multiple offers

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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Saying goodbye to the hottest housing market ever

May 31, 2022 By Ryan Lundquist 21 Comments

The housing market sizzle has faded and we’ve entered a different season. We’ve basically said goodbye to the most aggressive housing market ever, and we’re in a new market now. Granted, the housing trend still feels elevated from normal, so it’s an error to call this market cold. Yet there is no mistaking a different temperature today compared to a few months ago.

A picture of a house made of money with the title, "Saying goodbye to the hottest housing market ever."

10 THINGS ON MY MIND ABOUT TODAY’S MARKET

1) The pandemic rush looks to be subsiding:

There was a large spike in the size of homes being purchased over the past couple of years. We’ve seen more luxury properties sell (larger homes) and buyers at higher price points (larger homes) have been taking advantage of being able to work from home. Well, that looks to be moderating as we get back to a normal size. We still need a few months of data, so I’m a bit tentative in my announcement here. But for now, it looks like we’re starting to see more normalcy in size, which suggests the mad rush to the market has subsided.

This line graph shows a spike in home size during the pandemic in both the median size and the average size. The graph goes from 2012 through May 2022

2) The trend feels uneven:

Some properties are getting lots of offers and others aren’t, and some price ranges are more competitive. Most of all, we’re seeing buyers become more sensitive to price, location, and condition since affordability has taken such a beating lately. My sense is properties at lower price points are experiencing more competition (not a shocker), but homes at any price level that check all the boxes are tending to be ultra-competitive too. Sellers, it’s time to listen.

BREAKING NEWS: The housing supply streak is over. For 22 months in a row in the Sacramento region we’ve had less than one month of housing supply. We finally ticked up over one month.

3) Price drops are growing:

We’re starting to see more price reductions. We aren’t at an alarming level of reductions, but they are really growing. In fact, 33.1% of all active listings in the Sacramento region have had a price reduction, which means about 950 listings have a reduction right now. The following visual shows a breakdown of the dollar amount of reductions. For instance, 11.24% of properties with a price drop have reduced the price between $5,000 to $10,000. By the way, here’s a quick link from Altos to show a few years of price drops in Sacramento County.

A bar graph to show the percentage of price reductions right now in the sacramento region. 33.11% of all listings have reductions.

4) Watch the forest and the trees:

I sometimes hear people make sweeping statements about the market while looking at only one example. My advice? Take time to know the forest and the trees. It’s key to understand the big picture of what the market is doing (the forest), while recognizing not every neighborhood and property is going to have the same dynamic (the trees). In other words, we want to be careful not to judge the entire forest based on a few trees. In real estate, the classic example is to judge the market based only on what is on our desk.

Confirmation bias: On a serious note, be careful of confirmation bias because it’s easy to look at a stat or small sample, and then paint the entire market with a doom brush or rosy narrative. There are many people who are so thirsty for a crash that all they see is doom. And there are others who aren’t recognizing a temperature difference because they’re too fixated on blazing hot headlines from the past. By the way, here’s a weekly video from Altos Research. I think Mike Simonsen has a balanced view of things. Worth digesting.

5) Fewer offers being made:

We are still seeing a higher percentage of multiple offers compared to a normal market, but there are fewer offers happening from a few months back. Most agents tell me the number of offers has basically been chopped in half and then some from early 2022. This makes sense since purchase mortgage applications have dropped), which reminds us fewer buyers are shopping (big point). Here’s a poll I did on Instagram. This isn’t scientific, but the results would’ve looked much different a few months ago.

A poll on how many offers agents are seeing. A poll from my Instagram stories. 13% of people saw 0 offers, 24% saw 1 offer, 49% saw 2-3 offers, and 14% saw 4-5 offers

6) Becoming a unicorn buyer by accident:

I’ve heard a few examples where a buyer paid way over the asking price to secure a property, but there ended up being only one offer. One example I know about involved a buyer paying about $70,000 over asking price (and being the only offer). Thanks John for the convo about this last week.

A picture of a unicorn sillouette with a statement saying, "I offered way over asking price. I just didn't know I was the only offer."

