Sacramento Real Estate Appraiser

How close is the housing market to normal?

October 12, 2021 By Ryan Lundquist 17 Comments

The housing market is trying to get back to normal, but how close are we? On one hand we’re feeling some seasonal slowing, but it also still feels really competitive. Today let’s talk about what normal looks like. If you’re not local I’d love to hear what you’re seeing in your market. Any thoughts?

Background noise: Last night I did a YouTube Live Q&A to talk about appraisal stuff. If you need some background noise, here’s two hours. Watch below (or here). I love doing stuff like this, so don’t forget to hit me up.

What does normal look like?

Comparing to 2019: The last normal-ish fall season we had was in 2019, so it’s a good frame of reference to consider what fall should maybe look like. Technically I should take the average of five years of fall data to establish normal, but I’m honestly just slammed this week and I can’t pull that off until someone hires me full-time to crunch numbers all day.

How does 2021 compare? In short, the market right now is showing some seasonal slowing, but it’s still far more competitive than it should be for the time of year. Check out some of these stats.

Brand new visual (do you like this one?):

Breaking it down: Today we have more multiple offers, properties are selling in half as much time, and we even have fewer price reductions. Most notably buyers last month paid above the list price whereas two years ago on average they paid about three percent below the list price. This is striking because in 2019 in a normal-ish September buyers on average paid $13,808 below the original list price, but this past month buyers still paid almost $6,000 over asking price. Another way to say this is buyers today paid about $20,000 more than a normal year in 2019 (13,808 + 5,951 = 19,759).

30% more aggressive? If I had to put a number on it I’d say the market is conservatively 30% more aggressive than it was in 2019 (maybe even more as some stats are still about twice as aggressive as they should be). For reference, stats for price reductions especially show this as there are 31% fewer reductions right now compared to two years ago. Check out Altos Research for price reductions.

Anyway, I hope that was helpful.

—–——– BIG MARKET UPDATE FOR THOSE INTERESTED ———––

Skim or digest slowly.

QUICK SUMMARY:

The market is experiencing seasonal slowing and it’s clearly not what it was at the height of spring season. This is important for sellers to understand to price according to today’s trend instead of headlines from the past. With that said, things are still really competitive and mostly all stats are not normal yet (still more aggressive than usual). On one hand buyers have gained power, but it’s still fierce out there. Here’s a good way to put it: “The market is not slow, but it’s slower than it was.”

Some visuals eh…

NOT AS MANY MULTIPLE OFFERS:

For five months in a row in the region we’ve seen multiple offers subside. Last month 56% of sales had more than one offer and that’s one of the most competitive months ever, but there is no mistaking a cooling seasonal trend.

AUGUST TO SEPTEMBER SEES SOFTENING:

For months I’ve been talking about the market starting to slow and we are finally starting to see it in the stats. Not every single stat is dull, so my advice is to look at the bigger picture of all stats together rather than hone in one stat. In short, it’s starting to take longer to sell, we have slightly more inventory in the region, and even prices have softened (part of that has to do with smaller homes selling).

LAST YEAR VS THIS YEAR:

Year over year comparisons get a little weird these days because the market was so atypical last year, but in my opinion this is still worth digesting since we want to be good students of the market. I suggest taking these percentages with a grain of salt and recognize these percentages DO NOT actually mean every house is worth that much more either. Also, remember that we are now comparing a market that is trying to be normal today with a super aggressive fall last year.

IT’S LESS COMPETITIVE:

The market is still ultra-competitive, but this image is crystal clear that the temperature of the market has changed in recent months. This is exactly what we should be seeing at this time of year. Keep in mind we should have closer to half of sales selling at or below the list price, so this market is NOT normal yet.

OTHER VISUALS:

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 housing market is trying to get back to normal

September 9, 2021 By Ryan Lundquist 24 Comments

Normal? That’s not a word we’ve used much to describe the housing market lately, but we are finally starting to see some normalcy. Many parts of the country are showing what looks to be normal seasonal slowing and that is a sight for sore eyes. Anyway, let’s talk about this and then I have lots of local stats.

The normal that should be happening: The market right now should be slowing for the season. That’s what normally happens and it’s what we are seeing in so many areas of the country too.

