Nevada County

Rates cuts & you might not be the problem

September 18, 2024 By Ryan Lundquist 9 Comments

We’ve been waiting for the Fed to cut rates, and it FINALLY happened today. That’s positive news, but let’s unpack what that means. Also, let’s talk about the problem of days on market. Any thoughts?

UPCOMING SPEAKING GIGS:
10/18/24 Prime Real Estate (private)
10/23/24 SAFE Credit Union (details TBA)
10/29/24 Orangevale MLS Meeting
11/19/24 Downtown Regional MLS Meeting Q&A 9am

THE FED CUT vs MORTGAGE RATES

I think some buyers and sellers are excited to hear that the Fed finally cut rates this week, BUT the Fed didn’t cut mortgage rates. The cut to the Fed Funds Rate is for things like credit cards and auto payments. Keep in mind actual mortgage rates have already dipped in anticipation of the Fed cutting, so don’t expect mortgage rates to fall 0.5% immediately.

GEN Z TRANSLATION (sorry)

I ran the paragraph through a Gen Z translator: Okay, so some peeps are hyped that the Fed finally slashed rates this week, BUT like, they didn’t touch mortgage rates. The Fed Funds Rate drop is mainly for credit cards and car payments. Just a heads up, mortgage rates already dropped a bit in anticipation of this, so don’t expect them to fall by 0.5% overnight, fam.

LET’S COMPARE THESE TWO RATES

I hope this graph will be useful. And if you’re confused, talk to your favorite loan officer to help clarify. In short, the Fed cut the orange (not the black). And now let’s keep watching what actual mortgage rates do.

“THE SLOW DANCE SINCE 1971”

And while we’re on the subject of rates, here’s the 10-year treasury yield, which has a very close relationship with the 30-year fixed mortgage rate. Check out the twinning for these two lines. This is why so many people who watch mortgage rates pay such close attention to the 10-year yield. As Logan Mohtashami would say, it’s been a “slow dance since 1971” between the 30-year mortgage rate and 10-year treasury.

2024 VIBES ARE NOT 2021 VIBES

I think this meme says it all. It’s just going to take longer to sell today. Is that what you’re seeing in the market? Please keep sharing perspective.

YOU AREN’T THE PROBLEM (HOPEFULLY)

“I’m glad it’s not just me.” I heard that a few times this week after pushing out some stats for days on market. A few agents reached out to say it was nice to see other people have listings on the market for 60+ days too. Yeah, you’re not alone because MANY properties are taking much longer to get into contract. Friends, it’s not 2021 any longer where stuff is selling in lightning speed, so we need to keep adjusting expectations. Check out the disparity between listings and sales though. My advice? Figure out what it takes to be a sale instead of a stale listing. Look to the neighborhood comps to understand the dynamics of why buyers are moving quickly or avoiding listings. And sellers, price accordingly. Don’t get stuck in the past like Uncle Rico.

THE MARKET IS DIFFERENT BY LOCATION

I think this really brings home the point that the market is NOT the same in every location. Remember, it takes longer to sell in some areas, and some of that is due to higher prices needing more time on the market. On that note, don’t expect Sacramento County dynamics when listing in Placer County. Know what I’m saying?

BUT SOME PROPERTIES ARE SELLING QUICKLY

Here’s median days on market, which represents what half the market has done in September (average is higher). So, we see an average of 25 days on market for closed sales in Sacramento County, but the median is only 13 days. On one hand, we really want to know properties are taking almost four weeks to get into contract on average. Yet, half the market got into contract in slightly less than two weeks (median). Both of these stats are valuable.

TARGETING THE MEDIAN?