7) Flattening pendings for May (but still down):

I put out this visual last month, and it shows a notable dip in the number of pending contracts in the region since April. Frankly, pendings have dipped in volume for over six weeks now, and preliminary stats for May show pending volume dipped by 14% from last year. Why is this happening? Because buyers are struggling to afford the market. There is no sugarcoating this reality. However, after a sharp dip in April, it looks like pendings flattened out in May (see black line). When some people saw the drop from March to April, the assumption was it would keep dropping at that pace. Well, that didn’t happen. What will this black line do in the future? I would expect for pendings to continue to be down from normal unless something interrupts the trend to create more affordability. Let’s keep watching.

A line graph to show pending contracts by the month since 2016. There is a line for 2022 that has dipped in recent months, so this visual helps show that pendings are down from previous years.

Here is a look at Redfin research below too. Do you see the black line (2022)? There was a sharp decline for a couple of weeks, and over the past month the line flattened. One thing that has helped this line flatten (for now) is mortgage rates have been hovering around 5.5% instead of skyrocketing. The market feels very sensitive to rate changes, so I would expect to see rate changes affect the number of pendings from week-to-week (thanks Captain Obvious).

A line graph from Redfin to show the number of weekly pending contracts in Sacramento County. The line for 2022 has dipped over the past 6 weeks, but over the past month it went a bit more horizontal instead of a massive downtrend

8) Increase of adjustable-rate mortgages:

We’ve seen more adjustable-rate mortgages happening lately. Is that good or bad? I’d love to hear your take. Basically, about 11% of recent loans nationally have adjustable rates. This is up from recent years, but way down from over 30% in 2005. Check out Mortgage News Daily to see how much lower adjustable rates are compared to fixed.

A line graph to show adjustable rate mortgages from 15 years ago until now.

9) Quick change leads to quick change:

Mortgage rates changed quickly in recent months, and we are starting to see more change show up in the stats. I’d say the market hit an inflection point over a month ago where open house traffic dropped and the temperature was noticeably different. I suspect over the next few months we will see even more slowness hit the numbers. Basically, we should expect to see the sizzling market become even more tame since we’re seeing fewer pending contracts and an uptick of inventory. That is, unless something happens to interrupt the trend (mortgage rates unexpectedly dipping, for instance).

10) Sellers are having to negotiate with buyers:

Sellers have been in charge for so long, and generally they still have more power than buyers. But there’s no mistaking the market temperature has changed, so sellers have had to start listening and negotiating. While there are still some lopsided examples of paying over asking price, we’ve begun to see more credits given to buyers, more price reductions, and more negotiation for repairs. Finally.

A couple new memes I made this week. Anyone else watching Season 4 of Stranger Things? My family binged it, but I fell asleep, so I basically caught episode one and episode seven. Haha.

Buyers feeling like they can actually get into contract. That's the title of this meme. It's a picture of one of the kids in the Stranger Things series (Dustin). Smiling kid.

This meme is of Eleven of Stranger Things with her hand extended. The title reads, "Sellers trying to use their power to bring multiple offers."

BONUS THOUGHTS:

Mental health and housing doomscrolling

Look, I want to say one thing in closing. Lots of people are obsessing about the housing market and even stressing over stats and trends. It’s easy to watch the housing market like it’s cryptocurrency – constantly changing by the minute. But we need time and objectivity to see the trend, and the housing market doesn’t change every time we log on to social media. My advice? Take your mental health seriously by finding ways to add peace into your life in the midst of a changing real estate landscape. I’m not saying to ignore any stats either (not at all). I’m just saying to keep stats in their proper context.

An image with a note to basically encourage people to remember to take care of their mental health. It's easy to obsess over real estate, but this is a marathon.

There is so much more we can talk about. Let me stop here for now. Stay tuned for a big market recap for May in about two weeks.

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 are you seeing out there in the market? What number stands out to you the most? What did I miss?

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

Freakish home price growth so far in 2022

March 8, 2022 By Ryan Lundquist 21 Comments

Freakish price growth? Yes. That’s exactly what we’ve been seeing. Here we are again with what feels like a carbon copy of last year, which was our most aggressive market ever. In short, 2022 is doing its best to crush 2021. Let’s talk stats and perspective. I’d love to hear your take.