Sorta kinda normal: When a market cools for the season we tend to see some of the signs in the image below to one degree or another. Even though we are beginning to see many of these things show up in the market, we really cannot say the market is fully normal yet because supply and demand are still too imbalanced. But any hint of normalcy lately is actually a really good thing. Imagine the chaos of seeing another year like last year where the market just kept going up through the fall. That is exactly what we don’t want to see.

Anyway, which signs are you seeing or not seeing in your area?

Now let’s talk about slowing.

I’ve had a number of emails lately critiquing my use of the word “slowing,” so I wanted to talk about this openly. I hope that’s cool. If this isn’t your thing, just scroll down. By the way, I’m always good with constructive critique too.

Bro, don’t say slowing: Over the past few months the market has slowed. Or wait, it cooled. No, the temperature changed. I mean, it’s normalizing. Uh, it’s actually stabilizing. Thankfully there isn’t just one way to describe things. I’ve been talking about a seasonal slowing for months because that’s the story the stats are telling. But the word “slowing” almost seems offensive to some, so let’s talk about that.

The market isn’t fragile: The housing market is big and I feel like it’s splitting hairs to argue about whether we should use the word slowing, normalizing, or cooling. Here’s the thing. Use whatever word you feel best represents the market, but it’s probably going to take a few key phrases to do the trick. No matter what, recognize the market is NOT fragile (“fra-gee-lay“) and it doesn’t need you or me to protect it with glowing words. Look, I can think positive thoughts all day long about cryptocurrency, but that doesn’t change the value of bitcoin. In terms of housing, the market is dynamic, multi-layered, complex, and there is no such thing as jinxing the trend by using less-than-glowing words.

Moving fast & slowing: If you aren’t down with the word slowing, that’s fine, but in my mind it’s a reasonable way to describe the market. But to say slowing alone isn’t perfect either as I keep saying because the market is doing two things. It’s moving really fast. And it’s slowing for the season.

Okay, I won’t talk about this again for a while.

My commitment: I will never spin data or sugarcoat things to sound better or worse than they are. My goal is to be neutral while presenting analysis based on the numbers. I’ll come up with helpful word pictures to describe the market too (and sometimes crazy comparisons).

Respectfully,

Ryan

Any thoughts?

—–——– STATS SHOWING SOME NORMALCY ———––

Skim or digest slowly.

THE SHORTER VERSION:

The market is still moving faster than it should be for the time of year and stats are still just about at all-time high levels, but the market is hands-down cooler than it was a few months ago. That’s the story stats are telling and it’s absolutely what I’m hearing from the trenches of escrows. “The market is not slow, but it’s slower than it was” sums it up perfectly.

Overall it’s starting to take a little longer to sell, there were fewer multiple offers last month, and prices dipped from their peak in June. But overall stats from July to August were pretty flat, so if someone said the market felt a bit horizontal, I wouldn’t bat an eye. Of course we do expect some renewed attention on the market as the kids get back to school, so stay tuned for that.

One quick thing. I’m watching cash purchases and while we still don’t have much cash in the market, there has been a noticeable uptick these past two quarters.

Some visuals eh…

NOT AS MANY MULTIPLE OFFERS:

For four months in a row in the region we’ve seen multiple offers subside. Last month 62% of sales had more than one offer and that’s one of the most competitive months ever, but there is no mistaking a cooling seasonal trend too.

IT’S LESS COMPETITIVE:

The market is still ultra-competitive, but this image is crystal clear that the temperature of the market has changed in recent months. Even though prices were flat from July to August, this visual shows clear slowing from a few months ago. This is exactly what we should be seeing at this time of year. But here’s the thing. We should easily have half or more of sales selling at or below the list price, so this market is NOT normal yet.

This visual below is striking because it shows definitive change. A few months back I started to point out this change and it was incredibly minor then. I know at times it’s easy to scrutinize mentioning small changes and some people even get bent out of shape, but sometimes small changes are the beginning of a trend. That is EXACTLY why we pay attention to the small stuff (while not getting sensational).

PRICES PEAKED IN JUNE:

These visuals help show prices look to have hit their seasonal peak in June. This is pretty normal and historically August is sometimes lower than July and sometimes about the same.

