Ryan Lundquist

Sellers are hibernating & the housing market feels broken

March 28, 2023 By Ryan Lundquist 27 Comments

Sellers are hibernating. It’s been striking to see sellers sitting back so far in 2023, and it’s really starting to create more competition for buyers. Let’s talk about it. Scroll by topic or digest slowly.

UPCOMING (PUBLIC) SPEAKING GIGS:
3/28/23 Downtown Regional MLS meeting
4/1/23 NAA Conference in Sacramento
4/13/23 Realtist Meeting
5/4/23 Event with UWL TBA
5/10/23 Empire Home Loans event TBA
5/22/23 Yolo YPN event TBA
7/20/23 SAR Market Update (in-person & livestream)

THE HOUSING MARKET FEELS BROKEN

The housing market feels so broken lately with sellers sitting out. This has been a curve ball in 2023 so far. Granted, we’ve been seeing fewer new listings hit the market over the past few years in Sacramento ever since rates went below three percent. But what we’ve experienced this year so far has been ridiculous with close to 3,400 fewer listings in the first quarter of the year compared to last year. Keep in mind the number is even higher when we consider the pre-pandemic normal (closer to 4,000).

MISSING HALF THE LISTINGS

So far in 2023 we’re missing about half the number of new listings compared to last year in the Sacramento region. This is making the market feel more competitive than it should for a time in real estate where a significant number of buyers (almost 40%) are not present due to affordability issues.

CAN WE BLAME THE WEATHER?

It’s easy to say it’s the weather causing fewer new listings, but can we really “blame it on the rain”? (yes, that was a Milli Vanilli dad joke). Look, it’s possible some sellers have held back due to nasty weather, but nearly half of sellers missing due to the rain seems high. Moreover, we’re seeing a missing trend throughout California and even nationally, so that points to something else going on. Time will tell, so we’ll see.

Here’s a look at the national trend from Altos Research. These are active listings (not just new listings), and look how low 2023 has been.

BIG NEWS: MULTIPLE OFFERS ARE HIGHER THAN NORMAL

Mostly all the stats have been worse than normal for many months, but the percentage of multiple offers is starting to outpace the normal trend. This is freakish to see and totally unexpected, but it makes sense in light of such an anemic supply right now. Around this time of year, it’s typical to see 50-55% of properties getting multiple offers in the region, but lately it’s been 59%. This might not sound like a big difference, but this is happening in a market where we’re still missing so many buyers. Keep in mind in 2021 the number was more like 75%, so we’re not having 2021 vibes today.

Past two weeks of pendings (% of multiple offers):

– Sacramento (65.8%)
– Placer (46.2%
– Yolo (67.3%)
– El Dorado (43.2%)
– Sacramento region (59.3%)

UPDATED: We actually have more pending contracts than active listings in Sacramento County right now, which is not normal. This dynamic happened in portions of 2021 and 2022, and it’s a sign of a really lopsided market. Other local counties are not quite to this level, but it’s getting really tight everywhere.

NEW CONSTRUCTION IS IN A GOOD POSITION

So many sellers are not moving, and this puts new home construction in a good position to gain market share. There really isn’t any mechanism in place right now to quickly create more new supply (unless we have huge economic carnage), so builders are ripe to build more units as long as they can make the numbers work. In Sacramento, February was actually a strong month for new construction sales. In fact, it was a rebound month after volume had been down about 50% for many months in a row. The rebound is very likely due to builders dropping prices and offering concessions to buyers. And now we’ll see if the trend can keep up or not.

CAN DISTRESSED SALES HELP WITH INVENTORY?

We are seeing more short sales and bank-owned properties, but this is a tiny sliver of the market. In short, we should see more distressed units ahead, but it’s likely to be a smaller number still. I wrote more about distressed sales a few months ago. For now, here are all current short sale listings, and it’s clear we’re starting to see more listings as a result of market conditions (prices went down). Keep in mind reverse mortgages go back to the bank after the owner dies, so it’s not a concern to see most of these.

CALIFORNIA INJECTING MORE STIMULUS

There is a new loan that launched yesterday in California to give buyers up to 20% for a down payment. It’s CalHFA’s “Dream for All” program, and it’s a shared appreciation loan. It’s to be determined how many buyers jump at this, but there appears to be strong interest based on conversations with loan officers and real estate agents. Look, I am all for buyers getting help in many ways, but I have concerns about stimulating the market when things are already tight with sellers sitting. Moreover, this dreamy program could create chaos in some price ranges by fueling more competition. We’ll know more soon. Please keep me posted with what you’re seeing.

