Ryan Lundquist

Don’t get stuck on home prices…

May 2, 2022 By Ryan Lundquist 7 Comments

What are prices doing? That’s always the question, and I get it. But there are bigger fish to fry to understand what the housing market is doing.

Market webinar: On Thursday May 19th at 10am I’ll be doing a deep market update webinar through SAR to talk about the latest trends. We’ll have an hour, so we can go over a ton of stuff. Sign up here.

A shift: Over the past few weeks there has been a shift in demand, which is why this conversation is so important. This isn’t about doom and gloom. I’m just saying we need to look at other things besides prices.

The last time: Let’s look at what happened when the market changed in 2005. There’s some helpful insight here, even though what happened last time isn’t the new template for every future correction.

WHY PRICES ARE THE LAST PLACE TO LOOK

Not that much different: The real estate bubble burst in Sacramento County in August 2005, but prices were only down 4-6% during that first year. When thinking of a pop, that doesn’t sound like much, right?

TWO THINGS TO WATCH INSTEAD:

The real story was volume: Prices saw a modest dip, but sales volume was imploding. There was a 43% change in the number of sales between August 2005 and August 2006. Some could’ve said, “Meh, prices are only down slightly,” but the glaring issue was nine hundred fewer sales in August 2006 compared to August 2005.

The real story was supply: Prices dipped slightly, but housing supply increased by 207% in the background. In other words, housing inventory went from 2.6 months to 8.0 months the next summer. And this helped set the stage for a massive collapse in 2007.

THE BIG POINT:

Prices were about the last place to look to understand the trend at the time. The real story was seen when looking at listings and volume.

What to watch: If you want to see what the housing market is doing, I suggest giving strong attention to the number of listings, the number of weekly pending contracts, and the number of sales. There are many other things to watch, but are buyers willing to continue to play the market? That’s the big question, and we’ll see the answer in volume before prices. Of course, if you want to sound suave on date night, watch other things like price reductions, the number of offers, days on market, etc… I’m talking through lots of these things every week. If you’re not local, check out the Redfin Data Center for weekly stats.

Whatever you do, don’t get stuck on prices alone.

Getting buyers to walk: As I said last week, price growth slowed in April compared to truly exuberant gains between January and March. Today we are seeing slow traffic in general at open houses, more price reductions, and buyers having an easier time getting offers accepted (not always). This really happened quickly too over the past few weeks. Overall, buyers are far more sensitive to price, condition, and location, which means sellers need to be open to negotiation. I’ve heard a few examples of buyers walking after sellers said, “Yo, Bestie, thanks for the offer. Now give me $25K more and remove the appraisal contingency.” That might have worked in January, but this is May. It’s a different market today. I’m also hearing more examples of, “We priced it right, but we aren’t getting any action yet.”

Embracing stats: The other day someone wasn’t happy because I wouldn’t call this dynamic the start of a market correction, but the truth is we need time and stats to understand the longer-term trend. This is not me sugarcoating. This is me being objective. Let’s keep watching the numbers (by the week) and letting the stats form our narrative.

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 stands out to you most in this post? What did I miss? I’d love to hear your take.

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

Scott Peterson’s house & raging price growth

April 5, 2022 By Ryan Lundquist 18 Comments

I have two things on my mind today. Scott Peterson’s house hit the market. And price growth has been raging so far in 2022. Let’s talk about this.

Think Like an Appraiser Class: I’m teaching my favorite class on April 28 from 9am-12pm. We’ll talk through choosing comps, making adjustments, and lots of practical scenarios. Hope to see you there.

SCOTT PETERSON’S HOUSE IS ON THE MARKET

Last week Scott Peterson‘s old house listed for sale again, and it’s always a wonder how a house with a history might be perceived. If you don’t remember, about twenty years ago Mr. Peterson was charged with killing his wife and unborn child. The disappearance of Laci Peterson was national news.

History of sales: This property was purchased by Scott and Laci in 2000, sold toward the top of the market in 2005, sold as a foreclosure in 2007, and then sold as a short sale in 2013.

Price position: My observation is this house has had a fairly similar price position through the years despite the history. Right now, the property is listed for sale at $459,888, which is an extremely aggressive price point in Modesto. In fact, last month on average, properties between $400,000 and $500,000 sold 4.5% above their original list price. In short, this house isn’t going to be for everyone, but a house with some history or baggage doesn’t always automatically sell for a discount either. I wrote fame and real estate a few years back. Would you buy this house? Why or why not?

I shared some thoughts about this property with CBS 13 a few days ago.

RAPID PRICE GROWTH IN 2022:

Switching gears, we’ve seen explosive price growth so far in 2022. It’s been like a slap in the face to buyers (sorry, an Oscars reference). Seriously though, despite mortgage rate increases, the market has been moving really fast. A better way to put it would be to say BECAUSE of rate increases, buyers have been running to the market. Stay tuned for an exhaustive market update out next week. I’ll definitely talk more then about market temperature (something that is always changing).

Massive growth in our eleventh year: Look at the growth between January and March. This is our eleventh year of price growth, and we’ve seen really strong growth despite prices already being so high. In terms of the dollar amount, this was a record-breaking two-month stretch to see the median price up about $60,000 in the region from January to March. The percentage growth was also stunning. The market was legitimately slowing down through 2019, so had the trend persisted, it’s likely we would have been talking about 5% growth so far this year instead of just over 10%.

