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Has the housing market peaked for the spring?

May 14, 2024 By Ryan Lundquist 4 Comments

Has the spring market peaked? There is a good chance it has. Let’s talk about that today. This post is designed to skim by topic or digest slowly.

UPCOMING SPEAKING GIGS:
5/15/24 KW Roseville Event (open to real estate pros)
6/5/24 Marketing Mastermind (register here)
6/6/24 Golden 1 Credit Union (details TBA)
6/11/24 Elk Grove Regional MLS Meeting 8:30am
6/13/24 Sacramento Realtist Association (details TBA here)
6/21/24 Exporting data from MLS (details TBA)
7/11/24 Women Investor Event Q&A 6pm (details TBA)
9/17/24 Downtown Regional MLS Meeting Q&A 9am
9/20/24 How to Think Like an Appraiser class (details TBA)
10/18/24 Prime Real Estate (private)
10/29/24 Orangevale MLS Meeting

THE NARRATIVE VS THE MARKET

At times, there is a disconnect between what people are saying about the housing market online and the actual market. Look, peaking for the spring should help more buyers, but we don’t have a slow market right now in Sacramento either. The good stuff especially goes very quickly.

HAS THE SPRING SEASON PEAKED?

I think so. It looks like the local market has seen a peak for the spring season. This doesn’t mean the market is dull, so save your hate mail, but the temperature has changed as we’re starting to see less competition from the height of the spring season in April. I’m noticing a difference in the percentage of properties getting multiple offers (yes, our MLS tracks this). This might sound like an obscure stat, but I have to say it’s a fantastic leading indicator for the market. Every year, this is one of the ways I see the market changing before we see the trend in closed sales 30 to 60 days down the road.

QUICK UNSOLICITED ADVICE:

Listen to the market. Every year we see the housing temperature change, but my sense is some people struggle to talk about it. Look, my family has started to use the air conditioner. Do you know why? Because the weather has changed. Well, in real estate, it’s the same dynamic where buyers, sellers, and real estate professionals need to be in tune with the housing temperature. So, price it right, adjust the price if the market requires, and keep watching the stats closely.

WATCH FOR A PEAK IN PRICES

The median price typically peaks in June, so let’s be on the lookout for a seasonal peak. Prices have felt a little flat in some counties lately, so it’ll be interesting to see what stats in May and June show. I do wonder if prices have peaked a little earlier, but only time will tell. My advice? Know what normal looks like so you can build expectations and spot anything abnormal. Knowing the seasonal rhythm well is a hallmark of real estate expertise.

WATCH FOR A PEAK IN VOLUME

Volume for closed sales typically peaks in June each year. This reminds us the height of pending contracts is around May, and these properties close in June.

BRO, TELL US MORE ABOUT MULTIPLE OFFERS

Here’s more context with multiple offers. If May continues to hold around the current level, then May will be the peak of competition this year. This is very normal since the peak is typically April or May each year. Remember, the pendings of today become the sales of tomorrow, so June closed sales should start to dip lower. In other words, market competition has changed.

CONDOS AREN’T AS HOT AS DETACHED UNITS

New construction is hot. Upgraded homes are hot. And condos are…. not as hot. Single family detached volume is up 5% from one year ago, but condo volume is down 5%. In short, we have a little condo slump on our hands.

HOA FEES STAND OUT IN A BAD WAY

This weekend I had quite a few conversations about why condo volume could be down. It could be a few things. Insurance woes. Attached living with a tiny yard isn’t as appealing right now at current prices. But most of all, that HOA fee on top of the cost to afford is glaring. This graph is a HOT MESS, but I wanted to share what it looks like to have 36,000+ dots on one visual. Haha. This shows condo HOA fees in Sacramento County since 1998. I have some further research with specific HOA communities overlapped. I’m happy to push that out if there is demand. Let me know.

A SPRING MARKET RECAP:

Here are some visuals to help show what’s been happening this spring in the Sacramento region. I’ve included topics and county stats.

VOLUME IS UP FROM ONE YEAR AGO:

It’s good news to see more sales this year. We are just still so low, and I think real estate professionals have been feeling this reality. Remember, last year was the worst year of volume on record in many decades.