I hope this was helpful.

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

Questions: Why are sellers listing right now? What are you hearing? What do you think of the “Dream for All” loan? I’d love to hear your take.

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

Real estate price cycles & getting bid up

March 14, 2023 By Ryan Lundquist 9 Comments

I’ve got two things on my mind today. Price cycles and getting bid up during the first week. Well, and banks failing. And my 23rd wedding anniversary this week. And getting in shape. Anyway, let’s look at the first two things.

UPCOMING (PUBLIC) SPEAKING GIGS:
3/24/23 How to Think Like an Appraiser (at SAR)
3/28/23 Downtown Regional MLS meeting
4/1/23 NAA Conference in Sacramento
4/13/23 Realtist Meeting
5/4/23 Event with UWL TBA
5/22/23 Yolo YPN event TBA

HELLO, I’M A BANK FAILURE EXPERT

I had no idea there were so many bank failure experts, but they’ve been all over social media this week. Haha. Seriously though, this is something to watch, and we need time to see if other banks will follow Silicon Valley Bank.

NEW PRICE CYCLE GRAPHS

It’s been a number of months since I’ve updated this visual, so I wanted to share a new version. Here’s price change in Sacramento since the days of shag carpet in 1975. This is based on the Freddie Mac Price Index, and I adjusted it for inflation since that helps show more pronounced change.

Here’s what the nominal price data looks like (not adjusted for inflation):

A FEW THINGS ABOUT PRICE CYCLES

1) Up and down: Markets go up and down. Bottom line. A simplistic explanation of real estate is that it’s about supply and demand, but what happens behind the scenes with the Fed and financial policy is a massive factor in shaping the housing market (including supply and demand).

2) Seasonal price bumps: The graphs above don’t show it, but a spring seasonal uptick can happen during a declining cycle. For instance, the spring in 2007 and 2008 saw a seasonal increase in both volume and prices. We’ll see what happens in coming months now that rates are higher, but in early 2023 there has been a seasonal price bump so far. I find in many neighborhoods there was a huge price decline from May 2022, but now prices are flat or slightly higher in light of growing spring demand. In short, the sharp decline from last year has seemed to flatten over the past few months.

By the way, appraisers, what box are you checking right now?

3) Cycle length of five to six years: Prices in Sacramento tend to drop for five to six years when there is a declining trend, and we should be in tune with that. But it would be a mistake to say we’re locked into a predetermined period of time for this cycle ahead. Ultimately, the market feels so uncertain right now with high inflation, the Fed trying to break something, and the volatility of mortgage rates, so we need to see what happens (while being in touch with the normal trend). Also, it’s worth noting we have such a weird dynamic of sellers sitting out of the market right now, and we’ve only scraped the surface of understanding what this will mean for the next few years.

STARTING TO SELL QUICKLY

The market has been heating up for the spring, and properties are starting to sell quickly again. This is nothing at all like early 2022 in the stats, but half of pendings since March spent 15 days or less on the market, and that’s lightning speed compared to the ice bath fall season.

GETTING BID UP DURING THE FIRST WEEK

Yes, some properties are getting bid up today, but it’s nothing like early 2022 levels. If bidding up happens, it typically occurs during the first week or so. When properties get bid up, it’s usually 5% or less above the original price. And the longer homes are on the market, the lower they tend to sell from their original price (duh, thanks). Right now, we’re seeing about a quarter of sales close above the original price, which is a little lower than normal for the time of year, and profoundly lower than the last two years.

GOING BELOW DURING THE FIRST WEEK

There are also lots of properties that sold BELOW the original price in the first week. Kudos to sellers for listening to buyers and responding quickly.

SOME FRESH VISUALS

A few people asked me for more visuals like this, so here goes. These graphs show the relationship between days on market and how properties sold compared to their original list price. By the way, it’s easy to only see the glowing portion of these visuals, but don’t ignore the rest. Oh, and the original list price obviously makes a huge difference here. I find when properties get bid way up today, it’s often a reflection of being priced way too low.

LASTLY, THANK YOU

I’ve had so many speaking gigs lately, and I’m having an absolute blast. I wanted to say thank you everyone for showing up. I’m deeply honored. And thank you to event organizers for having me out. Photos from Carlos.

I hope this was helpful.

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

Questions: Are you seeing a spring bump when pulling comps? Or are prices still down? What do you think of the new visuals? I’d love to hear your take.

