Sellers have been saying goodbye to some of the equity they gained during the past couple of years. In Sacramento, we’ve actually lost 40% of the pandemic gains since May. Today I want to talk about price trends, and I hope this is helpful – whether you’re local or not. Skim quickly or digest slowly.
three times the normal speed for seasonal softening. This doesn’t mean every property is literally worth 12% less, but I have to say the change is sizeable when looking at neighborhood comps lately and hearing feedback from real estate agents. Sellers, did you hear that?
changes: The median price rose $185,000 from the beginning of the pandemic, and $75,000 of that increase has disappeared over the past six months. Or we could say the median price is still up $110,000 from March 2020.
SEEING DECLINES IN NEIGHBORHOODS
It’s easy to fixate on the median price, but when appraising in neighborhoods my trendlines are also showing a sharp change. Here’s an example with the 95747 ZIP code in Roseville. As I talked about recently, I am definitely selecting the “declining” box in my appraisal reports.
THE MARKET IS NOT A PARKED CAR
I heard someone talk about the housing market as if it was a parked car, but I disagree with the analogy because the market hasn’t literally stopped. For instance, over the past two months in the region there were 1,800 fewer sales compared to last year, but there were nearly 3,400 sales that did happen. I find it’s easy to fixate on the glaring portion of the market that’s missing, but let’s not forget to notice the part that is happening.
NO PRICE RANGE IS IMMUNE FROM THE TREND
“My neighborhood is super special.” I know it really is, and so are you. But all ships rise and fall with the tide. What I mean is every price range has seen an effect from higher mortgage rates. Keep in mind volume is down in every single price range in the region too, which reinforces this point. However, the bottom half of the market has seen the biggest change in volume, which suggests buyers who are more sensitive to rate changes are having a more difficult time.
FLIRTING WITH LAST YEAR’S PRICES
The median price in the Sacramento region is exactly the same as it was last year at the same time. On one hand this feels like a big event to write home about, but it’s really not a shocker since prices have changed quickly to adapt to a dramatic shift in the monthly mortgage payment. In other words, a sharp change in rates has led to a sharp change in the stats.
OPENDOOR IS GETTING BODY SLAMMED
This market hasn’t been easy for iBuyers. 76% of Opendoor’s active listings are listed below their acquisition price. This is blatant carnage. Keep in mind Opendoor typically has a 5% credit from the seller, but even with that it’s not enough to be profitable in so many of these listings.
NO REAL HELP WITH AFFORDABILITY YET
Prices have dropped, but this hasn’t translated to more affordability since rates have continued to rise. Some people are predicting lower rates in 2023, but we’re going to have to wait to see what happens. Almost nobody gets their rate predictions right, and I don’t pretend to have a crystal ball.
A DOUBLE WHAMMY FOR SELLERS
The problem with overpricing is prices are going down, so the longer you’re on the market, the more you lose. Not only will you have to lower the price due to being overpriced from the beginning, but you now have to lower even more due to prices declining since you listed. It’s a double whammy.
LOSING ABOUT 2.5% PER MONTH LATELY
For five months in a row the median price has dropped by about 2.5% each month, and this visual helps show the change. The red line is the pre-pandemic average so we can see what “normally” happens from month to month. For instance, from September to October the median price normally dips by -0.07% (red line), but this year in 2022 the dip was -2.65% (black line). Remember, this doesn’t mean every property has literally lost 2.5% in actual value. Moreover, not every county has shown the same loss either by the month.
I can’t emphasize enough the importance of looking to the neighborhood comps to understand the market. In other words, DO NOT automatically impose a downward 2.5% adjustment (huge mistake). But don’t take these stats lightly either. If anything, these numbers ought to be a cold shower to wake sellers up to get their act together. The truth is there is a smaller pool of buyers active right now, so price it right to meet buyers where they are at.
YEAR OVER YEAR STATS:
Here’s a look at stats compared to last year. Remember, closed sales in October really tell us what the market used to be like in September when the bulk of these properties got into contract. Look at the hit volume has taken lately. We are pushing 40% down from last year, which is a big number.
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 PRICE VISUAL:
MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.
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Questions: What stands out to you above? What are you seeing happen with prices right now? I’d love to hear your take.
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