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housing trends

The trend isn’t the same in every neighborhood

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This year is almost over and I’ll be shutting things down until January. Okay, I actually have a ton of work to finish, but this will be my final post of the year. With that said, I have a few things on my mind.

A photo of a front yard with holiday trees made from pallet wood (leaves on the ground)

January public speaking gigs:

  • January 12: Top Producer Panel in Granite Bay (sold out)
  • January 18: SAR Big Market Update (sign up here)
  • January 19: PCAR WCR Big Market Update (details TBD)
  • January 25: Joel Wright’s Market Event (details TBD)

A FEW THINGS:

1) Thank you: I appreciate all the conversations we had this year and I’m so grateful to be on this journey together. I know that sounds cheesy, but it’s true. Thank you for your friendship, support, and all the business you sent my way too. And I haven’t forgotten those who helped me when things got dicey with my hospital vacation in 2020 (I’m doing great these days). Anyway, blessings to you and your family as 2021 comes to an end.

2) Real estate really isn’t THE thing: Yeah, I know I talk about housing trends non-stop online, but the most important things in life have nothing to do with housing data or money. Seriously. But this is a pretty cool Mid-Century modern listing I saw in person last weekend…

3) Avoiding politics at the dinner table: If you want to talk about real estate at the holiday dinner table instead of politics, here are some suggested topics. Inflation, affordability, investment fund buyers, and the elimination of single family zoning. Totally kidding. It’s sometimes impossible not to get political as we talk about housing. Good luck though if politics is your thing. “Pass the yams. And does everyone really think the Fed is going to hike mortgage rates three times next year?”

4) Different trends in different neighborhoods: I pulled some stats for a Capital Public Radio piece that will be going live soon (link coming). The idea is to compare a few neighborhoods a decade ago with the same time period today. It’s interesting to see how stats have changed, right? But this is also a reminder that neighborhoods don’t always have the same exact trend either. In other words, even though we might say various locations are simultaneously going up in price (or down), there can still be huge differences because market dynamics aren’t the same everywhere for lots of reasons. For instance, check out cash purchases, distressed sales, and sales volume.

UPDATE: Here is the post from Capital Public Radio.

This data table compares Sacramento County in 2010 with 2021This data table compares East Sacramento in 2010 with 2021This data table compares Oak Park in 2010 with 2021This data table compares Del Paso Heights in 2010 with 2021

Thanks for being here. Happy Holidays and Merry Christmas!!

Questions: What are your plans for the holiday season?

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Buckle up for next year’s housing market

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It’s real estate prediction season and I have a few thoughts about the beginning of next year. I’m cautious about predicting because my crystal ball is broken, but it’s a no-brainer to say we’re poised to start next year with heavy competition. 

This image shows three seat belts in a back seat and the caption is, "Buckle up for next year's housing market." The seats are white and the belts are gray.

Big 2022 market update: I’m doing a big market talk at SAR on January 18th from 9-10:30am. Hope to see you there. Sign up here.

Predictions: First off, nobody knows the future, so I take predictions with a grain of salt. If 2020 taught us anything it’s that it’s impossible to predict the future with certainty. With that said it seems most data sources are predicting anywhere from 2-7% home price growth for 2022. So far it seems like the theme is, “The wild stallion market of 2021 will become tamer.” And almost everyone has disclaimers to say what happens with rates and inventory could change the prediction. Calculated Risk has a table with specific predictions.

Zillow didn’t crash the market: By the way, a few weeks ago some people were saying Zillow failing as a flipper would cause the housing market to crash. Well, that didn’t happen. My advice? If you’re listening to anyone who keeps making predictions like this, find people who let data form the narrative instead. By the way, here’s a real estate prophet test I made a few years ago:

This is a flow chart for someone to test if they are a real estate prophet or not.

