Be optimistic in life. Be hopeful. And don’t let anything shake you. But when it comes to housing statistics, be realistic about the market that actually exists. Today, let’s talk about housing hope (and unpack some new stats).
Upcoming (public) concerts:
01/18/23 WCR Market Update at Cameron Park (register here)
01/19/23 Important market update at SAR on Zoom (details TBD)
1/23/23 Residential RoundUP on Zoom (register here (free))
05/22/23 Yolo YPN (details TBD)
A FEW THINGS ABOUT HOPE IN HOUSING:
1) Hope vs glaring statistics:
Over the past week, I’ve had quite a few conversations with people who think the market will rebound in 2023 because they say rates are about to drop. I suspect that buying requests have increased slightly over the past few weeks and that lower mortgage rates have generated some excitement. Listen, it’s good if that happens, and it’s nice to hear excitement about the future, but let’s make sure to embrace the market that’s actually here right now too.
2) Modest rate changes will not alter the trend:
Modest rate cuts won’t be an instant reset button to bring missing buyers back to the market. We’re missing about 40% of buyers locally, so affordability is still a big issue. That’s what I tried to communicate last week when talking about the market gets worse before it gets better. The idea is that we won’t see volume return to normal until accessibility improves. And like I said, we don’t know how long the volume will be under control, and obviously rate cuts can help increase affordability.
3) The housing narrative is like a game of ping-pong:
The housing narrative is like a game of ping pong where bright and dark perspectives come together back and forth. Some say the market will rebound, but there are concerns about recent job numbers. Or in one breath some think rates will go down, but in the next there is uncertainty about the Fed meeting next week. Or people are in a rush to increase conforming loan limits, but it’s still not possible for many buyers to afford the deal.
4) No one knows the future:
The truth is that no one can predict with certainty the future of the housing market. Everyone has ideas, but no one knows for sure what will happen. That doesn’t mean we have to be naive about trends or the future, as we are clearly in the middle of a market with depressed volume and falling prices. Ultimately, housing must become more affordable. Keep in mind that many forecasts are based on rates at 6% and above, so forecasts will change if rates change. Ultimately, let’s continue to observe and cultivate objectivity by embracing the perspective formed by the numbers.
I hope it was hopeful. Thanks to be here.
———–——– DEEP LOCAL MARKET UPDATE ———––——
Scroll fast or digest slowly.
HOW I DESCRIBE THE MARKET:
Many buyers are missing, prices have fallen three times faster than normal, and selling is taking much longer. Sellers aren’t entirely aware of appropriate pricing, but they’re more frequently offering credit to buyers, which shows they’re listening. Sellers did not rush to list. Monthly inventory is technically up from last year, but we’re still a few hundred listings short of a normal trend.
SELLERS BEGIN TO LISTEN:
It’s good to see. 49.4% of sales closed in Sacramento County had dealerships last month. This means that nearly half of all sales had some sort of credit for repairs, closing costs, rate reductions, etc.
PRICES DROP 3X FASTER THAN USUAL:
There are two stats to look at here. How much has the market fallen in recent months, and is it still rising?
One thing to note is that prices fell a little less in November compared to previous months, but I wouldn’t write about that. I can’t wait to see how the stats turn out in December. So far a reading of pending properties suggests a permanent price drop for December. We will see.
NOTE: Placement stats bounce more because there aren’t as many sales, so take the median price with a grain of salt.
PART OF THE MARKET LACKS IN ACTION:
It’s easy to focus on price, but I think volume is the most important factor because it shows how many buyers are actually participating in the market.
1) last 7 months: Since May, we have seen over 5,000 fewer sales in the Sacramento area compared to last year. In other words, the volume is down 29% compared to last year. But around 13,000 sales took place, which shows that the market has not stopped.
2) last 60 days: But let’s now look at the volume over the past 60 days to get a better idea of the trend. When we look at more recent history, it’s clear that volume has recently fallen almost 43% (not just 29%).
3) The historical average: Many people ask if the comparison with 2021 is bad since the volume was higher that year. Well, it makes a small difference, but not a lot. Here’s a look at pre-pandemic average volume, which shows the region is down 40% instead of 43%. But look at Sacramento County down 45%, not much different from the picture above.
PRICES ARE OFFICIALLY LOWER FROM LAST YEAR:
It’s been a while since we’ve seen a year-over-year price drop, but that’s the market we’re in right now. This is exactly what should happen since affordability has taken a huge hit lately. Remember that the sales that closed in November really tell us what the market looked like in October when most of these properties closed.
CHANGE FROM MONTH TO MONTH:
It’s also essential to look at sequential months so you don’t get stuck or hyper-focused on the last year (the past).
NOTE: Take Placer with a grain of salt (not many sales).
OTHER PRICE VISUALS:
OTHER VISUALS:
MARKET STATISTICS: I will have lots of market stats this week on my social media so watch Twitter, instagram, LinkedInand Facebook.
Thanks to be here.
SHARING POLICY: I invite you to share some of these images on your social networks or in a newsletter. In case it helps, here’s 6 ways to share my content (do not copy verbatim). Thanks.
Questions: What stands out to you higher? What do you see happening in the market right now? I would like to hear your point of view.
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