VOLUME IS SLIDING (NORMAL):

The number of sales peaked in June and now we’re seeing fewer sales happening. This is exactly what should be taking place. The red line represents 2021 and it’s very consistent with the green line (which is the market average).

INVENTORY IS UP SLIGHTLY:

Monthly housing supply is still sparse, but it’s up from a few months back. It actually declined slightly from July to August in most local counties. Ultimately supply is still SO LOW. But isn’t it amazing how with even this slight uptick lately we feel a difference in the market?

IT’S TAKING LONGER TO SELL:

It took a few days longer to sell last month in Sacramento County, which is what we should be seeing at this time of year. Properties are still selling about as fast as they ever have, but clearly we’ve seen a softer trend over the past few months compared to the intensity of spring.

HOW PRICES ARE DISTRIBUTED (NEW IMAGE):

This visual shows how prices are distributed throughout the market. In other words, about 10% of homes last month sold between $300-400K (just to give a clue on how to read this one). This is a new visual. Do you dig it?

SMALLER HOMES ARE SELLING (HUGE POINT TO WATCH):

It’s normal around this time of year to start to see the types of homes selling change. We tend to see the largest homes in the market sell during the height of spring and then smaller homes for the rest of the year. There was actually a huge spike of larger homes selling during the first year of the pandemic, so it’s going to be interesting and important to watch how this trend unfolds. Keep in mind some of the massive price increases over the past year has to do with a focus on larger homes.

LAST YEAR VS THIS YEAR:

JULY TO AUGUST FEELS A BIT HORIZONTAL:

The market was somewhat flat month to month. Nothing too sensational. Keep in mind some of the smaller counties have fewer stats, so the numbers bounce around each month. This is why I would suggest giving strong weight to Sacramento County and the region as a whole to decipher the bigger trend in the market.

ONE LAST VISUAL:

Price per square foot as a metric has yet to soften. I think it’s going to take a little longer for that because smaller homes have been selling these past few months and since smaller homes tend to have a higher price per sq ft, it only means this metric is going to be a bit more inflated.

Anyway, this is getting too long…

Do you see what I mean about the market trying to get back to normal? What a different vibe from last year.

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 do you think about my take on the market not being fragile?

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

The players in the market & normal pendings

February 12, 2019 By Ryan Lundquist 17 Comments

Who are the players in the market? Who is buying and selling? Who is coming? Who is going? These are questions we have to ask to grasp a local market. And for real estate professionals, knowing who the players are helps us serve clients well and sometimes even make future business plans.

Well, let’s talk about a new player in town called Opendoor. This company is trying to gain a foothold in about 20 markets across the country right now. If you’re not local, are they in your area?

Opendoor posted up in Sacramento last year and they’ve begun to make a splash. They’re not dominating the market by any stretch, but in the region over the past few months they bought over 90 homes. I don’t fully understand the fine print of their business model yet, but in a nutshell they buy from owners privately and then put these homes back on the market to sell to the public. In fact, mostly all of their private purchases are currently re-listed on our local MLS. Opendoor also has an affiliation with Lennar – a local builder.

My real estate antennas: Any time I see a group buying a larger amount of homes, I pay attention. In the past I talked heavily about Blackstone, and in the future I’ll discuss other players whether they’re making a splash or shaping the market (like Blackstone did). Any stories or thoughts?

Now for those interested, let’s talk about the market – especially pendings.

I hope this was interesting or helpful.

—–——– Big local monthly market update (long on purpose) —–——–

The market slumped during the second half of 2018, and now it’s an interesting spot. Let’s talk about it.

THE SHORT VERSION:

Pendings were normal for January
Sales volume has slumped for 8 months in a row
Prices are barely up from last year
Most metrics softened as expected for January
The market is starting to wake up for the spring
This post is long on purpose. Skim or pour a cup of coffee.

DOWNLOAD 70+ graphs: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

THE LONGER VERSION:

Here’s some of the bigger topics to consider right now.

We need time: We don’t have a totally clear picture for where the market is going yet in 2019. We still need more time. Here is what I am specifically looking for in the stats over these next few months.

