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.
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.