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The housing market is slowing (but not slow)

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The housing market is slowing and today I want to share seven quick ways I’m seeing that. But here’s the thing. This market is still driving at warp speed. In short, the market is slowing, but it’s not slow.

Podcast with Golden 1 Credit Union: If you need some background noise, here’s a podcast I recorded recently. I had fun with this one. Listen here.

This post is designed to skim or digest slowly.

7 WAYS THE MARKET IS SLOWING:

The housing market is still so competitive, but there are subtle ways I’m seeing slowing. This is so important for sellers to understand – not to mention real estate professionals who are talking with clients and the public. If you’re not local, what are you seeing in your area?

1) Taking longer to sell: Last month on average it took 12 days to sell a home and 6 median days. Since June pendings have taken two extra days to get into contract. This is still lightning fast, but it’s slower than it was.

2) More homes are selling below the list price: There are slightly more homes selling at or below the list price right now. Here’s a visual to show what buyers are paying compared to the asking price. As you can see most categories slowed slightly last month, but not every category.

3) Fewer multiple offers: For two months in a row we’ve seen fewer multiple offers in the Sacramento region. Keep in mind the percentage of offers is still about as high as it’s ever been.

4) More listings are hitting the market: We still don’t have enough listings to satisfy demand, but there are now literally multiple hundreds of extra listings on any given day in the Sacramento region compared to a few months ago.

5) Slightly higher monthly inventory: We are seeing a slight uptick in monthly housing inventory. Very slight. It’s wild to say this when we basically still have half-a-month of homes for sale, but supply is up just a little in most counties from a few months ago. Of course now we are seeing mortgage rates at their lowest point in months, so we’ll see what happens to supply in coming time.

6) We hit the big home peak: The dark blue line represents the average home size in Sacramento and it goes up and down like clockwork each year. Do you see how size typically hits a seasonal peak during May or June (besides last year)? Anyway, the average size slumped in June, which is what we’d expect to see in a normal year. This goes to show we’re seeing some normal seasonality. 

7) Word on the street: I’m hearing from lots of real estate agents, loan officers, and appraisers that they’ve seen a slightly slower vibe. I haven’t heard anyone say the market is slow, but there is lots of chatter about slowing. At the same time I’m hearing things like, “My listing had 23 offers” or “We got outbid again,” which speaks to how competitive it is right now.

8) Other: What is number eight?

Any thoughts?

3 WAYS THE MARKET IS NOT SLOWING:

1) Record prices: The market still has upward price pressure in lots of areas and each month we’re seeing old price records shattered (nominal prices not adjusted for inflation). See stats below for specific price metrics.

2) Buyers paying big money over asking: On average properties sold $25,865 above their original list price last month. This is a wild stat considering it represents over 2,800 sales. This figure is higher than any of the previous three months too, which shows the market is still bananas. By the way, the average amount clearly does not perfectly represent every individual escrow.

3) Record sales price to list price ratio: Last month properties on average sold 4.1% above their original list price. This might seem low, but it’s actually higher than it’s ever been. This is a good reminder that not every stat is showing slowness. In other words, when a market slows we don’t always see it in every single metric. Of course it’s good to keep in mind sales in June really represent pending contracts from May more than anything.

Okay, two last thoughts.

NOT CRASHING: The doom and gloom crowd loves to look at slowness and say the market is starting to crash, but that’s what they say every year when stats sag. Look, I’m not saying the market is perfect. I’m just saying stats right now don’t support a crash and burn narrative.

IT LOOKS SEASONAL EH: In a normal year we’d expect for the housing market to crest around this time and begin a seasonal descent for the rest of the year. So it’s no surprise to see the market slowing right now.

——————– BIG MARKET UPDATE ——————–

For those interested, here’s a big Sacramento market update:

THE SHORT VERSION:

Here is a highlight reel to talk through some of the bigger themes right now. In short, the stats are sensational and we are in the midst of an incredibly competitive market. But we’re also seeing some slowing. Both things are true at the same time.

THE LONG VERSION:

Stats are on steroids and we are still seeing one the wildest markets we’ve had. It’s just some metrics are showing some symptoms of what looks like seasonal slowing. Here are some of the bigger themes.

