Depressed Inventory – Will it Continue?

Depressed Inventory – Will it Continue?

We suspect for the near term it will – at least until next Spring. Since the Federal Reserve handed out nearly free money over the last three years and most all consumers who own real estate have taken advantage of it by lowering their monthly cost of ownership significantly, the properties that are now enjoying these historically low debt costs may never come to market again.

According to BAREIS MLS, Sonoma County had exactly 646 single-family homes left for sale at October’s conclusion – 21 percent fewer than this same period last year. Sellers delivered 260 new listings to the market during the month – 40 percent less than in 2021 - while buyers gained control of another 303 new deals – 36 percent off from a year earlier due to higher interest rates and fewer options for buyers to select from. In support of these metrics, completed sales tipped the scales at 309 this last month – 40 percent fewer than the prior year.

The continued pace of the markets can be measured by the months’ supply of inventory (MSI) and, with the Federal Reserve aggressively trying to dampen demand by raising the cost of money MSI has risen from its depths of 1.2 in December of last year to 2.1 as of last month – still indicative of a seller’s market though with buyers being able to have more influence on the terms of a sale.

MSI is the metric that indicates the number of months it would take to sell the current inventory at the current rate of sales. An MSI ranging from 4.0 to 6.0 is indicative of a balanced market, with lower numbers increasingly favoring sellers and vice versa.

Getting down to the details in the town of Sonoma, which submarket includes the hamlets of Kenwood and Glen Ellen, there were 88 homes reported for sale as October ended – 13 percent less than this same period a year ago. This region experienced the addition of just 23 new listings during the period – 41 percent fewer than last year - while buyers garnered accepted contracts on 23 more properties. Sellers in the valley awarded keys to just 17 new homeowners – 61 percent off from a year earlier – allowing MSI to jump to 5.2 – officially in balance for the first time in years.

Healdsburg witnessed 10 new listings arrive to the market last month – 67 percent fewer than in 2021. Buyers absorbed 12 homes in new deals while sellers closed out another 18 transactions leaving this submarket with 50 homes for presentation to buyers in November, along with an MSI retreating back to 2.8.

Petaluma’s Westside attracted just 16 new sellers in October which allowed available inventory to kick-off the new month with 37 homes for buyers to select from. Home seekers grabbed 16 new deals in the period while sellers closed out 20 purchases allowing MSI to settle back to 1.9.

Sebastopol wrapped up October with 45 available homes for buyers to consider inclusive of the 19 additional offerings unveiled during the period. Home shoppers placed 22 more dwellings into contract while sellers completed 26 sales causing MSI to slip to 1.7.

Windsor property owners delivered another 17 new listings in October while buyers captured 18 deals during the period. Sellers closed out 14 more transactions leaving 28 single-family homes available for buyers to peruse in November while highlighting an MSI swinging back to 2.0 from just 1.2 in the prior month – an activity pattern that has been repeating since Spring.

The desirability to not sell a property that has such low cost will likely be prevalent throughout the marketplace, meaning buyers will be dependent on the development of new housing options to meet their desires for home ownership and that many that buy a new home will not likely sell their current one thereby adding to the forecast of generally lower inventory levels moving forward. This scarcity of options supports the theory of putting a floor in existing home values. So, what should you do regarding your next move in the home ownership arena? Get a real estate advisor you trust involved in your plans now.