no thanks and instead focusing on homes with more space. No matter how you look at it there are fewer condo sales happening, and that’s telling. If you’re not local, what’s happening in your area?

MARKET NOT COLD: One thing I want to clarify is just because condos haven’t been as popular doesn’t mean the condo market is dull or cold. Inventory is still sparse among condos, so don’t expect to get the deal of a century. In fact, there is not an oversupply of listings among condos at this time. Inventory is really tight.

CRAZY CONTRACTS:

It’s common these days to see the appraisal contingency removed and many buyers are even offering to pay above the appraised value (if it comes in lower than the contract price). Anyway, I’ve been getting lots of questions about this, so here are some thoughts:

1) Value is not found in the contract: The reality is value is found in the comps – not the contract. Technically the terms in the contract shouldn’t matter because the only thing that counts is comparable data. Of course I realize some appraisers are swayed by the contract, and that’s unfortunate. Ultimately if you find yourself worried about the terms, I’d recommend focusing instead on communicating well with the appraiser because the comps are the bigger factor.

2) Offering above the appraisal: When I see a contract that states the buyer will pay above the appraised value by a certain amount if the appraisal comes in lower, the practical part of me wonders if the buyer actually thinks it’s not worth what was offered. But since my job is to be objective, my curiosity about the buyer doesn’t mean anything for the appraisal. The bottom line is I cannot let that influence my perception of market value. Besides, offering to pay more might not be about the buyer’s perception of value at all. Instead it could be a strategy to get an offer accepted. And most of all, the comps are what matters – not what an individual buyer thinks about value.

3) Hiding information: I was asked recently if it would be OK to only give the appraiser the purchase contract without an addendum that had further terms. Look, I’m not a lawyer or broker, but from my perspective I’d ask that you please give the appraiser the entire contract instead of holding something back for whatever reason. In my mind when this happens it seems like the goal is to try to influence the outcome of the appraisal, and that doesn’t smell right. Let’s keep it transparent.

Anyway, this is a loaded topic. Lots of emotions. What are your thoughts? Any stories to share? Please do so in the comments.

MARKET UPDATE VIDEO: Here’s my latest market update where I unpack glowing rebound stats. Watch below (or here).