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

A spring bump in the housing market

March 9, 2023 By Ryan Lundquist 26 Comments

It’s a bump. Do you feel it? The housing market has been waking up in 2023, and we’re starting to see an uptick in lots of different stats. Let’s talk about it. This post is designed to skim quickly or digest slowly.

background with wooden table and grunge blue wall. A white banner in the middle of the image says, "A spring bump in the housing market."

UPCOMING (PUBLIC) SPEAKING GIGS:
3/10/23 PCAR Market Update Lunch & Learn
3/24/23 How to Think Like an Appraiser (at SAR)
3/28/23 Downtown Regional MLS meeting
4/1/23 NAA Conference in Sacramento
4/13/23 Realtist Meeting
5/4/23 Event with UWL TBA

A SPRING BUMP IS UPON US

It’s normal to see more attention on the housing market in the spring – even during a downward year. I have lots of price recap images to share below, but check out these two (weekly and monthly). Not every local county looks like this, but the region did show a price bump from January to February.

BUT NOW RATES ARE 7%

Lots of stats from February reflect properties that got into contract in January when rates were 6%. Thus, the real tell for the spring trend will be stats ahead over the next two months that show what 7% rates do to the market.

DOOM VS ROSY

These days many people embrace either a housing doom narrative or a rosy one, but let’s try to let the stats form our understanding instead of imposing one big idea on the market. Ultimately, housing stats are like life. Not everything fits into one neat little box or ideology. Moreover, markets are often a mixture of lots of different trends, so not everything is going to be totally dark or glowing.

HOT POCKET VIBES

Sales volume is ticking up right now for the spring, but it’s also subdued from a normal level. This is why I’m describing the market as heating up for the spring, but still frozen (like a hot pocket taken out of the microwave too early).

MISSING 40% OF BUYERS STILL

Over the past 90 days, there were about 2,200 fewer sales compared to last year and even the pre-pandemic normal. The truth is we’ve seen some of the worst volume on record lately. It’s no joke. Let’s not forget over 3,300 sales closed though. I think sometimes the part of the market that is happening gets lost or ignored in the midst of sensational stats.

GET READY FOR SUPER SENSATIONAL STATS

Some of the stats look bonkers right now. Days on market was freakishly low last year, and now it’s basically a bit above the normal trend, which ends up creating a sensational comparison. I can picture it now, “Dude, the median days on market grew by 428%.” Okay, technically true, but very sensational.

IT’S GETTING TIGHT (ESPECIALLY AT THE BOTTOM HALF)

In January and February there were about 2,000 fewer new listings compared to last year (and 2,500 from the pre-pandemic normal). In short, the market is starting to feel tight because we’ve seen sellers sitting out to a greater extent these past few months. Here’s a look at listings and sales to give some clues into what competition feels like at various price ranges. It’s true that we don’t need a huge amount of supply to see the market decline, but having anemic new listings certainly makes things more competitive. Imagine what the market would feel like right now with 2,000 more active listings…

MULTIPLE OFFERS ARE GROWING

It’s not a shocker to see more multiple offers in both recent sales and current pendings. It’s still nowhere close to the same level of competition in early 2022 though. Do you see that uptick lately? That’s what early spring should look like. Remember, it’s normal to see multiple offers, but not normal to see the freakish levels from 2021 and 2022.

BUYERS ARE GETTING CONCESSIONS:

49% of transactions in Sacramento County last month had some form of a concession to the buyer (credit for repairs, credit for closing costs, rate buydowns, etc…). Placer County was more like 43%. This is good news for buyers, and it also speaks to sellers doing a better job listening.

DON’T GET CARRIED AWAY WITH A HOT NARRATIVE:

There are many metrics that show the market is heating up for the spring, but the trend right now is nothing like 2021 or 2022. In short, whenever someone says, “It’s 2021 all over again,” a puppy dies. Okay, that’s probably not true, but all I’m saying is statistically speaking it’s not 2021.

BUT SERIOUSLY, PROPERTIES ARE STARTING TO GO QUICKLY:

Half the pendings over the past two weeks went in fifteen days or fewer. These stats will eventually show up in closed sales in March and April.

IT’S ALL ABOUT THE FIRST WEEK

Properties that sold above their original list price tended to get bid up during the first week. Not a huge shocker. Of course, some properties are being priced too low to generate interest, so don’t think of this as buyers paying 10% over market value. Nope. But if you price 10% too low, you’ll likely get bid up. By the way, whenever I hear about properties with 15 offers, the price is almost always somewhere around $450,000 (and likely priced low).

