California is The Place You Want to Be!
The NFL will be showcasing its upcoming advertisement for California this year – a sunny and warm 88 degrees in our state and yes, it is February. With so many eyes watching this annual event and people relaxing in their homes and hometowns across the country wondering what life would be like if they could only enjoy the California lifestyle year-round. This imagery is one that typically inspires while providing a catalyst for those in not so friendly climates to ask the question of themselves – how soon can I move there?
Our new year begins with hope and a resurgent, energetic marketplace. According to BAREIS MLS, January’s data points indicate that Sonoma County buyers successfully contracted to purchase 281 single-family homes – 25 percent fewer than a year earlier. A remarkable feat considering inventory was off 49 percent from the prior year. Couple this with property owners delivering just 226 new offerings in the month – also 49 percent fewer than last January - and you find a recipe for values to press higher. Buyers managed to complete purchases on 242 dwellings – 23 percent off from last January and primarily due to the lack of inventory available.
The compression within our markets is easily understood by realizing that the spike in buyer demands coupled with reluctant sellers over time creates a chasm that inevitably forces prices higher to tempt sellers to market. This prolonged immense activity has created a hurried pace causing available inventory to sell promptly while less new offerings have been showing up in each of the preceding 12 months, thereby leaving us with 232 single-family homes to carry over into February – another new record low point – compared to the 458 units available for sale during this same period last year while leaving the Sonoma County market now staring at an absorption rate of 107 percent.
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 rapidly, 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.
One of smallest of the seven Bay Area Counties, Marin, is one of the few hotter locations - at least on a percentage basis - than Sonoma County. Now, with the holidays behind us, we should see sellers awakening to participate once again. Marin property owners introduced 79 new single-family offerings in January – 58 percent less than a year earlier – with buyers promptly absorbing 87 homes in consummated contracts. Seller brought finality to another 95 transactions during the period leaving the entire region with just 71 homes available for buyers to peruse in February – 49 percent less than just twelve months ago. Marin’s pace highlights one of the Bay Area’s most hurried markets with the absorption rate now at 134 percent.
Napa County’s markets are following suit – though still at a lesser pace - with available monthly inventory closing out the month at 117 units – 38 Percent less than this same time last year along with being a new all-time low. Sellers managed to deliver 67 new homes to market in January while buyers placed 69 new deals into escrow. Home sellers closed out another 60 sales in the period establishing a 51 percent absorption rate and keeping buyers on notice that a home is a very precious commodity.
Nationally, as well as locally, we have underbuilt the supply of new homes for well over a decade now – due primarily to development hurdles, the Great Recession and underlying costs to construct each new unit. Even with concerted swift action this will take decades to correct, so for now we will continue to see values escalate in the most desirable markets and much like the Clampetts family from the 60’s TV show, people will rediscover that California is the place you want to be…swimming pools, movie stars.
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