The economy may not yet be in a recession, but the housing market is. U.S. home sales have declined for nine straight months. That’s the longest losing streak since the National Association of Realtors began tracking that data in 1999.

El Dorado County’s existing home sales for November fell 52% from November 2021. That’s the lowest number of monthly sales since 2008, when we were in the middle of the Great Recession. Homes that sell are taking longer and sellers are accepting less than their asking price. In November 2021, 14 days was the average time a home was on the market before the seller accepted an offer. Seventy-five percent of all accepted offers were 101.29% over the listing price. Last month, 54% of the homes that sold were on the market for an average of 40 days and sellers received an average of 98.36% of their asking price.

After 12 years of sustained overdrive, the county’s median selling price has shifted into reverse. Since the end of the 2008 Great Recession, county home prices have been accelerating. In 2010 the median selling price for a county home was $295,000. Ten years later county home prices had increased 78% to $525,000. The pandemic propelled the market to warp speed. From December 2020 to June 2022, the county’s median selling price went from $515,000 to $700,000, a whopping 35% increase. That housing rocket has run out of fuel.

Last month the median selling price for a county home was $565,000. That’s the lowest price since March 2020 and a 20% drop from June’s peak. The market is undergoing the largest reset in home values since the Great Recession. That’s because mortgage rates have doubled in the last year. They are likely to continue climbing as the Fed attempts to not only bring down a 40-year high inflation rate but deliberately crash home prices.

In the November Open Market Committee meeting, Chairman of the Federal Reserve Jerome Powel made it pretty clear he would use his best efforts to drive down home values. “The housing market was very overheated. The market needs to get back into a balance between supply and demand. We need to go through a correction to get back to that place.”

We wouldn’t need to get back to whatever “place” Powell is thinking about, if the Fed had not over-heated the market by maintaining an unprecedented low interest rate environment. What did the Fed expect would happen to home prices when they lowered interests rates to nearly zero and left them there? The government’s $5 trillion COVID-19 spending binge accelerated things. Lowering interest rates and federal stimulus monies likely prevented a prolonged COVID recession but they ignited both inflation and the run-up in housing prices.

Where to from here? A significant portion of folks fear the housing market is headed for a significant crash. According to a recent survey by LendingTree, 41% of Americans expect the market to crash within the next 12 months. Of those who expect a crash, 74% believe it will be bad or worse than the 2008 Great Recession.

Senior economist with Pantheon Macroeconomics, Kieran Clancy, said “Collapse of home prices is coming.” Pantheon estimates that existing home prices will fall 20% from their June peak. Data-Trek Research reported, “Home prices will need to decline as much as 20% over the course of a multi-year correction before the housing industry can get back on track.” The California Association of Realtors expects the median selling price for a California home next year will be 8.8% lower.

Author and one-time Northern California journalist Mark Twain was reported as saying, “The news of my death is greatly exaggerated.” The same could be said for the fatal projections about the real estate market — they have been greatly exaggerated.

Another quote attributed to Mark Twain: “Figures don’t lie but liars do figure.”

Statistics are often misleading. While it’s true sales and prices have declined, November and December numbers are typically the slowest months during the year and June is one of the best. November’s home prices were 20% lower than its June peak, but the median selling price for the past 11 months is $650,000, $30,000 higher than last year’s statistical average.

The November drop in the county’s median selling price cannot be applied to every county home. Averages and median prices can be influences by extremely high and low numbers. In November last year, 43 homes sold in excess of $1 million. Last month 16 homes sold in excess of $1 million. Fewer million-dollar sales will affect the county’s collective median price but not necessarily the value of an individual property.

Every home, its location and price range is going to be affected differently. Modestly priced homes less than $550,000 are selling faster than homes priced more than $800,000. Rural properties are taking longer to sell at prices 7% below similar sized homes located in more developed communities.

California’s chronic housing shortage insures the state will fare better in the national housing recession. El Dorado County will hold up better than the state. That’s because we have more folks who want to move here than homes available.

Articie by: Ken Calhoon a real estate broker in El Dorado County. He can be reached for questions and comments at ken@kencalhoon.com.