2025, Will it Be the Year That Turns Our Markets Upward Once Again?
All trend line indicators suggest this is exactly what we should expect in 2025.
According to BAREIS MLS, with 2024 now in the books, we can identify trends that are starting to take hold as each new month turns over. The data points indicate that Sonoma County buyers successfully entered agreements to purchase 200 single-family homes in December – 13% ahead of last year at this time. Property owners delivered merely 111 new offerings during the month – 28% fewer than a year earlier along with being another new historical low for the period. Buyers managed to complete purchases on 248 dwellings – 8% greater than the 229 units that transferred ownership just a year earlier.
With 2025 in play now, buyers will be surveying the 550 available homes remaining in Sonoma County – an encouraging 28% bounce above the 30+year low we experienced last year at this time. As the new year opens up, buyers will be putting the holiday distractions behind them as they start to reignite their home buying process once again to assess the current offerings as well as new ones and determine whether to purchase now or not. This will show up in a common market measure - the absorption rate. December’s activity left us once again with a heightened reading of 45% - meaning that unless a robust amount of new inventory shows up this may create market forces that cause prices to experience an uptick.
The absorption rate is calculated by dividing the total number of homes sold in a month by the total number of homes available for sale at the end of the same month. A high absorption rate – 20 percent and above – indicates that the supply of available homes will shrink, thereby increasing the odds that an owner will sell a property in a shorter period. Conversely, an absorption rate below 15 percent is indicative of a buyer’s market, meaning homes are selling more slowly.
Similarly, Marin property owners introduced only 27 new single-family offerings in December – another all-time monthly low and 29% less than a year earlier. These very weak new delivery numbers will continue to compound the challenges for buyers in Marin County and will continue to create a more competitive environment for both new and existing buyers in pursuit of making Marin their home in 2025. Buyers absorbed 77 homes in consummated contracts while sellers completed sales on 136 dwellings during the period – 21% ahead of last year - leaving the entire region with 147 dwellings available for buyers to peruse this January. Marin’s absorption rate for the month jumped to 92% - one of its highest levels over the last two years – foretelling that buyers will encounter greater competition with each new home they come upon in the marketplace.
Napa County, which has trailed the demands seen in both Sonoma and Marin, has been a balanced market for the prior six months, until now. December brought the release of 33 new offerings to the marketplace – 27% less than last year – leaving 236 homes available for buyers to peruse in January. Buyers placed 54 new deals into escrow – 10 more than last year – while closed transactions tipped the scales at 80 during the month – a staggering 48% more than a year earlier. The combination of new releases coupled with buyer activity has allowed the absorption rate to climb upwards for the first time in the last seven months to close out 2024 at 34%.
Yes, our real estate marketplace should see both more inventory as well as more closed sales - let’s not get carried away with expectations of grandeur - think this means about 10% more sales volume by the time we end 2025 and values that – depending on the niche market – may see price escalations of 2-5%.
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