FORECLOSURES HAVE NOT INCREASED:

Some folks are talking about an increase of foreclosures, but that hasn’t been happening. What I mean is these properties are definitely not showing up on MLS. I keep hearing of a coming foreclosure wave also due to forbearance rates, but those keep going down.

MAY TO JUNE PRICE STATS INCREASED (NOT A SHOCKER):

How has the market changed recently? Take a look at May to June prices. In short, every metric in all surrounding counties showed an increase last month.

LAST YEAR VS THIS YEAR:

Last year the market was dull at the beginning of the pandemic, so this year versus last year gets a little weird for a comparison. My advice? Take these percentages with a grain of salt because they’re inflated due to sagging numbers last year. And remember these percentages DO NOT actually mean every house is worth that much more either.

MORE PRICE VISUALS:

A few more visuals to show the insanity of price growth lately. Look how far disconnected 2021 prices are from previous years.

SALES VOLUME HAS BEEN STRONG:

For thirteen months in a row we’ve seen higher monthly sales volume compared to the previous year. This June was up from the previous two years and overall at a fairly normal level. Frankly it’s impressive to see this many sales in light of having such low supply. It just goes to show buyers have been getting it done. Keep in mind last year did have lower volume due to two lower months at the beginning of the pandemic, so that’s one reason why the percentages are up so much this year. But we’ve also seen increased migration this year too, particularly in El Dorado and Placer County.

Anyway, this is getting really long.

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? What are you hearing buyers and sellers say? I’d love to hear your take.

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

Hot real estate stats during the pandemic?

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I can see the headlines now. “Prices rose despite the coronavirus,” or “The housing market shows strength in March despite the pandemic.” But let’s step back and think critically about glowing stats from March and what they really tell us. I hope this will be helpful. Any thoughts?

Five things to consider about stats during the pandemic:

1) Prices rose last month (technically): If we’re not careful the hot headline can be the median price rose 3.5% last month in the Sacramento region despite the pandemic. In other words, the median price increased from $425,000 in February to $440,000 in March. On paper it looks like the market is fine and moving along without any effect. BUT we have to remember prices in March actually reflect pending contracts from mostly January and February. So sales in March actually tell us way more about previous months rather than March itself. If you don’t believe me, only 2.9% of all sales in March got into contract on or after March 12th (the day we found out Tom Hanks had coronavirus) and only fifteen properties have gotten into contract and closed since the lockdown went into place. So we have very little pandemic data to consider within March sales.

2) Pulling stats too soon: This sounds geeky, but it’s key to understand. Pulling sales stats on the first of the month is way too early because not all sales have been entered into MLS yet. In my experience on the first of the month we’re still missing about ten percent of the sales from March because not all sales have been entered into the system yet. So if we wait about a week instead to pull stats we end up getting a much more accurate picture. I quoted the median price above at $440,000, but that is preliminary and it could easily change based on ten percent of the market not being accounted for yet.

3) What to watch right now: If you want to see the current market, watch what is happening in the listings and pendings rather than recent sales in March. Are listings moving or sitting? Are we seeing more price reductions? Are properties spending less or more time on the market? What is the sentiment among buyers and sellers? Who is gaining or losing power? Has there been a change to the number of listings and pendings? Do sellers have to give more credits to buyers? Are contracts getting bid up? Are contracts falling apart more often? We need to ask these questions in every neighborhood and price range. My advice? Look to neighborhood stats and let the numbers inform your narrative about what is happening in the market.

4) Be objective about data: I find it’s so critical to be objective about prices. What I’m saying is if we’re not careful we can judge a market’s price direction based on what we think should be happening, recent sensational headlines, or even regional trends for pending contracts rather than looking to actual stats in a neighborhood or price range. Appraisers even need to do this. It can be tempting to say prices are declining, but we need to be sure that is the case based on what we are observing in the neighborhood market. Remember, it’s possible to be see pendings and listings start to slough, but that doesn’t always mean we’re seeing price declines at the moment. Could that be coming soon? Yes. But we need to let the data tell the story. Let’s remember the market is changing quickly, so what we’re saying today might be different tomorrow.

