trend graphs

Buyers & sellers feeling stuck in the housing market

September 8, 2022 By Ryan Lundquist 16 Comments

I love the original Back to the Future movie. Do you too? Well, I can’t help but think of today’s housing market compared to the film. Sellers have tended to be stuck in the past expecting the market to be hotter than it actually is right now. And some buyers are stuck in the future, anticipating lower prices ahead, and therefore expecting to score a deal below what the market will allow.

Back to the future meme with Michael J Fox (it says sellers stuck in the past) and Doc (it says buyer stuck in the future)

Tension is real: The tension between buyers and sellers is real, but the remedy is simple. Pay attention to stats and let the numbers form your perception. It’s key for buyers and sellers to be realistic about the market that actually exists. Staying connected to the present is the goal here instead of fixating on a hot past or a colder future. Ultimately, sellers need to listen to buyers, be open to the idea of offering credits, and recognize there’s a really good chance the property is going to sell below the list price. And buyers can take more time shopping, but also recognize it’s not January 2008 when properties on average sold a whopping 13% below their original list price in the region.

Thanks for being here. What are you seeing in your area?

UPCOMING (PUBLIC) SPEAKING GIGS:
9/08/22 SAFE CU “Stats & Mimosas” (sold out)
10/07/22 Market update with SAR (Sign up here – On Zoom)
10/13/22 Market update in Midtown (details TBD)

—–——– DEEP MARKET UPDATE (FOR THOSE INTERESTED) ———––

Here are some quick thoughts about the latest stats. There is so much to talk about. Scroll quickly or digest slowly.

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.

HOW I’M DESCRIBING THE MARKET RIGHT NOW

THE QUICK VERSION:

1) Buyers are gaining power.
2) Sellers are losing power.
3) The sharp change in recent months has begun to level.
4) Seasonal price declines have been more pronounced.
5) 25% of the market is missing right now.
6) Lots of stats are now softer than pre-pandemic normal levels.
7) Uncertainty remains present in light of rates above 6%.

THE LONGER VERSION:

1) Buyers are gaining power:

Last year buyers had to basically bend to the will of sellers, but now they are able to take more time shopping, they’re getting in below the list price in many cases, and credits from sellers are on the rise. About 40% of sales last month included concessions in Sacramento County, and that’s a sharp change from previous months. I expect this percentage to increase through the fall season.

A line graph to show the percentage of sales with concessions in Sacramento County over recent years.
2) Sellers are losing power.

Sellers used to have the luxury of reviewing eight offers from the weekend, but that ship has sailed. About half of all active listings have had a price reduction from the original list price. Even though sellers are starting to listen more to buyers, they are still behind the ball because of how many price reductions we’re continuing to see.

A table to show price drops by the county in the sacramento region

3) The sharp change in recent months has begun to level.

The market showed a sharp change with sales volume, but over the past month or so we’ve started to see the numbers go sideways a bit. This means instead of showing yet another month of massive change, the market has sort of stabilized. Granted, volume is still down 25% or so from last year, but the market has seemed to find a little more balance lately. Of course, this could change with mortgage rates shooting up again. All I’m saying is a number of stats have gone more horizontal lately, so the sharp change from May onward looks to be subsiding (well, besides prices). And the real culprit for change has been seeing fewer new listings hit the market since June. That’s given some breathing room for sellers and buyers to figure out the new market.

Inventory didn’t spike: By the way, inventory actually dropped last month too. Monthly supply saw a huge uptick in recent months, but that spike didn’t continue last month. Scroll below for an image.

4) Seasonal price declines have been more pronounced.

It’s normal for prices to drop at this time of year as the hot spring market fades away. But price declines have been much more pronounced this year. In other words, we’re seeing easily about twice as much price deceleration compared to normal. We still need time to understand the long-term trend, but for the time being prices have seen a more dramatic dip lately. The median price is down about 7% since May in the region, which is about $45,000. Keep in mind this doesn’t mean every property has gone down by that much, so please look to neighborhood comps to understand neighborhood dynamics.

NOTE: Prices this year crested in May, so it makes for an awkward comparison when we analyze May to August this year with previous years. Prices normally crest in June, so that’s why I’m making charts to show change from June onward too (as well as May).

5) 25% of the market is missing right now.

We’ve seen about a 25% dip in volume over the past few months, so on the negative side, one quarter of the market is missing. And on the positive side, about 75% of the market is still happening. Both things are true.

6) Lots of stats are now softer than pre-pandemic normal levels.