The market has a “weird” vibe like I talked about last week because some stuff is going very quickly while other properties sit. My advice is for sellers to aim for median days on market where possible. What do you think of that? The median stats below represent what literally half of all properties have done in September. In my mind, this is a great target to sell within this timeframe instead of overpricing and enduring multiple price drops. Of course, higher-priced homes could easily need more time on the market, so don’t be rigid about the overall median here. And some properties moving quickly have a condition and location advantage, which is why they’re selling fast. Yet, price tends to be able to solve everything, so pricing reasonably is the key. In other words, buyers are often turned off by cosmetic fixers today, so don’t price a fixer like it’s updated or even average.

THE COMMENT POLICE: I have a captcha on comments now since I got 16,000 spam comments during ten weeks away, and this is helping me solve the issue. I really don’t like that it asks people to do a math problem, but it’s my solution so far. Hang in here with me.

I hope this was interesting or helpful.

Questions: What are you hearing from consumers about rates? What stands out to you about the stats? I’d love to hear your take.

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

Buyers aren’t impressed yet with lower rates

September 11, 2024 By Ryan Lundquist 17 Comments

Mortgage rates have gone down, but buyers aren’t that impressed yet. It seems like the real estate community is really excited about lower rates, but buyers aren’t sharing the enthusiasm so much (yet). Let’s talk about it and maybe kick around some language to describe today’s housing market.

Skim by topic or digest slowly.

UPCOMING SPEAKING GIGS:
10/18/24 Prime Real Estate (private)
10/23/24 SAFE Credit Union (details TBA)
10/29/24 Orangevale MLS Meeting
11/19/24 Downtown Regional MLS Meeting Q&A 9am

WEIRD VIBES IN REAL ESTATE

When talking to the real estate community across the country, the word “weird” is often used to describe the housing market. I keep hearing stuff like, “It was priced to the comps, but nobody is even coming to look at it.” Or the market feels so uneven, and it’s either multiple offers or crickets. The truth is buyers are extra sensitive about price, condition, and location. Additionally, there could be some heightened sensitivity in light of the uncertainty of who is going to pay for the buyer’s agent commission (NAR lawsuit). I was talking with Realtor Desiree Taylor today, and she was telling me quite a few contacts are saying they’re going to wait until rates drop more. Have you been hearing that? In short, there are many layers to the weirdness.

NO BIG CHANGE IN PURCHASE APPLICATIONS (YET)

When looking at national mortgage applications data, there’s been an uptick in refinances, but purchase applications have been pretty flat. This shows we haven’t reached an inflection point yet where the math is working enough for buyers. In other words, buyers need more affordability to be able to play the game, and we’re not there yet. Granted, if rates persist to drop, we’ll definitely get some buyers back, so let’s watch by the week. On that note, we can hear about a change in buyer demand from the real estate community first before it shows up on a graph like this. Ultimately, we need a sharper change to affordability to get a sharper change to the number of buyers. Many experts think 5.5% or slightly lower is a threshold for more buyer activity, and that seems reasonable to me. But it’s not like all buyers will come back at a certain rate, which is why we need to watch by the week. Only time will tell. Do you think we’re on the cusp of more buyer demand? Am I going to be writing a blog post in a few weeks or months about buyers thawing out?

BUYER FOMO IS SO 2021

We’ve had more closed sales this year in Sacramento, but barely more than last year. As long as rates remain steady, the positive news is we’re poised to see more volume in 2024 compared to 2023. Yet, we’re only up 345 sales from last year, so it is super close. Today’s buyers tend to be patient, picky, and they don’t reek of FOMO (Fear of Missing Out) like they did in 2021.

SELLERS, GIVE SOMETHING TO BUYERS IF NEEDED

Are sellers giving more concessions? Yes. That’s what tends to happen during the second half of the year. The white vertical bars represent July to December, and do you see the increase during this time (besides 2020)? Concessions happened in about half of transactions in Sacramento County last month. And yes, it’s on my radar that the yes or no concessions field could get muddy in light of the NAR lawsuit. Let’s watch and digest over time.

WILL UNEMPLOYMENT HURT SOME BUYERS?