5) Upping your numbers game: If you work in real estate I can’t emphasize enough how important it is to be fluent in market trends and to be able to talk through current dynamics so you can offer informed real estate advice. If it’s helpful, I am posting a few YouTube videos each week right now as well as lots of content on Facebook and Twitter. Or let’s set up a Zoom meeting with your office so we can talk shop (local offices are free). My goal is to offer perspective and objectively share the story of the market without sensationalism.

A few closing things:

New market update video: Here is a new market update video from two days ago. This is 15 minutes. Watch below or here. I have some new stuff to share, so be on the lookout hopefully today.


 

Fresh daily visuals: During this pandemic I’ve upped my stats game and I’m finding new ways to visualize how the market is moving. I’m not focusing on prices for now because we don’t have enough data yet.

Side note for appraisers: There are disclaimers being put into appraisal reports that talk about not being able to quantify the long-term or short-term effect of coronavirus, but if we pay close attention we likely have enough data right now to at least talk about some of the short-term dynamics. It’s easy to put boilerplate pandemic comments in an addendum for liability and that’s a really good idea, but what’s even better is our market analysis. Colleagues, would it help to have some tutorials for these types of graphs so you can make them in your market? If there is enough interest I’d be glad to put something together. Let me know.

I hope this was interesting or helpful. Thanks for being here.

Questions: What stood out to you about this post? What are you seeing out there in the market right now?

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

My last blog post in 2017, Bitcoin, & a big market update

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I started this blog almost nine years ago, and this is my last post for the year. After next week I’ll be lying low, enjoying family, doing some woodworking, staying on my diet (I’m down 30 pounds), and taking some time to get recharged. But first I have two things on my mind. 

Thank you: Thank you so much for hanging with me for another year. I cannot tell you how much I appreciate your support, friendship, comments, emails, insight, and the business you send my way. It might sound cheesy, but I get so much joy out of writing once a week and I’m grateful for you. It’s been a dynamic year for business too, and I honestly could not be doing this without your support. Here’s to continuing to grow together. Please don’t stop asking questions, pitching in thoughts, and challenging my thinking.

Big market stats: Secondly, if you’re looking for the latest market trends for Sacramento, you’ve come to the right place. Check it out below. 

From my family to yours, Merry Christmas and Happy Holidays.

–——-——- Big monthly market update (it’s long on purpose) ———–——-

The market is often dull during the fall, but that’s not the case this year. I mean, we’re definitely seeing slightly lower prices, it’s taking longer to sell, and sales volume is sloughing, so clearly the signs of a slower market are here. Yet this fall season isn’t really incredibly slow or painfully dull either.  

Sideways: Price metrics were more or less sideways last month, though some metrics either showed a slight uptick or a slight decline. Overall there wasn’t much change from the month before in terms of price, but it took an average of three days longer to sell. This November saw almost the same amount of sales as last November for the region. Housing inventory is slightly higher than the same time last year, but it’s still hovering at 1.60 months for the region – which is still low. In other words, the housing shortage didn’t go anywhere.

Bitcoin & Modest Appreciation: The rapid increase of Bitcoin has been the talk of town lately, and it’s also seemed to fuel some conversations about quickly rising values in real estate. I get the comparison, but we’re really not seeing Bitcoin type huge increases in real estate. In fact, this year in Sacramento values have seemed more modest in many price ranges, which means somewhere around 5-7% upticks. I realize “modest” in California would be huge in other areas of the country, but that’s not really the case on the west coast. Yet the bottom of the price market easily saw 10-15% increases in many areas of Sacramento. That’s not so modest.

Our “Bitcoin” real estate market in 2012 & 2013: The closest to rapid appreciation we’ve seen in Sacramento in recent years took place between 2012 and 2013 in which we saw price metrics change by 35-40% over the course of one year. During that time both real estate agents and appraisers said it wasn’t easy to keep up with how quickly prices were changing.

$7M Sale: Did you see the sale in Granite Bay that closed two days ago at $6.95M? What the? This is one of the highest residential sales ever in the Sacramento area. You can watch a video tour of it here. Also, that $4.1M condo listing Downtown has been pending since November. I don’t know what it’s in contract for yet, but let’s talk about it when it closes.

Rents: Sacramento made a list again on the fastest growing rents. Yardi Matrix reports a 9.1% uptick in rent year over year in November. Now if we can only get wages to grow by 9.1% too.