UPCOMING PUBLIC SPEAKING GIGS:

3/15/2022 NARPM Luncheon (details)
3/22/2022 SAFE Credit Union market update (details)
4/28/2022 SAR Think Like an Appraiser (details)

WHAT IS HAPPENING?

Buyers are essentially running to the market to get in before rates spike more. On one hand affordability has declined as rates have risen substantially lately, but so far this has only created a frenzy to buy. At some point theoretically we’d expect to see demand soften due to rate increases, but we haven’t hit any sort of inflection point yet where buyers are backing off the market. That’s something to watch though with the number of purchase mortgage applications, pending contracts, and sales.

FREAKISH PRICE GROWTH:

Below I’d like to show a few examples of what price growth looks like in the Sacramento region right now. I suspect many markets across the country look something like this too.

A QUICK RECAP:

Some quick stats. Feel free to share some of these images on your social channels too. But please see my sharing policy. Thanks.

1) MASSIVE MEDIAN PRICE GROWTH:

This visual shows the median price in February in black, and this year is so far above others. It’s normal to see prices rise in February, but this is massive growth – especially in the eleventh year of this price cycle.

2) RECORD-BREAKING DOLLAR GROWTH:

This year the median price ticked up $31,000 from January to February. This is essentially the largest dollar gain we’ve seen in the Sacramento area between these two months. From a percentage standpoint this was a 5.56% increase. This isn’t the highest percentage ever, but it’s the second-highest percentage gain from 2004 (2015 saw a larger gain).

3) WEEKLY PRICE GROWTH HAS STARTED TO RAGE:

Check out the black line. That’s 2022, and it’s been raging higher. Until the last week of February it looked like the median price for the month was going to be strong, but nothing too crazy. But then stats starting coming in, and we see a much different trend. Remember, closed sales from last week really represent the market from about a month ago when these properties got into contract.

4) BUYERS PAID WAY ABOVE NORMAL:

On average buyers paid nearly $16,000 over the asking price last month. This is far above a normal February where buyers tend to pay closer to $10,000 BELOW the list price. It’s important to note February 2022 was about twice as much as February 2021. Keep in mind this is the average of every single escrow. This number doesn’t perfectly describe every single transaction. In other words, some buyers went way above this number and some went lower. The takeaway here is to know how disconnected this number is from normal rather than offer $15,764 above list price thinking that is the winning number. It might have to be way more. Or in some cases it could be less.

5) FEWER MULTIPLE OFFERS TECHNICALLY

This month there were fewer multiple offers compared to last year at the same time, but we’re actually seeing a more aggressive market today. On one hand this stat suggests the market is slightly cooler in temperature, but it doesn’t feel cooler because the offers that are being made are higher.

6) BUYERS MADE MORE AGGRESSIVE OFFERS:

This month there were fewer multiple offers compared to last year, BUT the market was more aggressive since buyers offered higher amounts above the list price to secure properties. This speaks to buyers having a fear of missing out on low mortgage rates (and anemic supply of course).

7) MORE INVENTORY IS COMING

We are seeing more listings hit the market. Typically, the market really starts to hit more of a stride in March with listings coming, so stay tuned. We won’t have enough listings, but more is better.

YEAR OVER YEAR:

Year over year stats are important to digest, but don’t forget to look at month to month stats to understand what the market is doing right now. Also, not every location and price range are going to have the same stats.

MONTH TO MONTH:

Year over year stats are important to digest, but don’t forget to look at month to month stats to understand what the market is doing right now. Keep in mind Placer County has a limited number of sales too, so I would take Placer with a grain of salt from month to month.

OTHER VISUALS:

As if anyone really wanted more…

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.

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?

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

Is the housing market starting to slow?

June 8, 2021 By Ryan Lundquist 36 Comments

Is this crazy housing market slowing? Let’s talk about that today. On one hand stats are basically at all-time highs, but when we look deeper we’re starting to see some subtle signs of slowing. What are you seeing out there?

