Is The Sky Falling?

Is The Sky Falling?

Just because “Chicken Little” has a nut fall on his head does not mean the sky is falling. And so goes the tale of the real estate marketplace when it comes to absorbing the knocks from mortgage rates rising or falling, political rancor and world peace versus chaos.

According to BAREIS MLS, as June appears in the rearview mirror, we find our markets reporting lesser buyer activity along with a higher level of inventory options to select from than a year earlier when inventories were at 30+ year lows. The data points indicate that Sonoma County buyers successfully entered agreements to purchase 399 single-family homes in June – 13 percent ahead of last year at this time. Property owners delivered 336 new offerings during the month – off 21 percent from 2023 along with being another new historical low for the period – while buyers managed to complete purchases on 348 dwellings – 11 percent fewer than the 390 units that transferred ownership last year at this time.

With July now upon us, buyers will be surveying the 893 available homes remaining in Sonoma County – a significant 35 percent bounce above the 30+year low we experienced last year at this time. 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. June’s activity left us with a heightened reading of 39 percent as buyers worked harder to find the home they want - at an interest rate they like – and remain more encouraged to make concerted efforts to follow through on their purchases with rates in the 6.0-6.5 percent range 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 126 new single-family offerings this June – another all-time monthly low. These woefully lacking inventory levels may continue to create a more competitive environment for both new and existing buyers in pursuit of making Marin their home in 2024. Buyers absorbed 210 homes in consummated contracts while sellers brought finality to another 194 transactions during the period – just 19 fewer than last year - leaving the entire region with 334 dwellings available for buyers to peruse in July. Marin’s absorption rate for the month stabilized at 58 percent once again - indicating that this market should still experience price escalations coupled with multiple offers.

Napa County’s markets still trail both those mentioned above when it comes to activity. June witnessed the release of just 84 new offerings to the marketplace – another all-time monthly low. The lack of willing sellers continues to leave inventory levels in the shallows with only 332 dwellings for home seekers to peruse this July. Buyers placed 76 new deals into escrow – just one more than last year – while closed transactions tipped the scales at 72 during the month – 11 percent fewer than last year. The combination of new releases coupled with buyer activity has the absorption rate even lower this month at 22 percent – demonstrating that this market keeps shifting modestly back and forth and remains tenuously close to reflecting a market in balance – though still one with a bias towards sellers holding the advantage.

The fact that we experience constant change and constant hype does not mean there is disorder in the marketplace. These macro conditions can have impact on regions, nations and even the psyche of the world population and we need to realize, while putting this into perspective, as to it having little effect on our own micro scenarios. The question for each of us is how we let any of these events affect our own emotional state of mind from the perspective seat we each sit in and if there is a real, personal effect on our immediate lives? So maybe the sky isn’t falling, maybe you just got bonked on the head by a nut!