THE BIG POINT:

Buckle up for next year: No matter what happens throughout 2022 as a whole, we are poised to start January at a really competitive place where the market continues to feel lopsided. The truth is we’ve experienced some normal seasonal slowing this fall, but the market still feels like it’s on steroids as most stats are elevated beyond normal levels. The bottom line is we are going to start the year with anemic supply and strong demand as buyers continue to devour listings (even in the midst of affordability declining). This doesn’t mean the train can keep going forever, but I am saying buckle up at the beginning of 2022 because the market is poised to start ultra-competitive.

Fewer listings since the pandemic: Here is a quick look at the supply problem we’ve been having. New listings are in blue and pendings are in red (since 2018). Do you see what happened in 2020 where we started to have fewer listings hit the market? When the pandemic began sellers pulled back and we just haven’t returned to normal levels yet. Though pending contracts have been strong, which means buyers are devouring what is available.

This line graph shows the number of listings in the Sacramento region since 2017 as well as the number of pendings. Basically new listings are down over the past two years (though pending contracts are fairly normal).

Let’s talk about Omicron: Honestly it’s exhausting hearing about new variants of COVID-19. I am still making healthy choices, I’m boosted, and I’m doing all I can on my end to promote safety. But I’m also fatigued with the non-stop narrative. Anyway, when it comes to real estate this is something we must talk about because we need to get through this pandemic for any hope of normalcy. There is no mistaking we’ve seen fewer listings hit the market in Sacramento since the pandemic began, but this is also happening nationally (see below).

This line graph shows the number of listings in the United States over recent years and there has been a huge dip in 2020 and 2021

Staying in homes: Even when we get through this pandemic eventually part of me wonders if we’re going to have fewer listings due to so many homeowners locking in sub-3% rates as well as a huge focus on remodeling, installing pools, building the perfect backyard, and creating space to work from home. In other words, people have been positioning themselves for financial health and creating a more perfect home to meet their needs. It seems like that gives more incentive to stay put, so we’ll have to watch stats carefully in coming years.

Seriously man, you want more visuals? Here are a few more visuals to get a sense of how listings have changed through the years. The downfall of these images is they only represent a snapshot of the market. Basically each year on December 1st I pulled the number of listings. This is valuable, but the ideal image is the first one above where I show new listings throughout the month. However, even the monthly image shows a dramatic dip in listings these past two years. 

This bar graph shows the number of active listings in the Sacramento region each year from 2015 and it's basically normally to have about 3,500 or more listings, but these past two years we've had about half of that on December 1st.

Weird times: When comparing 2020 and 2021 we’re starting to see more similarity with the number of listings. When 2020 first began it was a drastically different comparison to 2019, but now we’re starting to have similar numbers between 2020 and 2021. In other words, from a stats perspective this is sort of a new pandemic “normal” so to speak. Weird times for sure.

Okay, that’s it for today. Thanks for being here.

Questions: What do you make of the predictions for 2022 so far? What are you seeing out there in the market? 

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Tech companies & Wall Street targeting residential real estate

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Tech companies and investment funds have their eye on residential housing. I wrote about this a few months ago and wanted to do a follow-up piece. Here are some things on my mind as well as fresh visuals. Any thoughts?

TWO THINGS:

1) iBuyers are on a rampage:

The iBuyer model has been on a buying spree in many parts of the country. They are purchasing to flip and here is a breakdown of their activity in the Sacramento region based on Tax Records (Realist).

  • Opendoor, Zillow, and Redfin own 690 units in the region.
  • Opendoor and Zillow each own about 330 properties.
  • The average price of acquisition was $555,000.
  • The median price of acquisition was $545,000.
  • Besides a few outliers they are NOT targeting the luxury price point.
  • iBuyers represent 6.4% of all listings and pendings right now.
  • The iBuyer model does not represent 93.6% of the active market.
  • Acquisitions are spread throughout with half of purchases below the regional median price and half above.

2) Invitation Homes is back:

I reported a few months ago that Invitation Homes is back and since May they’ve purchased 77 units in the Sacramento region. In 2012 and 2013 they bought tens of thousands of units across the country in many markets. At the time they were backed by Blackstone, but these days they are not affiliated with Blackstone.

What is Invitation Homes buying?