We saw a really sharp change toward normalcy in recent months, but some of the stats are now going above “normal” levels. For instance, on average it takes 29 days to get into contract in September, but this year it looks like the number will be 32 days. Or 34% of sales typically sell above the list price in a normal August, but that number was 25% last month.

Normal: When I say “normal,” I’m referring to the pre-pandemic average of 2016 to 2019. Sometimes people get bent out of shape about this word, but this is a solid stat to consider.

7) Uncertainty remains present in light of rates above 6%.

The market has sort of been leveling in quite a few ways lately, but mortgage rates are now above six percent again, so we have to watch the stats to understand the trend over time. But it’s really a simple thing. When rates go up, it takes demand out of the market. Bottom line.

YEAR OVER YEAR STATS:

Annual stats are important to digest, but don’t forget to look at month to month stats. And remember, closed sales in August really tell us what the market used to be like in July when the bulk of these properties got into contract. Also, not every location and price range have the same trend (big point).

MONTH TO MONTH:

Looking at sequential months is key too so we don’t just get stuck or hyper-focused on last year (the past).

OTHER VISUALS:

Here are lots of visuals. Probably more than you wanted. Enjoy if you wish though, and let me know what you like best.

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 stands out to you above? What are you seeing out there in the market? I’d love to hear your take.

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

A sharp change in the housing market

July 6, 2022 By Ryan Lundquist 24 Comments

A quick change in rates has led to a quick change in the housing market. We didn’t see much difference right away in the stats, but we are finally getting some good numbers now. Let me show you what I mean.

A blue background with today's blog title about sharp change. And there is also a wooden table on the lower 1/3 of the image.

UPCOMING (PUBLIC) SPEAKING GIGS:
7/15/2022 Lunch & Learn Market Update (sign up (for real estate agents))
7/20/2022 Beer & Stats at Out of Bounds (sign up (for real estate agents))
7/26/2022 Navigating the Shift (sign up here (for real estate community))

BEER NEWS:

I just finished two years without alcohol. I gave up alcohol for health reasons, and it’s been a good experience. I’ll be adding another year now, so if anyone wants to join, let me know.

FIVE THINGS TO WATCH IN TODAY’S MARKET:

We’ve seen quick change in the stats lately. Check out how steep the line is between May and June in some of the visuals below. This is what I mean by “sharp” change. Let’s keep watching while staying objective.

1) PRICE GROWTH IS SLOWING

Price stats aren’t as sexy as they used to be. This visual doesn’t necessarily look sensational, but instead of being up 15-20% from last year, prices in most counties are now “only” up about 6-7% instead. In short, we are seeing price growth slow down. Right now, the growth actually looks somewhat normal at 6-7%, but let’s keep watching this line to get a sense of the direction of prices. In a normal year we should see prices soften for the next few months and then flatten out for the rest of the year.

This chart shows the median price from 2016 onward from January to December each year. This year the median price has started to crest about one month early.

2) BUYERS ARE FINALLY PAYING BELOW THE LIST PRICE

For seventeen months in a row buyers paid at or above the list price on average. This is profoundly atypical, but it’s been our normal for so long that I think we’ve gotten used to it. This visual shows buyers in June 2022 on average paid about one percent below the original list price (or $7,254 less on average). Look at how sharp the change was from the previous month. For now, the stat is actually very normal compared to 2018 and 2019, but let’s keep watching to see where the line goes in months ahead.

A line graph to show the dollar amount buyers are paying in relation to the original list price in the Sacramento region from 2018 onward. This line goes up and down depending on the time of year. Right now it's going down due to softening demand.

3) FEWER PENDING CONTRACTS ARE HAPPENING

One of the bigger ways we are seeing a shift in the market is with the number of pending contracts dipping for three months in a row. In most local counties in June, we were down a whopping 25% in volume from last year at the same time. On the positive side, this means 75% of pendings are still happening, but there is no ignoring the reality that we had over 1,600 fewer pending contracts over the past few months compared to last year. The black line below represents 2022, and this June was the lowest year in recent time. This isn’t a big surprise because mortgage rates doubling in a short period of time has given affordability a beatdown. This means fewer buyers are able or willing to play the game right now.

A line graph to show pending contracts from January to December each year from 2016. The line for 2022 is way below other years, which shows there has been a drop in pending contracts.

4) A SHARP INCREASE IN LISTINGS

Here’s the number of active listings on July 1st each year in the Sacramento region. I know this is only one day, but the monthly trend actually looks very similar. We’ve seen a quick rise in the number of available listings lately. We’re much higher than last year, but still lower than normal. We are missing about 800 listings from the normal trend. This rise in listings here isn’t so much about sellers choosing to list their homes. The real culprit has to do with fewer pendings, which means the pile of active listings has grown quickly.

