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volume tanking

Prices went up & worst volume ever

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Did prices really go up in February? What’s happening in this market? Today I have a few things on my mind (including a Hot Pockets analogy). Scroll quickly or digest slowly. I hope this helps – whether you’re local or not.

Round white plate on a wooden table. View from above. A black font on the white plate says, "The housing market in 2023 so far."

UPCOMING (PUBLIC) SPEAKING GIGS:
3/06/23 Matt the Mortgage Guy YouTube Live 3pm PST
3/09/23 Matt Gouge Event (sign up here)
3/10/23 PCAR Market Update Lunch & Learn
3/24/23 How to Think Like an Appraiser (at SAR)
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

A meme with Kip from Napolean Dynamite. It says, "I guess you could say buyers are getting pretty serious."

1) DID THE MEDIAN PRICE REALLY GO UP IN FEBRUARY?

Yes, the median price so far is up in February in the Sacramento region. The dark bars below are February each year, and it’s normal to see an uptick from January to February. This doesn’t mean every neighborhood went up in value though because the median price doesn’t translate rigidly to every location and price range. My advice? Look to the comps to understand the trend.

A bar chart to show the median price in the Sacramento region by the month since January 2017. All the bars are golden, but February each year is black. And the black bars show an increase after January each year.

2) DOES THIS MEAN THE MARKET IS RECOVERING? 

Any hint of positive price news tends to stoke housing optimism, but let’s talk about this. The bar chart below shows median price change from January to February over twenty years, and there’s been an increase EVERY. SINGLE. YEAR. Even in 2007 when the market was tanking. Ultimately, it would be a mistake to say, “Prices went up last month. It’s a sign of recovery.” I’m not trying to be a killjoy, but this is a sign of seasonal normalcy. In other words, an uptick from January to February in the region is what should be happening, so let’s be careful about confusing normalcy with recovery. Keep in mind rates rose in February, and that could damper the price trend ahead.

NOTE: The regional median is up, but NOT every local county is up. The month isn’t over yet, but it looks like the median will hold (I could be wrong).

A bar chart to show median price change from January to February from 2004 to 2023. The wild part is this chart shows percentage median price growth literally every single year.

3) WORST VOLUME EVER

Okay, now for a glaring stat. Monthly sales volume has been below 2007 levels for four months in a row in the region. This isn’t about not having enough listings. This is the byproduct of buyers stepping away. As I keep saying, the way to get more buyers back is to see affordability improve.

A bar chart to show February volume in the Sacramento region from 2001 to 2023. February volume is horizontal with 2023 on top and 2001 at the bottom. This is a helpful way to recognize volume in 2023 for February is the lowest we've had in these two decades.

ADVICE: For real estate friends, my advice is to focus on the part of the market that IS happening rather than the part that isn’t. Find buyers and sellers who have incentive to participate in today’s market (see #5 too). Oh, and graphs like this are EXACTLY what sellers need to see to understand there is a smaller pool of buyers in the game today.

By the way, who is watching The Last of Us? If you’re not, you won’t get the meme (sorry). My wife and I are glued to this show.

A meme from the HBO show, The Last of Us. The main character, Joel, is perplexed in three different photos. He looks stressed. The first image says, "December volume below 2007," the second image says, "January volume below 2007," and the third image says, "February volume below 2007."

4) SPRING IS HEATING UP (LIKE A HOT POCKET)

Do you see that orange line? Those are monthly sales in 2023, and we’re starting to see an increase in closed sales. This is normal for the time of year, but hey, any hint of normalcy right now feels pretty nice to lots of people. A good way to describe the housing market at the moment is heating up for the spring, but also still frozen. In other words, the housing market is like a Hot Pocket taken out of the microwave too early. It’s somewhat hot, but it’s sort of frozen too.

A line graph to show seasonal volume in the Sacramento region from January through December. This basically shows 2023 is starting out really low compared to the normal trend. But volume is increasing, so we are seeing some seasonality in 2023.

5) PAY ATTENTION TO RATES & FHA LOANS:

RATES: Mortgage rates have risen this month, and that’s taken some heat and affordability out of the market. In January, it seemed like lots of people were predicting mortgage rates to go down, but now I’m hearing many thinking they’ll go up. This just goes to show very few people get it right. What happens with rates ahead will make a huge difference (duh, thanks).

A meme with a couple in bed under the covers. The woman is looking at the man, and the caption reads, "What happened to romance?" (she's thinking this). And then man looks deep in thought, and his caption says, "What are mortgage rates going to do?"

FHA: Last week it was announced FHA will lower its mortgage insurance, which will help buyers save a modest amount each month. Look, I don’t expect this to transform the housing market since FHA is only a small sliver of volume in Sacramento. However, loan officers have been reporting conventional loans are getting more expensive lately, so FHA becoming slightly cheaper can be meaningful for buyers. The new FHA savings really won’t kick in until March 20th, but so far FHA loans have already been up in 2023.

A line graph to show FHA loan volume since 2009. Basically, FHA used to be about 30% of the market in 2009, but lately it's been more like 11-12%. There has been a slight uptick lately.

I hope this was helpful.

MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.

Questions: What do you think is going to happen to rates? What are you hearing from buyers and sellers right now? I’d love to hear your take.

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