It’ll get worse before it gets better. That’s pretty much true in lots of ways in life. Going through the teenage years, recovering from injury, remodeling a kitchen… and enduring a housing downturn. Today I have a few things to share, and I hope this will be helpful (especially #3 as you look to 2023).
UPCOMING (PUBLIC) SPEAKING GIGS:
12/5/22 SAFE Credit Union market update on Zoom (register here (free))
1/18/23 WCR Market Update in Cameron Park (details TBD)
1/19/23 Big market update at SAR on Zoom (details TBD)
1/23/23 Residential RoundUP on Zoom (register here (free))
5/22/23 Yolo YPN (details TBD)
Three quick things:
1) THE MARKET ISN’T THE SAME EVERYWHERE
The housing market is NOT the same in every part of the country, or even every sliver of the local market. Here are two images from John Burns Real Estate Consulting to show what I mean. Read their original post here.
Does anything surprise you on the list? It’s not a shocker that Sacramento made the falling list along with some of the usual suspects we’ve been reading about in media stories.
DIPPING PRICES IN SACRAMENTO
Here’s a look at the preliminary median price for November in the Sacramento region. I’ll solidify this visual in a week when we have more November stats collected. But do you see how the median price this year (black line) is officially below last year (orange line)? As I mentioned a few weeks back, 40% of pandemic price gains have been wiped away over the past six months. That’s not always easy to digest, but it is exactly what sellers need to hear right now. And again, the median is not a perfect metric as it doesn’t rigidly translate to every price range and location.
2) GETTING WORSE BEFORE IT GETS BETTER
Back to my blog title. It’ll get worse before it gets better. Someone saw this visual during a presentation last month and had an epiphany that closed sales volume got really ugly for a couple of years during the previous housing crash, but volume eventually returned to the market. I think the takeaway for this person was to hold on tightly right now, and hope for eventual recovery too. Of course, there isn’t any template for how a housing market needs to correct, so we don’t want to think of 2007 as the formula. But it does make sense to see some volume vanish for a season until the housing market starts to heal by becoming more affordable. It’s impossible to say how long volume will be subdued ahead, but we’ll get more buyers back as affordability increases and market confidence grows.
Worst November in Two Decades: I know this sounds super sensational, but it’s what the stats show. As of now it looks like we’re going to have the worst November in over two decades in the Sacramento region. It’s possible we could slightly surpass 2007 if an unexpected number of sales close over the next week, but November volume looks like it’ll be down about 43% from the pre-pandemic average, and down 49% from last year (Sacramento County is 46% and 50%). No matter how we look at it, nearly half the market is missing. Or we could say half the market is happening. Both trends are accurate.
November Rain: On a side note, all this talk of change reminds me of a classic Guns ‘N Roses song, November Rain.
3) EXPECT A SPRING VOLUME UPTICK IN 2023
This might be helpful as you plan ahead for the spring market. It’s important to note that seasonal volume changes can still exist even in a downward market. Check out the visual below where the dark bars represent sales from January to June each year. Even in 2007, one of the worst years on record, we still saw a spring seasonal uptick in volume. This shows it’s really difficult to erase the seasonal trend in real estate – even when prices are plummeting. Granted, we don’t technically know what is ahead for the market, so if rates spike unexpectedly, all bets are off. For now, I would expect to see some seasonality ahead. This makes sense in light of stories from the trenches too where I’m hearing buyers waiting for better inventory in the spring, and some sellers will wait to list in the new year instead of December.
I hope this was helpful.
FREE WEBINAR ON DECEMBER 5TH:
I’m doing a deep dive into the Sacramento market on December 5th at 12pm. There is so much to talk about, and I’ll have about an hour. Thanks to SAFE Credit Union for making this FREE EVENT happen. Register here.
Thanks for being here.
Questions: What stands out to you above? What did I miss?