A bar chart to show July listings in the Sacramento region from 2014 onward

5) LOTS OF PROPERTIES STILL SELL ABOVE THE LIST PRICE:

It’s easy to say everything is selling below the list price, but that’s fiction. In truth, almost 53% of sales last month sold above the list price, so it’s safe to say about half the market went above the original list price. Of course, this is a sharp change from last year when 76% of sales sold above the list price, so we’ve clearly moved beyond that honeymoon market. And I know, it would be helpful to have more years on this visual, but I don’t have that (yet).

A line graph to show the percentage of homes that sold above the list price in the Sacramento region from November 2020 through today. This line goes up and down depending on the season of the year.

6) OTHER VISUALS:

Okay, here are some other visuals in case that’s your thing. The stats are finally showing some bigger changes. I remember someone arguing with me in April that the market hadn’t shown much of a temperature change. The truth is the market did change, but we didn’t see change in the stats…. yet.

A line graph to show pending contracts from January to December each year from 2016. The line for 2022 is way below other years, which shows there has been a drop in pending contracts.

OKAY, ONE MORE:

May to June median price change: This last visual shows median price change from May to June from 2004 onward. This is a bit geeky, but it’s atypical to see the median price dip between May and June. I mean, it happens, but typically this takes place when the market is declining or in a year where there was dullness in the marketplace. For this year, keep in mind the 2022 real estate season crested early, so we are now comparing subdued stats today to heightened stats last year. I’m not sugarcoating at all here. It’s just key to know what we are comparing and how that makes a difference with the numbers.

On a related noted, for many in real estate prices are sacred, but I don’t take that view. Markets go up and down. That’s just what happens. Thus, my role here is to tell the story of the market without any bias. I’m not here to protect prices or promote doom. I want to sling the straight dope and help convey what is happening.

Anyway, I hope my explanation for May to June change makes sense. I’m happy to talk about that more in the comments. We need a few more months to understand price trends more definitively.

A bar chart to show May to June growth in the Sacramento region

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.

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

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

Don’t get stuck on home prices…

May 2, 2022 By Ryan Lundquist 7 Comments

What are prices doing? That’s always the question, and I get it. But there are bigger fish to fry to understand what the housing market is doing.

Market webinar: On Thursday May 19th at 10am I’ll be doing a deep market update webinar through SAR to talk about the latest trends. We’ll have an hour, so we can go over a ton of stuff. Sign up here.

A shift: Over the past few weeks there has been a shift in demand, which is why this conversation is so important. This isn’t about doom and gloom. I’m just saying we need to look at other things besides prices.

The last time: Let’s look at what happened when the market changed in 2005. There’s some helpful insight here, even though what happened last time isn’t the new template for every future correction.

WHY PRICES ARE THE LAST PLACE TO LOOK

Not that much different: The real estate bubble burst in Sacramento County in August 2005, but prices were only down 4-6% during that first year. When thinking of a pop, that doesn’t sound like much, right?

TWO THINGS TO WATCH INSTEAD:

The real story was volume: Prices saw a modest dip, but sales volume was imploding. There was a 43% change in the number of sales between August 2005 and August 2006. Some could’ve said, “Meh, prices are only down slightly,” but the glaring issue was nine hundred fewer sales in August 2006 compared to August 2005.

The real story was supply: Prices dipped slightly, but housing supply increased by 207% in the background. In other words, housing inventory went from 2.6 months to 8.0 months the next summer. And this helped set the stage for a massive collapse in 2007.

THE BIG POINT:

Prices were about the last place to look to understand the trend at the time. The real story was seen when looking at listings and volume.

What to watch: If you want to see what the housing market is doing, I suggest giving strong attention to the number of listings, the number of weekly pending contracts, and the number of sales. There are many other things to watch, but are buyers willing to continue to play the market? That’s the big question, and we’ll see the answer in volume before prices. Of course, if you want to sound suave on date night, watch other things like price reductions, the number of offers, days on market, etc… I’m talking through lots of these things every week. If you’re not local, check out the Redfin Data Center for weekly stats.

Whatever you do, don’t get stuck on prices alone.

Getting buyers to walk: As I said last week, price growth slowed in April compared to truly exuberant gains between January and March. Today we are seeing slow traffic in general at open houses, more price reductions, and buyers having an easier time getting offers accepted (not always). This really happened quickly too over the past few weeks. Overall, buyers are far more sensitive to price, condition, and location, which means sellers need to be open to negotiation. I’ve heard a few examples of buyers walking after sellers said, “Yo, Bestie, thanks for the offer. Now give me $25K more and remove the appraisal contingency.” That might have worked in January, but this is May. It’s a different market today. I’m also hearing more examples of, “We priced it right, but we aren’t getting any action yet.”