NEW LISTINGS & PENDINGS ARE UP FROM LAST YEAR:

Sellers and buyers aren’t quite as frozen as last year. We are still missing about 33% of the market from the pre-2020 normal, but more is what we want to see.

INVENTORY IS UP FROM LAST YEAR, BUT STILL LOW

When we look at the months of supply, we’ve seen an uptick from last year, but it’s still quite low (and so much lower than 2007). Let’s continue to watch the number of active listings. And let’s watch some red flags as I talked about last week (unemployment, credit card debt, etc…)

WHERE IS THE MARKET HAPPENING?

Here’s a way to see how prices are dispersed throughout the region. The highest prices often get the most attention, but the bulk of the market isn’t happening above $1.5M.

Here’s another way to look at volume. Remember, prices went up last year, which helps explain why the black bars have essentially moved up this year compared to the price bucket last year.

CLOSER TO NORMAL, BUT STILL MORE COMPETITIVE

The green line represents 2024, and it’s still more competitive than the red line (pre-2020 avg). Ultimately, we are so much closer to normal so to speak, and we are very far from the 2021 trend (some people need to hear that).

MODEST PRICE UPTICK. NOTHING CRAZY:

Whether we look at the median or average sales price, we’ve seen a modest price uptick (see red line). We’ve been getting closer to the peak of prices in mid-2022, but not quite there. I’m eager to see the comparison when May stats are fully available since May 2022 marked the price peak.

OTHER VISUALS:

A few more visuals. I know, there are way too many already.

YEAR-OVER-YEAR RECAP

Some annual recap visuals. Please note smaller counties have been lumped together in sixty-day chunks. The goal is to try to tell the story in smaller areas since monthly data is too erratic. I’m experimenting, and I welcome your feedback. Thanks.

MONTH TO MONTH RECAP:

Questions: Do you think the spring market has peaked? What’s going on with condos? Anything to add? What did I miss?

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Some red flags for the housing market

May 2, 2024 By Ryan Lundquist 19 Comments

Consumers are feeling economic pain, and we need to talk about some of the things that are brewing. Today, I want to look at growing debt, distressed sales, and unemployment. I have both national and local stats. Sounds like a happy post, right? Look, some people really hype this topic and use it to magnify doom, but let’s talk about the market that actually exists.

UPCOMING SPEAKING GIGS:
5/9/24 Empire Home Loans (register here)
5/15/24 KW Roseville Event
6/5/24 Marketing Mastermind (register here)
6/6/24 Golden 1 Credit Union (details TBA)
6/11/24 Elk Grove Regional MLS Meeting 8:30am
6/13/24 Sacramento Realtist Association (details TBA here)
6/21/24 Exporting data from MLS (details TBA)
9/17/24 Downtown Regional MLS Meeting Q&A 9am
9/20/24 How to Think Like an Appraiser class (details TBA)
10/18/24 Prime Real Estate (private)
10/29/24 Orangevale MLS Meeting

MORTGAGE DELINQUENCIES ARE REALLY LOW

First off, we don’t have a big problem with mortgage delinquencies, but there is a little bit of an uptick. Basically, depending on the data source, delinquencies have inched up very slightly. This is something to watch, but it’s important to not amplify the small change to promote a narrative. Visuals from Calculated Risk, NY Fed, and ICE Mortgage Technology.

GETTING INTO CREDIT TROUBLE NATIONALLY

Consumers are getting into debt and missing payments for credit cards and auto loans in particular. We may not be in mortgage trouble right now, but some people may need to solve their financial problems by selling a home. However, people will fight to keep homes with low payments. In other words, letting go of a home to solve debt seems like a last-case scenario.

CREDIT & AUTO TROUBLE IN SACRAMENTO

These visuals come from the California Policy Lab credit dashboard. What I like is this is Sacramento only instead of a national stat that may or may not apply to the local area. Credit card delinquencies are above pre-pandemic levels. You can click on the link to play around with different areas of California as well as seeing which age groups are in the most trouble.

Auto delinquencies are also ticking up in Sacramento.