QUICK SUMMARY: The market is still bananas, but we’re seeing some slight slowing. Stats could change in coming weeks and months, but for now the best available information suggests a slightly slower trend. And I’m not saying the market is dull, so save your hate mail. It’s more like housing was driving 135 mph and now it’s driving 127 mph.

Some subtle examples of slowing:

1) It’s taking slightly longer to sell: It May it took only six days to sell (median) in the Sacramento region while pendings over the past four weeks took seven days to get into contract (median).

2) Fewer multiple offers: In May we saw the number of multiple offers slough by 6% as seen in the graph below. We are still basically at all-time high levels, but the percentage of multiple offers is slightly lower than it was.

3) Buyers paid slightly less above asking: In May buyers paid an average of $20,975 above asking price while in April they paid $22,247. This is a very minor difference that I’m honestly hesitant to talk about because we’ll have to revise May stats in a few weeks once more sales get added into MLS. So it’s possible this stat in May could change. Though right now the best available market stats show buyers paid slightly less above contract price in May compared to April.

4) Lower sales to original list price ratio: In May buyers paid an average of 103.3% above the original list price compared to 103.8% in April. Okay, this is even closer than the example in number three, so again, I’m reluctant to post this – especially since we’ll need to refresh this number when more May sales are counted. But for now it’s something to watch. Keep in mind the number in April at nearly 104% was literally the highest amount ever above the original list price, so 103.3% is telling of an incredibly competitive market.

5) Word on the street: I’m hearing from real estate agents that they’re seeing slightly fewer offers and having slightly fewer showings. This is mostly anecdotal and of course subjective to whatever sliver of the market an agent is working, but it’s something to consider.

CLOSING ADVICE:

a) Know the seasonal market: Each year around this time in a normal year we start to see the real estate market slow and this image shows some of the things we can watch. Remember, prices could keep going up in coming time, but prices reflect pending contracts from the past, so being on the cutting edge of the trend in a market has more to do with watching other stuff before the trend eventually catches up to prices.

UPDATE: I just wanted to say I fully expect prices to increase in June and who knows how much longer. We are definitely still in an increasing market to say the least. I know it seems ludicrous to be talking about slowing in the midst of such insane competition. But this is exactly the conversation to have because let’s watch all the little things instead of getting overly distracted by the bling of sexy price stats. Know what I’m saying?

b) Don’t misread this post: The market is still 100% on steroids, so I’m hoping people don’t walk away thinking, “Ryan said the market was dull.” Nope. Also, the market is not crashing, so be cautious about painting what looks like normal seasonal slowing with a doom and gloom brush. Buyers, you’re still going to have to make aggressive offers. But sellers, stay in touch because even though you have an incredible amount of power, you did lose just a little recently.

c) The x-factor of mortgage rates: If mortgage rates dip below 3% again it could easily change the speed and trajectory of the market.

d) Be careful of rose-colored lenses: It’s easy in real estate to only speak in ultra positive terms about the housing market. But markets change temperature all the time and we have to be real about the trends because buyers and sellers need good advice for the market that actually exists. My advice? Let the stats form your perspective and narrative. Don’t get trapped into thinking you need to speak in hyper-positive language either to be successful in real estate.

e) Say something different if the temperature changes: If the market speeds up in coming months and we don’t end up seeing seasonal slowing, then that’s what we need to say. The best we can do at any given moment is interpret the stats in front of us and let that shape what we say. So for now it looks like we’re seeing some slowing. What does the future hold? We’ll see.

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

APRIL TO MAY: How has the market changed recently? Take a look at the April to May visuals below.

Prices in Placer tend to bounce around month to month because there aren’t that many sales. Take these with a grain of salt.

NOTE ON PRICE GROWTH: Last year the market was dull at the beginning of the pandemic and there was a slump in sales and even prices – which tends to inflate the numbers this year. My advice? Take the percentages with a grain of salt. I think it’s likely better to focus on price metrics generally being up about 20-23% or so rather than fixating on pandemic percentages at 25-30%.

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 seeing any slowing at all? What is the market like in the trenches right now? I’d love to hear your take.

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

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