The unemployment rate has been rising, and if it keeps going up, we have to ask if it will affect the pool of future buyers. I find some real estate narratives about the future often only focus on the idea of a flood of buyers coming into the market, but let’s recognize some people are struggling. My advice? Don’t ignore unemployment rising, but be careful about sensationalism too.

WHY HAVE PRICES KEPT GOING UP?

Someone saw this image on X, and asked why prices have kept going up. It’s baffling at times to the public why prices haven’t really dropped much. Well, it’s because inventory is still low (despite growth this year). In short, sellers stepping back from the market has created a more competitive vibe. But price metrics have shown a very modest uptick this year too, so let’s keep the narrative in check. It’s not 2021 price growth. Keep in mind homes are slightly smaller this year too (for what it’s worth).

SELLERS AREN’T AS STUCK

Some good news. Sellers aren’t as stuck as they were last year. That’s true nationally as well as locally. It’s been great to see consistently more supply hit the market, but we’re still 34% below the pre-2020 normal for the number of new listings in the region. It’s true that inventory has skyrocketed in some places in Florida and Texas, but Sacramento has sort of a balanced vibe at the moment in the midst of growth this year. Keep in mind this “balance” only exists due to a low number of listings meeting a low number of buyers. It’s not that we actually have a normal number of buyers and sellers (it’s going to take time to get back there).

LISTINGS HAVE GROWN FASTER THAN SALES

This is one of the best ways to describe the market right now. The number of listings has grown faster than the number of sales. Locally, we’ve had about 2,600 extra new listings this year compared to last year, but only 345 extra sales. Look, the number of listings is still so much lower than normal, but there is no mistaking a wider gap between listings and sales right now, which means the market isn’t as tight.

NORMAL IS BORING

Can I get a drum roll? Okay, maybe not since this is going to sound boring. Market competition levels are somewhat normal right now. Check out the percentage of sales with multiple offers as well as sales selling above and below the list price. Days on market is also very close to normal. Of course, this doesn’t mean the market is normal. It’s a strange dynamic today where there is a sense of balance in some ways because we’ve had low supply and low demand. It’s just the number of listings and the number of sales are incredibly low compared to the norm. So, on paper the market feels somewhat balanced (but a cooler market than last year). But when we step back, there is a real problem with affordability, which is not healthy. We’ve had a volume crash. Not a price crash. That’s a good way to put it.

Okay, that’s what’s on my mind. Time to stop before this thing gets any longer. But some local stats for those interested…

LOCAL MARKET RECAP IMAGES

YEAR OVER YEAR

Some smaller counties don’t have much data, so I lumped them into 60-day chunks. One month just isn’t enough (too erratic). I have all these images on the STATS tab too (and more).

MONTH TO MONTH

I hope this was interesting or helpful.

Questions: What stands out to you about the stats? What are you seeing out there in the market right now? I’d love to hear your take.

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

Cash buyers are the X factor in 2024

June 6, 2024 By Ryan Lundquist 15 Comments

Cash buyers are really showing up. They are the X factor this year to explain the bump in volume we’ve seen compared to last year. Today, I have some really cool stats to unpack what is happening in nine local counties. If you’re not in Sacramento, is this happening in your area too?

UPCOMING SPEAKING GIGS:
6/6/24 Golden 1 Credit Union
6/11/24 Elk Grove Regional MLS Meeting 8:30am
6/13/24 Sacramento Realtist Association (details TBA here)
6/21/24 Exporting data from MLS (register here)
7/9/24 Future Homes Q&A (private I think)
7/11/24 She Invests – REI Networking Group 6pm (register here)
7/23/24 Matt Gouge Private Event
9/17/24 Downtown Regional MLS Meeting Q&A 9am
9/20/24 How to Think Like an Appraiser class (details TBA)
10/18/24 Prime Real Estate (private)
10/29/24 Orangevale MLS Meeting

CASH HAS MADE THE MOST DIFFERENCE IN 2024

When looking at a breakdown of volume this year so far compared to previous years, it’s really cash transactions that have made the most difference with higher volume in 2024. Cash isn’t down as much from previous years either since these buyers aren’t as sensitive to rates being at 7%.