SHORT SALES AND FORECLOSURES HARDLY EXIST

In the local market, distressed sales barely exist. Technically, 1% of all sales during the first quarter of 2024 were distressed, but that’s 1% of a really low number (low volume is the reality in the market right now). Basically, both bank-owned sales and short sales are inching a little closer to pre-pandemic levels, but not quite back there yet. In short, we should see more distressed sales ahead since there is no longer a foreclosure moratorium, and there is no place to go but up. We have truly bottomed out.

HELLO THERE CREDIT REPAIR

Some people ahead are going to need to repair their credit, so I think it’s important for the real estate community to have solid credit repair contacts and help consumers understand the process. Honestly, I’d love to see more reels and posts about this, especially since we’re seeing credit and auto delinquencies rising.

WHAT SHORT SALES ARE HAPPENING THOUGH?

Here are current short sale active listings and pendings in the region. Keep in mind these listings represent 0.3% of all properties, so this is a tiny sliver of the market. What can we learn though? Well, it looks like there are some older loans with carnage, and a handful of reverse mortgages where the owner likely died and the lender is taking the property back (normal to see). The thing that is more striking is that about half the loans originated when the market was priced higher in 2022. Again, this is a tiny sliver of the market, but if you work in real estate, take clues here that some people might need your help. For whatever reason, these people needed to sell instead of hold on.

WHAT PROPERTIES ARE BANK-OWNED?

There are few bank-owned (REO) sales right now, but when they happen, they’ve been a combination of older loans and some newer ones (but not really people who bought in 2022 at peak prices). Remember, people can go into foreclosure for so many reasons, and it’s not just about prices in the market. In many cases, it’s about a personal financial situation. On a side note, I’m definitely noticing some familiar agents listing bank-owned homes right now (mostly people who were big REO agents back in the day).

LET’S WATCH UNEMPLOYMENT

We’ve seen an uptick in unemployment. This is nothing to hype since it’s very low right now, but it is something we want to watch and NOT ignore. As can be seen, Sacramento and California have a similar vibe through the years.

Here are six local counties. All ships rise and fall with the tide, right?

And this one is a sincere hot mess when adding in three more local counties. Honestly, this graph is too much since these areas are too different, but sometimes I like to share examples of chaos on my desk.

CLOSING THOUGHTS

It’s important to watch any red flags in the housing market, but it’s also key to stay objective. I find the tendency online is to highlight a trickle of doom and make it sound like an avalanche. There is no integrity in that. Likewise, some real estate professionals only want to talk about the glowing stuff rather than some of the issues we’re seeing right now. Overall, we don’t have a distressed market, but let’s keep our antennas up about all of this while actively cultivating objectivity. And if you work in real estate, be prepared to serve clients in all stations of life. The good times and the hard times.

Questions: What stands out to you most above? Anything to add? What did I miss?

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When a property gets 147 offers

March 5, 2024 By Ryan Lundquist 25 Comments

A property in the Sacramento area had a whopping 147 offers as reported by the listing agent. This is a freakishly high number of offers, and I think there are some interesting layers here to talk about. Any thoughts?

UPCOMING SPEAKING GIGS:
3/8/24 Redfin (private)
3/11/24 Yolo Association of Realtors (YAR only)
3/19/24 WCR Gold Country (details here)
3/21/24 2024 Market Update for Brent Gove Team (big event free)
3/26/24 Orangevale MLS meeting 9am
4/11/24 Lindsay Carlisle Event (private)
4/25/24 HomeSmart iCare Realty (details TBA)
4/26/24 Prime Real Estate (private)
5/9/24 Empire Home Loans (details TBA)
5/15/24 Investor Meetup (details TBA)
6/6/24 Golden 1 Credit Union (details TBA)
6/11/24 Elk Grove Regional MLS Meeting 8:30am
6/13/24 Sacramento Realtist Association (details TBA)

UPDATE: MLS has since pulled this sale, so it is not longer available. I’m not sure why they pulled it, so I won’t speculate. I do have a screenshot from yesterday where it shows the number of offers. I had someone call me today saying, “Hey, I can’t even find the sale. What’s going on?” Well, this sale no longer exists in MLS as of later this morning. If I get more details as to why, I’ll speak to that.

