Market Update

Slumping volume & rising inventory

October 11, 2018

Volume is down and inventory is up. Is that a problem? It sounds like a question for a high school Economics class, but here we are talking. Today I want to kick around two quick thoughts and then dive deeply into trends. I hope this helps – whether you’re local or not. Anything to add?

What the? Yes, the market is softening, but prices saw an uptick from August to September. That might seem confusing since we’re talking about the market cooling, but it highlights exactly what I’ve been talking about lately in that you don’t often see a market changing by looking at prices. You see change first in the listings and sales volume – and then prices eventually. This is exactly what’s happening right now. 

Normal fall stuff: Last month it took longer to sell, the number of listings increased, and we saw a dip in sales volume. This is what we’d expect to see at this time of year, though the dip in volume was definitely sharp, which is something we’ll watch over time to see if it’s a byproduct of a dull fall or the start of a bigger trend. Beyond volume being down 6% this quarter, all the metrics look fairly normal for the fall. Well, they look normal for a dull fall season, that is.

Momentum slowing: Beyond a seasonal slowing we’re also seeing momentum slowing. 

Interest rates rising: One of the reasons why we’re seeing volume slough could be due to interest rates rising. Earlier in the year it seemed buyers ran to the market in light of news of rising rates, but right now it doesn’t seem like buyers have their running shoes on any longer.

Buyers have more power, but not all power: The market is shifting to favor buyers, though sellers still have lots of power. Some buyers hear about a softening market and think they can make lowball offers, but that’s just not realistic. For instance, last month 40% of all sales had multiple offers in the region. That tells us the market isn’t dead despite softening. Buyers, did you hear that? Enjoy your newfound power, but you still have to bring strong reasonable offers.

Listings may have peaked: Overall housing inventory is up as I mentioned above, but it looks like the number of listings is starting to crest for the year. I’ve been watching listings closely over the past few weeks and it seems like they maybe peaked. We’ll know for sure in a month or so. This is exactly what we’d expect to see happen around this time of year, but it maybe seems like more welcome news right now. Let’s keep watching to know for sure.

Being technical about weak volume and inventory: Here’s the thing, we saw a very weak sales volume in September, and it ended up really impacting inventory levels. In fact, when looking at graphs the trend line shot up dramatically last month (see below). But technically what happened was the sales that normally would’ve sold were basically piled on to the number of listings instead, and that’s making the housing supply figure look much more dramatic. Ultimately the number of listings isn’t all that abnormal for the time of year, though if sales continue to dry up over time, then it becomes a much bigger deal to have even this number of “normal” listings.

Pricing lower this fall: Right now at the least it looks like we’re poised to have a dull fall like we had in 2014. These past couples of fall seasons the market simply felt a little more flat, but this year I expect we’ll see a more pronounced price difference between sales in the spring and the fall. Remember, if listings aren’t attracting offers, it’s because the market is no longer biting at that level. What is similar and getting into contract? That’s the big question, and when a fall season is more dull it’s important to be realistic about the need to potentially price lower. In other words, it’s probably not going to be enough to price a property 1% below the height of spring and expect a flood of buyers. Remember, it doesn’t matter what other listings are priced at if they’re not selling. The only thing that matters is what is actually getting into contract. That’s where we see the market.


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