Price Sensitive: Lastly, the market may not be incredibly dull like it is during some fall seasons, but it’s still price sensitive. This means buyers are tending to be logical, well-informed, and often not so desperate as to offer any amount. My advice? Don’t just look to the high sales from the spring and summer. What is getting into contract right now? That will give you a good picture of the current market and a hint for how to price too (possibly lower than the height of spring / summer).

I could go on, but let’s get visual.

DOWNLOAD 69 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

SACRAMENTO COUNTY (more graphs & stats here):

SACRAMENTO COUNTY:

  1. The median price is currently $349,450. It’s the same as last month but down 1% from summer.
  2. The median price is 7.5% higher than the same time last year.
  3. Sales volume in November was 4.5% lower this year than 2016. There were 1354 single family detached sales last month.
  4. It took an average of 32 days to sell a home last month (one year ago it was taking 4 days longer).
  5. The median days on market last month was 18 days.
  6. It took 3 more days to sell in Nov. compared to October (median days).
  7. FHA sales were 20% of all sales last month in the county.
  8. Only 1.4% of sales last month were bank-owned & 0.9% were short sales.
  9. The avg price per sq ft was about $224, which increased last month (11% higher than last year).
  10. The avg sales price softened slightly last month and is currently $385,778. This is 10% higher than last year.
  11. Cash sales were 13% of all sales last month.

SACRAMENTO REGION (more graphs & stats here):

SACRAMENTO REGION:

  1. The median price is $389,000. It softened nearly 1% last month.  
  2. The median price is 9.5% higher than the same time last year.
  3. Sales volume in November was nearly the same as Nov 2016. There were 2220 single family detached sales last month.
  4. It took an average of 36 days to sell a home last month (one year ago it was taking 5 days longer).
  5. The median days on market last month was 19 days, which means properties are selling really quickly.
  6. The median days on market increased by 1 day last month, which shows a slowing in the market.  
  7. FHA sales were 17.2% of all sales last month.
  8. Only 1.5% of sales last month were bank-owned & 0.8% were short sales.
  9. The avg price per sq ft was about $230, which increased last month (10% higher than last year).
  10. The avg sales price increased less than 1% last month and is up 10% higher than last year.
  11. Cash sales were 14% of all sales last month.

PLACER COUNTY (more graphs & stats here):

PLACER COUNTY:

  1. The median price is currently $451,000 and decreased about 1% last month.
  2. The median price is 5.6% higher than the same time last year.
  3. Sales volume in November was 3.6% lower than 2016. There were 473 single family detached sales.
  4. It took an average of 40 days to sell a home last month (one year ago it was taking 9 days longer).
  5. The median days on market last month was 19 days, which means properties are selling really quickly.
  6. The median days on market deceased by 3 days last month (don’t read too much into that). 
  7. FHA sales were 12.6% of all sales.
  8. There were only 9 bank-owned sales last month and only 2 short sales.
  9. The avg price per sq ft was $236, which is slightly higher than last month (9% higher than last year).
  10. The avg sales price is currently $513,280. This is 6.8% higher than last year.
  11. Cash sales were 17% of all sales last month.

DOWNLOAD 69 graphs HERE: Please download all graphs in this post and more here as a zip file (includes a stat sheet too). See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: What are you seeing out there in the market? Anything I missed? I’d love to hear your take.

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

10 things to know about low housing inventory

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Inventory is low. Really low. That’s one of the big stories right now in real estate, so I wanted to spend some time kicking around some thoughts. Let’s take a look at ten things to know about housing supply in Sacramento. If you aren’t local, I hope you can still find some value. Do you see any parallels to your market? Any thoughts? 

DOWNLOAD 50 graphs HERE: Please download new market graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

10 THINGS TO KNOW ABOUT LOW HOUSING INVENTORY

1) Housing inventory is clearly on a declining trend.

inventory in sacramento county Since 2013 - part 2 - by sacramento appraisal blog

Housing supply has been vanishing over the past few years in light of greater buyer demand, sellers sitting instead of selling, less new construction, increasing sales volume, and other reasons.