PAINTING THE MARKET WITH EXTREMES

One of the temptations in real estate is to build housing narratives based on extreme examples. This happens on the doom side when people isolate properties with sensational price reductions and say, “The market is collapsing.” Or some find a non-performing Airbnb and say the entire short-term rental market is a bust. But this happens on the rosy side too with situations like this. The narrative can become, “Bro, everything is getting one hundred offers. This market is insane.” But, let’s step back and ask why this many offers happened. By the way, I’m not on Team Doom or Team Rosy. I’m on Team Market Stats.

THE MARKET vs THE MARKETING

Did this many offers happen because the market is so competitive? Or was it due to the marketing (pricing)? Well, in this case, a 1744 sq ft property in Rancho Cordova was priced at $199K before closing at $425K. Look, this is already a competitive area, but pricing over 50% below what the property sold for created an auction-like environment. Bottom line.

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A post shared by Ryan Lundquist (@sacappraiser)

THE ZESTIMATE IS PLAYING GAMES

The Zestimate on this property was above $450K before it listed for sale, but as soon as it listed at $199K, the Zestimate chased the list price (this is really common to see). Oh, and look what happened when the property closed at $425K? Yep, the Zestimate changed. I talked about this dynamic on a reel this week with a different property. I’m not a Zillow-hater, but I do hope people who get overly-fixated on the Zestimate will question credibility when seeing price-chasing games like this. Ultimately, Zillow touts itself as a ballpark estimate, but it’s really a benchmark for many consumers.

BRO, EVERYTHING IS NOT GETTING 100 OFFERS

Since June 2023, there have been only two sales with over sixteen offers in this neighborhood. When looking at the visual below, 68.5% of all sales had three or fewer offers, which is telling for what the bulk of the market looks like.

A NEW RECORD IS BORN

Getting 147 offers is a new record from 2016 onward in the Sacramento region. In 2016, our local MLS created a “number of offers” field, and since that time period there have only been two legitimate sales with one hundred or more offers reported. The previous record was 122 offers in 2021 for a property in Citrus Heights, and that house went viral on many news outlets. The narrative was, “The housing market is insane. A property just got 122 offers.” Part of me wonders if this new record of 147 offers will get similar treatment (even though it was an auction price causing this).

DOES AUCTION PRICING WORK?

The are many opinions on auction pricing, and I’d love to hear in the comments what people think. Did this property sell at the top of the range for the size of home? No. Should it have? Well, that’s not for me to say without doing an appraisal and knowing more about the condition of the property. I cannot say what this property was actually worth, and whether $425,000 was a legit market value or not. I can only say the price was toward the lower end of the competitive range for the size of home. Was that due to condition or some other issue? I would need more information.

And here’s the immediate neighborhood:

SELLERS & BUYERS

Sellers, don’t expect 147 offers. And buyers, it’s really competitive out there for the good stuff that’s priced well, but don’t let this one situation get you down. You’re not competing with that many offers unless it’s an auction price.

SOME GRAPHS TO HELP SHOW THE TREND

Here are some visuals to help unpack the neighborhood dynamic. I made these almost instantly using the free spreadsheet I pushed out in December. Feel free to download and experiment. Keep in mind, other MLS systems don’t always have a “number of offers” or “concessions” field, so those graphs aren’t possible outside of Sacramento.

TAKEAWAYS: It’s rare for properties to go 10% above their original price in this area. When bidding up happens, it’s usually a few percent of the original price. Also, many properties sell below the original price too. The property with 147 offers went $226,000 above the original price, and that’s a unicorn.

NOTE ABOUT INTENT: This post is not in any way meant to throw shade at the listing agent. This is about talking about a unicorn pricing situation for the sake of cultivating objectivity and being able to talk about a sensational example. On that note, I will not approve any comments that personally disparage the agent. I welcome any comments to talk about pricing strategy. Don’t make it personal in my space here though. Thanks.

Thanks for being here.

Questions: What do you think about situations like this? What did I miss? Any thoughts?

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Are sellers finally starting to thaw out?

January 30, 2024 By Ryan Lundquist 26 Comments

Frozen. Stuck in place. Not moving. That pretty much describes sellers. But in 2024 there’s a flicker of hope as sellers have thawed out just a bit. I’ll explain what I mean below, and I suspect many markets around the country are experiencing a similar trend. Any thoughts?