Be careful: This does NOT mean every house is worth 10% more since January. It would be a massive mistake to arbitrarily apply this regional metric to your house. My advice? Be infatuated with neighborhood comps instead of county or regional price metrics. In other words, price reasonably according to the comps – NOT price metrics like these. Keep in mind, not all zip codes and counties have risen by the same amount either. For instance, Sacramento County’s median is up 7.1% ($37,000) since January.

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: Would you buy Scott Peterson’s old house? Why or why not? What do you think of the price growth we’ve been seeing lately?

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.

The anatomy of doom & gloom real estate articles

February 22, 2022 By Ryan Lundquist 33 Comments

The market is going to crash. This time it’s going to be even worse. Have you been seeing more doom and gloom housing headlines? I sure have. This week I’ve had quite a few articles emailed to me. What do you think of this one? What do stats actually show? What do I say to my buyer who feels concerned? Let’s chat about this.

This photo is me holding a sign that says "doom and gloom"

This is me holding a shabby chic doom sign I made this past weekend.

UPCOMING PUBLIC SPEAKING GIGS:

2/25/2022 Placer Assn of Realtors market update (details)
3/15/2022 NARPM Luncheon (details)
3/22/2022 SAFE Credit Union market update (details)
4/28/2022 SAR Think Like an Appraiser (details)

TEENAGE BLOG: My blog turned thirteen years old on Sunday. I’m definitely going to be watching the car keys and liquor cabinet closely…

NOTE: This post focuses on breaking down what I tend to see in so many doom and gloom real estate articles (and YouTube videos). If you’re looking to read about market ups and downs, check out a piece I wrote a few months ago, “Is the housing market going to crash?”

THE ANATOMY OF DOOM & GLOOM ARTICLES

Sensational title: These posts start with a sensational title such as, “We’re going to see a massive implosion,” or “It’s going to be worse than 2008.” I get it. A great title helps people click.

Minimal statistical substance: In many doom articles we tend to see big ideas without statistical substance. These articles often say, “Prices are high, so we’re going to see the same thing happen again.” In my mind that’s not enough substance, especially since there is no such thing as a rigid formula where the housing market has to do exactly what it did the last time. Moreover, many websites have been sharing this message for years, so at some point we have to question credibility. But back to stats, many doom articles seem to hype up the future without entertaining the present. I guess the message of, “The market will change in the future,” feels a bit vague and boring to me. For reference, here’s a post I wrote a few years ago to discuss price cycles in real estate. Remember, not every price cycle rises and falls exactly the same. In other words, what happened last time isn’t automatically the new template for the future.

Perspective that goes against stats: Sometimes people say things like, “We’re going to see massive mortgage delinquencies and a new foreclosure crisis.” But when we look at actual stats, mortgage delinquencies are really low and foreclosures hardly exist. During the beginning of the pandemic, the mortgage delinquency rate shot up, but it has since declined. This doesn’t mean we cannot have a problem in the future, but current stats don’t support a doom narrative.

Here’s a look at forbearance rates also. They’ve been declining, and 1.30% of all loans are in forbearance (compared to 8.53% in early 2020). At the start of the pandemic there was so much concern (rightly so), but a housing collapse based on this hasn’t panned out.

A visual to show the decline of forebearance rates through the past couple of years. This is a line graph.

Fringe source: A few people sent me an article this week, and I wrote back stating, “This is a fringe political website that I’ve never heard of. I wouldn’t give any credibility to this slanted source.”

An obsession with doom: If someone is going to write with a doom lens, I’m skeptical because I know I’m not getting objectivity. To be fair, I feel the same way about a positive-only lens that ignores anything negative.

Experts likely not quoted: In many doom articles it’s just one person pontificating without expert perspective (or stats). It reads more like a housing diatribe instead of housing research.

That timeless feeling: The big thing is these articles feel timeless because they are so general in what they’re predicting. These pieces basically could have been written three years ago, and maybe they’ll even get repackaged next year. In my mind this “timeless” feel is the tell we’re reading sensationalism more than stats. Of course, one day the authors will be right since markets don’t always go up. But like the saying goes, a broken clock is right twice a day.

Other: What did I miss?

CONCLUSION:

I’m not saying all housing articles predicting demise are bad, but the doom niche tends to be formulaic with much of what I mentioned above. The truth is we should be talking about the current housing market as well as the future. Let’s keep doing that. But be careful not to get swept away by weekly articles that don’t add substance to the conversation. Know what I’m saying?

TWO RECOMMENDATIONS:

1) Know the numbers: Pay attention to actual stats and let the numbers form your perspective and narrative. Ultimately, without a good sense of seasonal trends and current stats, it’s easy to get tossed around by each new sensational headline. Moreover, a quick way to lose credibility in real estate is to habitually share articles that lack merit. I know, that sounds so judgy, but it’s the truth. If you feel like you’re not in tune with stats in your market, maybe start pulling them yourself, find a few people who are doing a good job (and devour their stuff), or even check out what a source like Redfin puts out there.

2) Read mostly everything: I recommend reading from a variety of sources and following lots of different people who talk about housing. Having a well-rounded perspective is important as a system of checks and balances too. On a related note, if someone has a positive-only or negative-only housing outlook, don’t waste your time. All that said, I appreciate hearing what Ivy Zelman has to say lately because she’s been more contrarian than most other housing analysts (which piques my curiosity). Some of my favorite housing voices include Calculated Risk, Altos Research, Odeta Kushi, Jonathan Miller, Len Kiefer, Daryl Fairweather, Steven Thomas (SoCal), Patrick Carlisle (Bay Area), etc…

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 doom and gloom articles have you read lately? What housing sources are you listening to right now?

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

Ryan Lundquist

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