2) Housing supply is really sparse (except at the top).

inventory - March 2017 - by home appraiser blog

Housing supply was low last year, but this year it’s 15-20% lower. Having less listings means it’s really competitive for buyers – especially under $400,000. However, inventory is not low at every price range as there are far more listings at the top. Before freaking out though, this is actually a normal trend we see almost every single month. But the disparity between under $500,000 and above $1,000,000 is striking. As an FYI, it’s worth noting the top of the market does feel a bit soft.

3) Inventory is still not as low as the Blackstone days.

inventory in sacramento county Since 2011 - by sacramento appraisal blog

It’s true that inventory is anemic, but we have to remember during 2012 and 2013 it was at one month for nearly an entire year when Blackstone and other investors were gutting the market. I mention this because while the market has an aggressive feel, it’s still not what it was. If inventory persists in declining though it will be a bloodbath in terms of competition for buyers (good for sellers though as a developer mentioned to me on Twitter). 

4) Inventory was 1400% higher ten years ago during the “bubble”.

inventory in sacramento county Since 2007 - by sacramento appraisal blog

Ten years ago during the worst of the real estate “bubble” popping we had a 14-month supply of homes for sale (as opposed to one month now).

5) Bank-owned inventory is not a driving factor today.

REOs and Short Sales Sacramento County - by Sac Appraisal Blog

Eight years ago over 70% of all sales in Sacramento County were REOs, but that number is now about 3%. Some folks promise a new “foreclosure wave”, but it’s definitely not here right now.

6) Low inventory is putting pressure on values to increase.

Median price since 2013 in sacramento county

Declining inventory over the past few years is a big factor in rising prices. Right now values are about where they were at the height of last summer (or slightly higher) after a lull in the fall in many neighborhoods in Sacramento County. But let’s not make the mistake to think the market is doing the same thing everywhere. The truth is in some areas increases have been modest at best over the past year while some price ranges feel flat, but the bottom of the market is hands-down experiencing the largest increases. Remember, in some price ranges the market feels more aggressive than actual value increases too, so it’s really important to sift through emotions, look at actual numbers, and not overprice because the market is “hot”. A good mantra for some areas is “Aggressive Demand, Modest Appreciation.”

7) Strong demand is a huge reason why inventory is declining:

price metrics since 2014 in sacramento county

Demand is strong right now for both buying and renting, and buyers and tenants are simply gobbling up almost anything out there (I say “almost” because buyers are still sensitive about adverse locations and overpriced homes). Thus it’s not surprising to see the median price is 7% higher than last year, the average sales price is 9% higher, and the average price per sq ft is about 9% higher. Prices increases from February to March were anywhere from 1-3% depending on the metric (this doesn’t mean values went up by 1-3% though). 

8) Increasing sales volume is one reason for lower inventory.

Cash in Q1 - by Sacramento Regional Appraisal Blog

Housing inventory is the relationship between sales and listings, so if there are more sales and no real change in the number of listings it will naturally mean inventory as a metric will show a decline. Look at the graph above to see all sales since 2013 for the first quarter of the year. Can you see how sales volume is increasing? At the same time we see cash volume declining. This reminds us the market is trying to figure out what normal looks like. It’s healthy to see sales volume growing.

9) Low interest rates have helped take homes off the market.

Interest Rates Since 2008

Historically low interest rates have played a big role in shaping inventory in that some owners are sitting on a 3.5% interest rate from years ago and they are simply not going to move unless necessary. Why would they anyway if their replacement home would come with a much higher mortgage? This means there are fewer homes hitting the market that might otherwise sell.

10) Low inventory is causing homes to sell faster.

CDOM in Sacramento County - by Sacramento Regional Appraisal Blog

Last year it was taking 5 days longer to sell a home and two years ago in March 2015 it was taking 15 days longer to sell a home. Can you see how low inventory makes a difference in how long it takes to sell? By the way, here is CDOM by price range. As you can see, the higher the price the longer it takes to sell. Just because it is a “hot” market does not mean every property is selling in 3 days.

BIG MONTHLY POST NOTE: Once a month I do a big market update (and it’s long purpose). Normally I talk about Placer County and the Sac Region too, but I tore my MCL a few weeks back, so I only had time to focus on Sacramento County in today’s post. Next month I’ll likely be back to normal (but I may change it up too).

DOWNLOAD 50 graphs HERE: Please download new market graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

Questions: Did I miss anything? Any other thoughts as to why inventory is low? How would you describe 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.