UPCOMING (PUBLIC) SPEAKING GIGS:
01/31/24 Joel Wright & Mike Gobbi Event 9am (on Zoom here)
02/01/24 Gateway Event (private)
2/09/24 PCAR WCR Event (11:30am-1pm (more details))
2/13/24 Downtown Regional MLS Meeting 9am
2/21/24 Matt the Mortgage Guy YouTube Live
3/11/24 Yolo Association of Realtors (YAR only)
3/21/24 2024 Market Update for Brent Gove Team (big event free)
3/26/24 Orangevale MLS meeting 9am
3/27/24 SAFE Credit Union Lunch & Learn (TBA)
4/11/24 Lindsay Carlisle Event (private)
4/25/24 HomeSmart iCare Realty (details TBA)
5/9/24 Empire Home Loans (details TBA)
6/11/24 Elk Grove Regional MLS Meeting 8:30am
6/13/24 Sacramento Realtist Association (details TBA)

MORE NEW LISTINGS IN JANUARY 2024:

A few days ago, we officially surpassed the number of new listings in January from one year ago in Sacramento. By the end of the month, we should have about 10-15% more new listings compared to January 2023. Granted, the number of new listings today is still anemic, but more is the direction we want to go. So, while this is statistically minor, it feels like really positive news. Check out a reel I did on Instagram to explain this.

“MORE IN 2024” IS THE THEME:

In my 2024 outlook, one thing I mentioned is we aren’t going to be anywhere close to normal for the number of sales or new listings, but the hope is to see more. Well, January showed us more new listings, more pendings, and probably more sales (the verdict is still out on sales, but I’m pretty sure we’ll beat January 2023 in the region).

BRO, SELLERS ARE NOT FLOODING THE MARKET:

When sharing about more new listings, some people think sellers are flooding the market, but that’s not the vibe. If it was, I’d say so. This image is a helpful way to think about the trend. Remember, having more doesn’t automatically mean a flood. I find a similar dynamic with the narrative on bank-owned sales today. There are definitely more this year, but it’s a tiny amount below 1% of all sales locally. Nonetheless, sometimes people see more and create a narrative about a flood of foreclosures.

CELEBRATING A SECOND-PLACE TROPHY

Okay, some real talk. Last January was the worst January in decades for the number of new listings, and this January is going to be the second worst. Look, I’m not trying to sound negative, but I want to give context to what I mean by more new listings this year. Ultimately, sellers are still frozen, but they’ve thawed out slightly from 2023 levels. The green bars help show the pre-2020 normal, and we’re nowhere close (still about 38% or so below that level).

BUT WHAT’S HAPPENING WITH BUYERS?

I’m glad you asked. We’ve actually seen more pending contracts in January 2024 compared to January 2023, so we don’t have a situation with vastly more supply compared to demand. This is something we can watch closely over the spring, but right now we don’t have a lopsided market where supply is far outweighing demand locally.

HELLO REAL ESTATE PROFESSIONALS:

Friends, this is really good news because it’s volume that pays the bills in real estate. I realize this isn’t a huge change, but more is absolutely the direction we want to go. This is also good for buyers and sellers because it’s healthy in the housing market when more people are participating.

THIS IS NOT ABOUT FEAR, BUT LIFESTYLE

Someone told me sellers are afraid of future price declines, so they’re listing their homes. Look, that’s fine if true, but I disagree. The word fear doesn’t typify the bulk of sellers I’m talking to right now. I find sellers today are mostly listing for lifestyle reasons such as inheriting a property, moving out of state, job transfer, moving up, moving down, divorce, etc… Fear is not the overarching theme or motivator. If it was, I’d be the first to say so.

An Instagram reel I made:

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A post shared by Ryan Lundquist (@sacappraiser)

WE NEED TIME TO SEE THE TREND:

This looks like a trend, but let’s see what happens in February and throughout the spring. In other words, I think it’s premature to say, “Sellers have thawed out completely, and we’re only going to see an increase from here on out.” Hopefully that’s the case. Now let’s see what the market does.

Thanks for being here.

Questions: What are you hearing from sellers right now? And what are you hearing from buyers? What stands out to you above?

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

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