This is from "Sacramenrto Appraisal Blog" authored by Ryan Lundquist.  Ryan has been an appraiser since 2003 and offers his unique perspective of the market.  Here is a link to his blog.  

Mr. Lundquist addresses the idea of normalcy in the real estate market and offers statistics to support his position

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Is the housing market getting back to normal?

“The housing market is getting back to normal.” I hear that quite a bit, but is it true? Well, yes and no. Let me explain.

THE VERDICT: NORMAL OR NOT?

NORMAL:

Lots of metrics are technically getting closer to normal pre-pandemic levels. We’re seeing price growth at 6-7% instead of 15-20%, monthly supply has ticked up, properties aren’t getting bid up like they used to, and it’s starting to take longer to sell. Technically, many housing metrics are flirting with normalcy. However, there are also some abnormal things happening.

NORMAL (EXAMPLE 1):

Bidding wars have calmed down. What I mean is the number of properties selling below the original list price is starting to approach normal levels. The black dotted line shows July sales so far, and we are pretty close to normal.

NORMAL (EXAMPLE 2):

Finally, properties are starting to take longer to sell. We aren’t back to normal levels quite yet (red line), but we’re getting much closer. This black will be a whole lot higher in the coming months.

NOT NORMAL:

• A sharp rise in inventory
• Sales volume last month was down about 25% from June 2021
• Pending contract volume was down over 25% from June 2021
• Price reductions have seen a sharp increase

NOT NORMAL (EXAMPLE 1):

Sales volume in Sacramento County had another really low month. It was one of the lowest months in the past twenty years.

NOT NORMAL (EXAMPLE 2):

The number of pending contracts is down in most counties by about 25% or slightly more. The number of pendings at this time of year is clearly below a normal trend (see black line). The future hasn’t happened, so we’ll see what this line does, but we’re poised to see pendings continue to dip in volume unless something happens to interrupt the trend.

In short, many metrics are hovering around normal or almost normal levels for the time being, so I can understand when people say the housing market is normalizing or trying to find balance. It’s like we were on a honeymoon for two years, and now it’s real-life instead of an endless mai tai vacation vibe.

But here’s the bigger truth. We are in the midst of change due to dropping buyer demand and increasing supply. Simply put, a sharp change in mortgage rates is driving a wider gap between supply and demand, which is changing the housing temperature by the week.

We need time and objectivity to see the long-term trend, but for now, it’s apparent we’ve seen a blatant shift from a really aggressive trend to more buyers struggling to afford higher prices. There are certainly still deals happening, as 75% of the pending volume was present last month, and 40% of pendings in July have had multiple offers. But understanding the housing market isn’t just about the deals happening. It’s also about the ones that aren’t happening. Let’s keep an eye on both. 

My advice? Be careful not to impose a doom or rosy narrative on the numbers. Also, I recommend paying attention to lots of metrics – not just the ones that fit a certain narrative. The key here is to continue to identify what is normal and what is not normal.

What are you seeing in the trenches? I’d love to hear.

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