  • They purchased 77 units since May 2021.
  • They’ve targeted homes typically between $450-550K.
  • 74% of their acquisitions have been under $500K.
  • They bought 0.5% of all MLS sales since May (half of one percent).
  • 88% of their purchases had an MLS number, which means the bulk of these sales were publicly listed for sale.
  • Invitation Homes is definitely competing with first-time buyers even though overall the fund doesn’t have a massive footprint in the market.

TAKEAWAYS:

1) Huge rent growth is propelling big funds: Having lofty rent gains in recent years has caught the attention of big investors and is essentially allowing them to play the market these days. It’s wild to think investors can presumably make the numbers work after ten years of price growth.

2) Hype vs Reality: Often the narrative is that investors are dominating the market and buying everything. For instance, there were sensational tales a few months back about Blackrock purchasing way above market value, but I have yet to see any data to back up those claims (I’m open ears if someone has something). Anyway, there is no mistaking growing interest from tech companies and Wall Street within residential real estate and we need to watch what they do. But we also need to keep sensational narratives in check.

3) Profit and Convenience: The iBuyer model is nowhere near a dominant force in the marketplace, but we’ve seen exponential growth over these past three quarters. A dissertation can be written on what these companies are doing, but I want to make a simple point. I often hear about how this model is designed to help make things more efficient for consumers, but let’s not forget these companies are here to infiltrate the existing real estate model to make profit. So in the midst of all the slick advertisements let’s be real about the big focus, which is to make money off consumers.

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: Do we want Wall Street and tech companies to own more of the real estate process? Is this a good thing for the public?

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Vacations & normalcy in the housing market

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Are you taking a vacation this year? It seems like half my Instagram feed is in Hawaii right now. I’m not doing anything that big, but I did get back yesterday from a few days in Santa Cruz and it was just what I needed. Here’s a video of me longboarding…

Big market update: On June 24th 10-11am I’m doing a big market update with SAR to talk through the latest trends. I cannot wait. Sign up here.

Anyway, let’s talk about normalcy. 

THE BIG POINT: It’s a good thing for people to find a normal rhythm in life with taking vacations and the kids getting fully back to school. Not only does it feel good to have a more regular rhythm after a pandemic year, but this is a step in the right direction for the housing market also to hopefully feel a bit more normal eventually. The real hope is for sellers to be more comfortable listing their homes, but that could take a while (especially since some would-be sellers are now wondering if there is even something available for them to purchase). Look, the market is still moving at warp speed and we are not close to a normal market. I’m just saying having more normality in life is exactly what we want to see because it’s a step in the right direction.

NORMALCY & SALES VOLUME:

1) A normal year looks like this: In a normal year we typically see the highest number of sales in June, though May and June trade places for top month status each year. This year I wonder if May will be our regional peak, but we’ll see. By the way, here is a free tutorial for how to make this type of graph. 

2) It’s been a *normal year of volume so far: It’s been a pretty normal year so far in terms of the number of sales happening. Check out the red line (2021) compared to the green line (an average of seven years). Of course the black line represents 2020 and that was a wild year in so many ways. 

* To be fair if we had more listings we’d actually be seeing bigger numbers, so there is an asterisk with saying volume is normal. 

Quick note on slowing: At times it’s a struggle for some to talk about the housing market slowing down each year, but the market isn’t the same every month and the green life is definitive proof. And keep in mind volume slowing doesn’t automatically mean prices stop rising.

3) Volume is elevated in two counties: Since the pandemic volume has been up in El Dorado and Placer County. What’s going on? Well, buyers seem to be attracted to larger homes, newer homes, highly-rated schools, and a location a bit further from Downtown (but not too far for a commute).

4) Bonus colorful visuals: Here are some colorful visuals to show what’s been happening between January and May. As you can see sales volume this year looks mostly normal for the entire region and Sacramento County while it’s ahead in Placer and El Dorado. As I alluded to above, it’s remarkable to see a “normal” level with such anemic housing supply.

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: Are you taking any trips this summer? I’d love to hear. What is the market like in the trenches right now?

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