BRO, REDUCE THE PRICE ALREADY

The market isn’t so overpriced like it was during the fall, but there is still a need for price reductions. Here’s a look at price drops among recent pending contracts. This is proof price reductions work. The real takeaway is to see a good chunk of price drops below $500,000. While this is an incredibly hot price range, it’s also proof buyers won’t pay any amount.

Okay, I’ve said enough. Probably too much. A few last recap images for anyone interested.

MARKET RECAP VISUALS

Year-over-year stats don’t tell the full story of the market right now. Someone might say, “No biggie, we’re down 8% from last year.” That’s technically true, but it fails to recognize that eight percent from one year ago is NOT the same thing as eight percent from the height of spring in 2022.

YEAR-OVER-YEAR

MONTH-TO-MONTH

OTHER VISUALS:

I hope this was helpful.

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

Questions: What are you seeing right now in the trenches of escrow? I’d love to hear your take.

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

The housing market is heating up & still frozen

February 21, 2023 By Ryan Lundquist 40 Comments

The housing market is definitely heating up for the spring, but it still feels frozen with so many buyers and sellers sitting right now. I recently talked about sellers sitting out of the market, but today let’s look at buyers.

UPCOMING (PUBLIC) SPEAKING GIGS:
3/06/23 Matt the Mortgage Guy YouTube Live 3pm PST
3/09/23 Matt Gouge Event (sign up here)
3/10/23 PCAR Market Update Lunch & Learn
3/28/23 Downtown Regional MLS meeting
4/1/23 NAA Conference in Sacramento
4/13/23 Realtist Meeting
5/4/23 Event with UWL TBA

GOOD & BAD TIMES IN REAL ESTATE DON’T LAST

Last week I had lunch with a real estate broker who’s been in the business a long time. He said the good times never last. And neither do the bad times. I just wanted to remind everyone of this truth. I loved the way he put that.

14 YEARS OF BLOGGING

My blog turned 14 years old yesterday. It’s been a fun ride, and I’m so grateful for all the relationships that have been built. Here’s to lots of conversations ahead and getting through these awkward teen years.

HELLO SPRING VOLUME

The housing market is clearly heating up for the spring. The black line below represents 2023 weekly closed sales, and we’re starting to see an uptick for the spring season. It’s a normal trend for the time of year to see volume increase, so this line should keep moving up even though it’s still clearly down from previous years (which reminds us the market also feels frozen).

MISSING & HAPPENING

When looking at the past 60 days of closed sales compared to last year, we’re missing 42% of volume this year. It’s easy to say we’re seeing fewer sales because of fewer listings, but this is about affordability rather than not enough listings (even though new listings have been down). For friends who work in real estate, I suggest dwelling on the part of the market that IS happening. I recommend obsessing over every escrow to understand who is buying and selling in today’s market (clues for how to focus business).

Okay, 2021 did have more sales, so let’s look at the pre-pandemic average too. This makes a slight difference in the stats, but really nothing major.

SELLERS & BUYERS

Sellers, the pool of buyers shopping today is still much smaller than normal, which means it’s critical to price correctly and negotiate as needed. Don’t walk into the room like you have all the power because buyers are sensitive to paying the right price, and we’re not seeing rampant overpaying like we did in 2021 (even though some properties are getting bid up). And buyers, be patient, be comfortable with the mortgage payment, recognize competition isn’t dead, and get all the market will give you.

PENDINGS DID THE LIMBO DURING JANUARY

2023 started with low pendings, but that’s not a shocker since it’s been the trend for many months. So far, the story is the same in February with subdued pendings, though the number of pendings is picking up for the spring as the market heats up. The hope is to see pending volume tick up more substantially as affordability improves, but that’s tough with rates shooting up lately. For weekly pendings, check out Redfin data.

BUYERS HAVE BEEN SITTING SINCE THE SHIFT

January 2023 is obviously lower than the start of any other year, but check out the black line (2022). Pending contracts have been tapering since the market changed last year, so we have a clear trend of buyers holding tight. The reality is the graph for new listings looks just the same, so we have a chunk of both buyers and sellers sitting right now.

CLOSING THOUGHTS:

We’re seeing the seasonal market heat up right now, but the market still feels a bit frozen since we’ve been missing about 40% of buyers. The bottom line is we need affordability to improve to get back to normal levels. I feel like a broken record saying this, but it’s true.

I hope this was helpful.

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

Questions: What is it going to take to see more buyers? What are you seeing right now in the listings and pendings? I’d love to hear your take.

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

Ryan Lundquist

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