A Rate Driven Market

A Rate Driven Market

Seemingly these days, the voracity of the market is being dictated by swings in interest rates. When the cost to finance moves steadily above seven percent, we see buyers being more indecisive though when interest rates subside into the six percent range we see a blossoming of commitment. 

According to BAREIS MLS, with April now in the books, we find our markets reporting steady buyer activity along with a slightly higher level of inventory. The data points indicate that Sonoma County buyers successfully contracted to purchase 354 single-family homes – eight percent ahead of last April. Property owners delivered 378 new offerings during the month – off 13 percent from 2023 along with being another new historical low for the period – while buyers managed to complete purchases on 318 dwellings – 13 percent more than the 282 units that changed hands last year at this time.

With May now upon us, buyers will be surveying the 676 available homes remaining in Sonoma County – a robust 48 percent more than in 2023. As the year continues to take shape, buyers will be making determinations on these offerings, along with the debut of new ones, as to purchasing now, or not, and this will show up in a common market measure - the absorption rate. April’s market participants drove us to a 47 percent reading as Sonoma County remains buoyant with activity lifted by interest rates dipping to offer buyers sub-seven percent financing once again. 

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.

Marin property owners introduced 177 new single-family offerings in April – 12 percent less than the 202 units that debuted during the same period last year, which was an all-time low record even then. This woefully lacking inventory introduction could exacerbate a staunchly more competitive environment for both new and existing buyers in pursuit of making Marin their home in 2024. Buyers absorbed 197 homes in consummated contracts while sellers brought finality to another 174 transactions during the period – just a nudge above last year - leaving the entire region with 294 dwellings available for buyers to peruse as we break into May. Marin’s absorption rate increased a bit to 59 percent - indicating that this market may experience price escalations as more suitors become available for each prospective offering, and with interest rates trending more favorably for the borrowing population, this could certainly make acquiring your new home an even more competitive task in Marin.

Napa County’s markets still trail both those mentioned above when it comes to activity. April witnessed the release of 111 new offerings to the marketplace – only three fewer homes than twelve months earlier though still another new monthly low. The lack of willing sellers is leaving inventory levels in the shallows once again with 276 dwellings for home seekers to peruse this May. Buyers placed 88 new deals into escrow – 16 percent more than in 2023 – while closed transactions tipped the scales at 90 during the month – 29 percent greater than last year. The combination of new releases coupled with buyer activity has the absorption rate a bit higher this month at 33 percent – indicating that the prevailing trend is once again pointing to a market controlled by those that own property.

The prediction for the next six months is cloudy, but with expectations of mostly sunny periods with random storms – interest rates and presidential election - dictating buyer activity levels while being dependent on willing sellers showing up with fresh inventory.