PLACER & EL DORADO ARE FLEXING

In the four-county region, it’s Placer and El Dorado that have come through the most in giving 2024 a boost to volume. Sacramento is the largest local county by far, but volume has been more lackluster. Why do you think that is?

ARE BUYERS MORE USED TO THE MARKET TODAY?

We’ve been seeing more volume all year, which is great news. I think the knee-jerk reaction is to say buyers using financing are more used to higher rates today, but what do the stats show? Well, it’s hit and miss by county as you can see below, but in the two largest local counties (Sacramento and San Joaquin), we’ve actually seen fewer financed offers this year and more cash. In others words, the modest overall bump in volume this year in these two counties is really due to more cash buyers. Yet, some counties are experiencing more financed offers. Overall, it’s cash that explains the volume bump when looking to the entire region.

KEEPING THE NARRATIVE IN CHECK

It’s easy to read a headline like my post today and say cash is completely dominating the market, but that’s not statistically true. In my mind, here’s the best way to say it. In 2024 so far, cash buyers in the region are playing a greater role than last year, and the bump in total volume is largely attributed to more cash (the bump is not just cash though).

IS IT ONLY CASH AT THE HIGHEST PRICES?

Nope. There are cash transactions throughout all price points. The median price for the entire year so far is $588,000, and 47% of cash transactions below $600,000 were cash. This tells us cash is dispersed above and below the median pretty evenly. Yet, there is more cash at the top. For instance, sales above $1M represent 9% of the entire market this year when considering all prices, but nearly 15% of all cash sales are above $1M. And put another way, 32.9% of all sales above $1M this year have been cash transactions.

WHO ARE THE CASH BUYERS?

There isn’t an easy way to perfectly unpack buyer demographics, but cash buyers aren’t just investors. Also, only about 20% of the entire market is cash, so it’s not true that cash is beating all other offers even though cash has seen an uptick. In short, cash represents flippers, long-term investors, some Bay Area buyers, and owner occupant buyers. Am I forgetting anyone?

REAL ESTATE FRIENDS

I think stats like this are important to be able to plan ahead for business and tell the story of the market. My advice? Position yourself to work with buyers who are using cash who are not as sensitive to rates. Yet, recognize the vast bulk of the market is financed too.

BREAKING IT DOWN IN 9 COUNTIES:

Here’s a much wider look at the greater region. The interesting part to me is to see both Sacramento and San Joaquin with very little growth despite being more affordable. Sutter has seen lower volume, and I wonder if part of that has to do with being a more outlying area compared to Yuba. Anyone have ideas why Solano is down this year?

EACH COUNTY FEELS A BIT DIFFERENT

When looking at various counties in the region, there are different stories to tell. I’d love to hear what stands out to you. What I like to see from a market health standpoint is more of all types of sales instead of just more cash.

I hope this was interesting. Thanks for being here.

Questions: What stands out to you most about the stats above? What types of buyers are you seeing use cash right now? What did I miss?

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

An unexpected housing market in 2023

January 11, 2024 By Ryan Lundquist 10 Comments

Last year was a strange time in housing. On paper, it looked like home prices should have tanked in 2023 since we had some of the worst sales volume ever. Yet, prices didn’t dip that much. Today, let’s talk about what happened in a big recap. I hope you get something out of this. Any thoughts?