Embracing stats: The other day someone wasn’t happy because I wouldn’t call this dynamic the start of a market correction, but the truth is we need time and stats to understand the longer-term trend. This is not me sugarcoating. This is me being objective. Let’s keep watching the numbers (by the week) and letting the stats form our narrative.

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.

Questions: What stands out to you most in this post? What did I miss? I’d love to hear your take.

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

Freakish home price growth so far in 2022

March 8, 2022 By Ryan Lundquist 21 Comments

Freakish price growth? Yes. That’s exactly what we’ve been seeing. Here we are again with what feels like a carbon copy of last year, which was our most aggressive market ever. In short, 2022 is doing its best to crush 2021. Let’s talk stats and perspective. I’d love to hear your take.

UPCOMING PUBLIC SPEAKING GIGS:

3/15/2022 NARPM Luncheon (details)
3/22/2022 SAFE Credit Union market update (details)
4/28/2022 SAR Think Like an Appraiser (details)

WHAT IS HAPPENING?

Buyers are essentially running to the market to get in before rates spike more. On one hand affordability has declined as rates have risen substantially lately, but so far this has only created a frenzy to buy. At some point theoretically we’d expect to see demand soften due to rate increases, but we haven’t hit any sort of inflection point yet where buyers are backing off the market. That’s something to watch though with the number of purchase mortgage applications, pending contracts, and sales.

FREAKISH PRICE GROWTH:

Below I’d like to show a few examples of what price growth looks like in the Sacramento region right now. I suspect many markets across the country look something like this too.

A QUICK RECAP:

Some quick stats. Feel free to share some of these images on your social channels too. But please see my sharing policy. Thanks.

1) MASSIVE MEDIAN PRICE GROWTH:

This visual shows the median price in February in black, and this year is so far above others. It’s normal to see prices rise in February, but this is massive growth – especially in the eleventh year of this price cycle.

2) RECORD-BREAKING DOLLAR GROWTH:

This year the median price ticked up $31,000 from January to February. This is essentially the largest dollar gain we’ve seen in the Sacramento area between these two months. From a percentage standpoint this was a 5.56% increase. This isn’t the highest percentage ever, but it’s the second-highest percentage gain from 2004 (2015 saw a larger gain).

3) WEEKLY PRICE GROWTH HAS STARTED TO RAGE:

Check out the black line. That’s 2022, and it’s been raging higher. Until the last week of February it looked like the median price for the month was going to be strong, but nothing too crazy. But then stats starting coming in, and we see a much different trend. Remember, closed sales from last week really represent the market from about a month ago when these properties got into contract.

4) BUYERS PAID WAY ABOVE NORMAL:

On average buyers paid nearly $16,000 over the asking price last month. This is far above a normal February where buyers tend to pay closer to $10,000 BELOW the list price. It’s important to note February 2022 was about twice as much as February 2021. Keep in mind this is the average of every single escrow. This number doesn’t perfectly describe every single transaction. In other words, some buyers went way above this number and some went lower. The takeaway here is to know how disconnected this number is from normal rather than offer $15,764 above list price thinking that is the winning number. It might have to be way more. Or in some cases it could be less.

5) FEWER MULTIPLE OFFERS TECHNICALLY

This month there were fewer multiple offers compared to last year at the same time, but we’re actually seeing a more aggressive market today. On one hand this stat suggests the market is slightly cooler in temperature, but it doesn’t feel cooler because the offers that are being made are higher.

6) BUYERS MADE MORE AGGRESSIVE OFFERS:

This month there were fewer multiple offers compared to last year, BUT the market was more aggressive since buyers offered higher amounts above the list price to secure properties. This speaks to buyers having a fear of missing out on low mortgage rates (and anemic supply of course).

7) MORE INVENTORY IS COMING

We are seeing more listings hit the market. Typically, the market really starts to hit more of a stride in March with listings coming, so stay tuned. We won’t have enough listings, but more is better.

YEAR OVER YEAR:

Year over year stats are important to digest, but don’t forget to look at month to month stats to understand what the market is doing right now. Also, not every location and price range are going to have the same stats.

MONTH TO MONTH:

Year over year stats are important to digest, but don’t forget to look at month to month stats to understand what the market is doing right now. Keep in mind Placer County has a limited number of sales too, so I would take Placer with a grain of salt from month to month.

OTHER VISUALS:

As if anyone really wanted more…

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.

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