Normal pendings: It’s big news that pending sales were normal this past month compared to last January. We’ve had a slump in sales volume for eight months, so what does this mean? Well, it could be the market trying to find some normalcy after two quarters of sluggishness. Though the real cause very likely stems from mortgage rates recently declining. It’s amazing how that can affect buyers and even sales volume. Remember, pendings in January will likely close in February and especially March. So if we start to see a normal level of pendings in January and February, we may see sales volume show normalcy for the time being.

Yeah, most metrics softened: We saw the typical signs we’d expect to see at this time of year with most metrics. It look longer to sell last month, prices dipped, inventory increased, and sales volume sloughed. Though overall the softening in most metrics felt way more pronounced.

Low rates are steroids: Mortgage rates declined and that’s seeming to draw some buyers back into the market. Low rates are like steroids for demand – at least temporarily.

More listings this year: There’s more listings this year compared to last year at the same time. In fact, it’s been about five years since we’ve started the year with this much housing supply.

Waking up: I’m hearing from many agents about more buyer attention on their listings lately. More traffic at open houses. More offers. It’s still to be determined what this spring market will look like exactly, but for now the spring season is starting to move.

Not seeing aggressive price gains: The rate of price change has slowed. What I mean is in years past we’d see 7-10% price increases when running stats, but now we’re seeing modest 2-3% year-over-year price gains.

In case you need slumping trivia to impress friends: Last month we saw the worst sales volume in 11 years for a January. We’ve had eight months in a row of year-over-year sales volume declines. That’s a dismal stat and there’s no sugar-coating it. If this trend doesn’t change we’re going to have a much different market. Yet this is why seeing normal pendings for January is a big deal because today’s level of pendings could presumably show a normal number of sales in a couple of months when these properties close.

The Tallest Graph in Sacramento: Here’s a look at over 60,000 single family detached sales in Sacramento County. This graph is inspired by Jonathan Miller.

Less offers: Here’s an interesting way to see the market has slowed. Multiple offers are down about 11% this year.

More concessions in new construction: Lots of builders are offering credits and concessions to help get their deals done lately. This is a symptom of a slower market. It seems more sellers are also offering concessions and credits too. Buyers, don’t be afraid to negotiate with sellers since the market has slowed, but at the same time don’t think you are driving the market either. Keep your perception of power in check. And sellers, talk with your agent about whether credits or concessions might need to be an option on the table.

Final thought before the graphs: In closing, the market is in an interesting spot. It feels like it’s juggling uncertainty from last year with a striving for normalcy today. We only have one month of data and we need to keep watching to see how this market is going to emerge.

I could write more, but let’s get visual instead.

BIG ISSUES TO WATCH:

1) SLOWING MOMENTUM: The stats show the market is slowing down when we look at the rate of change by year. Looking at monthly, quarterly, and annual numbers helps give a balanced view of things.

2) SALES VOLUME SLUMP: It’s important to look at sales volume in a few ways to get the bigger picture. Here it is by month and year.

SACRAMENTO COUNTY:

Key Stats:

January volume down 21.5%
Volume is down 4.7% over the past 12 months

SACRAMENTO REGION:

Key Stats:

January volume down 17.7%
Volume is down 5.8% over the past 12 months

PLACER COUNTY:

Key Stats:

January volume down 10.9%
Volume is down 7.7% over the past 12 months

3) LAST YEAR VS THIS YEAR: Here’s a comparison of last year compared to the same time this year. What do you see?

NOTE: Placer County had very few sales this January, so I wouldn’t put much weight on the price figures for this month.

SACRAMENTO COUNTY (more graphs here):

SACRAMENTO REGION (more graphs here):

PLACER COUNTY (more graphs here):

I hope that was helpful.

DOWNLOAD 70+ graphs: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

BLOG BASH: Just a reminder I’m hosting a blog party on March 2nd from 3-7pm. You’re invited to celebrate my blog’s 10th birthday. I know, that sounds a little cheesy. But I’ll be buying the first 100 beers… Details here.

Questions: Any stories to share about who is playing the market right now? What are you experiencing right now in the trenches with buyers and sellers?