UPCOMING (PUBLIC) SPEAKING GIGS:
01/12/24 Prime Real Estate (private event (I think))
01/17/24 Gateway Event (private)
01/31/24 Joel Wright & Mike Gobbi Event 9am (on Zoom here)
2/09/24 PCAR WCR Event (11:30am-1pm (more details))
2/13/24 Downtown Regional MLS Meeting 9am
3/11/24 Yolo Association of Realtors (YAR only)
3/26/24 Orangevale MLS meeting 9am
4/11/24 Lindsay Carlisle Event (private)
4/25/24 HomeSmart iCare Realty (details TBA)

SELLERS STEPPING BACK WAS THE X-FACTOR

Sellers stepping back from the market was the x-factor for 2023. We saw about 42% fewer new listings in the Sacramento region, and that completely changed the trend from an ice bath in the fall of 2022 to a much more competitive market for the remainder of 2023. We were missing just over 15,000 listings from the pre-2020 normal, and that basically led to low supply meeting low demand (which made things more competitive despite a glaring problem with affordability). On the positive side, over 21,000 sellers DID LIST their homes (some people think nobody did).

OVER 10,000 MISSING BUYERS IN 2023

We had our second worst year of volume in decades in 2023 as we were missing 10,600 buyers from the pre-2020 normal (that’s 2016-2019). In the region, volume barely inched above 2007 levels despite population growth since that time. In Sacramento County, it was the worst year ever though, and that’s notable since Sacramento County has the largest local population. On the positive side, over 17,000 sales DID HAPPEN this past year. Again, some people talk about housing as if zero sales are happening.

PRICES DIDN’T DIP THAT MUCH

One year ago, it looked like prices were getting ready to see a big drop in 2023, and I thought we’d see a much bigger change, but that didn’t happen since sellers stepped back from the market. It turns out the trend changes when 42% of sellers step back. Ultimately, prices are down a few percent from their 2022 levels, and it’s likely most of the downward dip occurred in 2022. I’m not sugarcoating here either. This is what the stats are showing.

OTHER BIG THEMES

When looking at the stats below, we saw an increase in distressed sales, it took longer to sell in 2023, there was a higher percentage of cash buyers, and larger homes sold compared to the previous year. 2023 was a year where we started to get further away from the craziness of competition in 20221, but it still felt really competitive (more like early 2020 competition).

NEW HOMES VOLUME WAS STRONG

One of the bright lights in the housing market has been brand new home construction. 2023 was only outpaced by 2020 and 2021. This is a much different trend than the existing real estate market that felt like it got a beatdown. For reference, when we add the existing market (older homes) and newer homes together, brand new homes were about 27% of everything.

HERE’S A WIDER VIEW OF PRICE CHANGE

In case you wanted to see the average price and median price through the years, here you go. There have been so many comparisons of 2023 to 2007 because volume felt like 2007, but price change was nothing like 2007, and inventory did not build like we saw years back then either.

ANNUAL RECAP IMAGES FOR 8 COUNTIES:

Here’s a look at eight counties in the wider region. Remember, annual stats compare the entire year of 2022 with the entire year of 2023. We also want to look at prices year-over-year because that can be different (see below).

WAIT, AREN’T PRICES UP 7% FROM ONE YEAR AGO?

This is super important, and I’m guessing some people might even get confused about this. Year-over-year prices are actually up from last year by 7-8%, so it might be surprising to see prices dipped when looking at the entire year. I posted year-over-year prices for all eight counties on my STATS TAB on the navigation bar. Please see that tab. But for now, I made a video to explain why year-over-year price change is so lofty right now. I’ll post this in a few other places today in case you can’t watch on Instagram.

NOTE: There are different ways to look at prices. We can compare year-over-year (December 2022 with December 2023), annual metrics (all of 2022 with all of 2023), or even how things have changed from the peak in May 2022. My advice is to know all of these stats to be able to talk about what the market is doing. If we give too much attention to just one of these things, we might have an imbalanced view of the market.

If people are confused about this, I’ll dig in a little deeper in coming weeks.

View this post on Instagram

A post shared by Ryan Lundquist (@sacappraiser)

Anyway, there is so much else we can talk about, but that’s it for now. I’ll have so many other visuals out in coming weeks. Stay tuned.

Thanks for being here.

Questions: What surprises you most about the stats? What are you seeing in the market right now in 2024? I’d love to hear your take.

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

Nevada County

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