The housing market feels like a reality TV show. New sensational drama every week, juicy gossip, strong opinions, emotions, and big cliffhangers that might affect the future. Anyway, today I want to dig into Dream For All and some of the bigger themes right now (monthly recap stats at the bottom).
Scroll by topic or digest slowly.
UPCOMING (PUBLIC) SPEAKING GIGS:
4/12/23 Q&A at Moksa Barrel House
4/13/23 Realtist Meeting 11:30am
5/4/23 Housing Market Q&A 12-2pm
5/10/23 Empire Home Loans event TBA
5/18/23 SAFE Credit Union event TBA
5/22/23 Yolo YPN event TBA
6/1/23 Event TBA
7/20/23 SAR Market Update (in-person & livestream)
DREAM FOR ALL PROGRAM RUNS OUT OF MONEY
The California Dream For All loan program (aka Dream For Some) ran out of money in less than two weeks. Nobody expected $300M in California to last long, but less than two weeks was unexpected, and this helps show there is a tremendous hunger for homeownership. So far, it’s not just one thing I’m hearing from loan officers and agents. Some buyers who didn’t get the loan are still out there, some have backed out, some are waiting for rates to come down, some are stepping back and saving more money, some are planning to target a lower price, and some are investigating other loan programs. I’d love to hear your story in the comments. By the way, I spoke to Channel 3 last night about this program.
GETTING RIDICULOUS UNDER $500K
Check out what’s happening under $500K in the region. It was already tight before Dream For All went into effect, but the loan program made things even more aggressive. Beyond the loan program, part of the issue here is more buyers shopping at lower prices because that’s what they can afford. And not that any governmental officials are reading this, but it’s going to be important ahead to consider how you might unlock supply instead of just increase demand.
Here are listings and pendings under $600K. Can you see why it’s so competitive in these ranges?
HOUSTON, WE HAVE A SUPPLY PROBLEM
As I said last week, the housing market was an ice bath in the fall of 2022, but now it feels like a bloodbath with the level of competition. I was expecting the market to heat up for the spring, but seeing 45% fewer new listings so far in 2023 in the Sacramento region has changed the trend. All that said, having low supply doesn’t mean prices will now go up forever. The market is going to figure this out. How do we deal with a lack of affordability in the midst of an extreme shortage of listings? Time will tell.
And a look at all price ranges. Actives vs pendings.
40-YEAR MORTGAGE FACT CHECK
There have been some viral social media posts about FHA now allowing a forty-year mortgage, but that is NOT true. FHA is only allowing a 40-year mortgage for a loan modification. I’m not saying that’s a good idea, but details and narratives matter. Some think this could open the door to a 40-year mortgage, and that’s fine to talk about. But let’s not perpetuate fake news.
CONCESSIONS ARE ELEVATED (BUT SLIGHTLY LOWER)
Sellers giving concessions is still elevated from what we saw over the past two years, but we’ve seen a dip during the spring season as inventory has been depleted in recent months. It’s important to recognize the market temperature has changed lately, but so many buyers are still in a place where they need some help. Sellers, did you hear that? My advice to buyers is to get as much as the market will give you, and be realistic about what it’s going to take to get an offer accepted today. Don’t forget to target overpriced listings also.
IT’S TAKING LESS TIME TO SELL (NORMAL)
As spring heats up, it’s normal to see a shift in days on market. It’s basically been taking about two weeks longer to sell than the pre-pandemic normal. Look at how lopsided things got in 2021 and 2022 though. It shouldn’t have only taken an average of two weeks total to sell, but that’s what happens when injecting a steroid of sub-3% rates into the marketplace.
TWO THOUSAND FEWER SALES
The market has felt ultra-competitive, but we are still seeing lower volume due to affordability. There were about two thousand fewer sales this past quarter compared to last year at the same time. Here’s a way to look at it with 2023 in black and 2022 in blue. We’ve seen a hit to nearly every price range, so all ships rise and fall with the tide. Basically, as prices have gone down, there are now more buyers shopping at lower price points. This is why we’re seeing the lower categories doing better. It’s as if the entire market was pushed to the left on this bar chart. Oh, and on the positive side, there were more than 3,500 sales that did happen. Sometimes the housing narrative only focuses on the part of the market that is missing, but there are still deals happening.
Here’s a different way to look at the trend. Keep in mind it gets a little weird when we look at percentages at the very highest prices since there aren’t that many sales. I really think we need to look at both of these graphs at the same time to help understand the trend.
DISTRESSED SALES HAVE INCREASED SLIGHTLY
Distressed sales showed an uptick over the past quarter, and they were about 1% of all sales in Sacramento County. This is a very minor increase, so it’s important to not blow 1% out of proportion. However, we should continue to see more distressed sales ahead, but nothing like early 2009 when 84% of all sales were distressed in the county.
REDFIN IS GONE AS AN iBUYER
Redfin is officially gone as an iBuyer in the Sacramento region. In November they announced an exit, but their last property has now officially sold. After months of truly brutal losses, they actually did well on the last unit. It was acquired for $480,000 in December 2022 and sold for $630,000 in April 2023 after paint and flooring was added. By the way, Opendoor owns 75 units right now. In recent years Opendoor has typically owned about 300 to 330 units in the Sacramento region, so they’ve really cut back.
SELLING 3% BELOW THE ASKING PRICE
It’s normal during the spring to see properties sell closer to their list price, and that’s what we’re seeing right now. On average homes sold about 3% below their original list price. Keep in mind this is the average, and there are individual properties that sold way above asking and many that sold way below. Backing up though, 97% is actually a pretty normal number for March.
MULTIPLE OFFERS ARE GETTING LOPSIDED
We’re not seeing 2021 and 2022 levels of multiple offers, but it’s been elevated lately. The percentage of multiple offers for March 2023 was slightly higher than the pre-pandemic average, but current pendings after March look like they will go further beyond the seasonal norm (see dotted line). As I keep saying, the market hit an inflection point around mid-March where we started to see a higher-than-normal percentage of multiple offers. My sense is supply began to be so depleted that low demand finally met low supply, and it created intense competition.
SEEING THE TREES & THE FOREST
This visual is a hot mess, but I like seeing every single sale and how it sold compared to the original list price. This is a good reminder that not everything is selling above asking price too. Ultimately, when hearing about sensational examples, we need to be careful to not isolate one example (a tree), and say it represents the entire market (forest). Maybe. Maybe not.
58% SOLD BELOW THE ORIGINAL LIST PRICE
The majority of homes in March sold below the original list price. Over the next couple of months, we should see this percentage continue to go down – especially in light of the market temperature changing. For now, the total percentage of homes selling below the original price in 2023 (black line) has been above the normal trend (red line).
31% SOLD ABOVE THE ASKING PRICE
I know these visuals are a bit chaotic, but the goal is to understand what normal looks like (red line) compared to other recent years. This year is getting closer to the normal trend, and we’ll see what happens in coming months as the market has been heating up. Part of it depends on pricing of course too. If we start to see lower pricing as a norm, that could change the numbers.
Okay, I’ve said more than enough. Now some recap visuals.
I hope this was helpful.
Questions: What are you seeing right now in the trenches of escrow? I’d love to hear your take.