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Seeing the market while driving, crunching numbers, & eating tacos

April 13, 2018 By Ryan Lundquist 13 Comments

It’s not just about numbers. Look, I geek out over stats, but sometimes all we need to do is drive around town or have a few conversations to see the market. Today I wanted to share some trends I’m seeing by sharing photos I’ve taken recently. Then for those interested we’ll get into the numbers in my big monthly market update below. Anyway, let’s take a drive.

The rage of modern homes: Modern units like this are popping up in Sacramento in places that are typically close to Downtown. This small development is located in Midtown.

Flipping seminars: I’ve seen this guy on late-night TV promising to teach people how to flip homes. The problem? The market isn’t actually that great for flipping in Sacramento right now. Read about celebrity flipping seminars here.

The Prince tree: A local artist in Citrus Heights paid tribute to Prince in her front yard. I know something like this would not fly in an HOA community, but it reminds us there is maybe some room for creative expression in real estate.

Marijuana homes getting busted: There was a big raid last week where federal agents targeted 75 homes in the Sacramento region that were suspected to be “grow houses”. Remember, recreational cannabis is legal in California, but it’s never legal to have a commercial grow operation in a residential property. Anyway, I came across a different article in the SacBee that listed nine addresses of previous grow houses (golden data for appraisers).

Tearing down the neighborhood: A ranch house in Arden Park was purchased for $462,000 and torn down to build a custom home (currently pending close to $1.3M). This doesn’t happen in every neighborhood, so I’m always asking questions: What is being built? Who is buying? What is being flipped? Where is the bottom of the price market? Where is the top?

Neighborhoods that are changing: This is a colorful six-unit modern project in Oak Park off 2nd Avenue. Modern units like this are starting to pop up – especially around The Broadway Triangle.

Here’s a modern project under construction on 1st Avenue in Oak Park.

The word on the street (while eating tacos): Every few months or so I get together with a group of real estate friends to eat at Chandos (my fav taco joint). It’s not like we gather to have exclusive rigid market talk, but I always leave with some insight because our taco club has investors, a loan officer, and a Realtor / flipper. I find understanding a market is about crunching numbers, but it’s also about the word on the street. This is why I regularly ask people, “What are you seeing out there?”

I hope that was interesting or helpful. Anything to add?

And now for anyone interested in the numbers….

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

Spring is definitely here. Well, the market has been alive for a couple of months, but we’re now really starting to see it in the stats. The median price rose about 4% in the region last month and it’s up 9% from last year. Overall we’re seeing all the normal signs of a spring market in that it took 7 less days to sell last month, more listings are hitting the market, and sales volume is increasing for the season. Housing inventory is up slightly in the region from where it was last year and so is sales volume (though volume is down 1.5% in Sacramento County).

New recap images: I spend so much time putting together graphs, but I’ve struggled to figure out a way to quickly sum things up. Anyway, here’s a stab at a summary. Do you like these? Anything you’d change? Feedback is welcome.

A few quick things:

Not much cash actually: It’s easy to believe cash is dominating – especially from the Bay Area, but it’s really not (did you hear that sellers?). Cash sales were 15% of all sales last month in the region and in Sacramento County we actually have about 3% less cash this year so far.

Oh dang… the median price: If you didn’t know, the median price is now 6.9% lower than when the “bubble” burst in Sacramento County in 2005. I tend to see jaws drop when sharing this stat, but here are some things to keep in mind about bubble conversations. Remember, there is no formula that says our market will “pop” if we go 6.9% higher, so it’s important to not get too stuck on the previous peak. Today’s market certainly has an inflated feel, but it’s also being driven by different factors than 2005 too, so it’s not a perfect comparison to always look back to 2005. Anyway, let’s not get too side tracked, but navigating this conversation will be key in coming time for real estate professionals, and I’ve heard some sellers wanting to list too in light of how high prices are.

Zillow is going to sell homes: Yesterday HousingWire reported Zillow is going to be selling homes. There was suspicion this would happen, but The Big Z always denied it. Well, the cat’s out of the bag and I’m wondering how this will unfold. I’m also wondering if they’re going to try to chop agent fees. Let’s talk about this more as things develop. On a side note, will we have to watch listings and sales on Zillow in addition to MLS?

I could write more, but let’s get visual instead.

DOWNLOAD 61 graphs HERE: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

SACRAMENTO COUNTY (more graphs here):