It’s Beginning to Feel a Lot Like Summer
As we embark on the summer season, we see a few factors that will dictate the cadence of our marketplace through November. The two key ones being the ebb and flow of interest rates as well as the political rancor leading up to the Presidential election.
According to BAREIS MLS, as May appears in the rearview mirror, we find our markets reporting steady buyer activity along with a higher level of inventory options. The data points indicate that Sonoma County buyers successfully contracted to purchase 421 single-family homes – 16 percent ahead of last May. Property owners delivered 386 new offerings during the month – off 22 percent from 2023 along with being another new historical low for the period – while buyers managed to complete purchases on 341 dwellings – five percent fewer than the 359 units that changed hands last year at this time.
With June now upon us, buyers will be surveying the 827 available homes remaining in Sonoma County – a significant 39 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. May’s activity left us with a heightened reading of 41 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 6.5-7.0 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 193 new single-family offerings this May – another all-time monthly low. These woefully lacking inventory levels may continue to exacerbate a more competitive environment for both new and existing buyers in pursuit of making Marin their home in 2024. Buyers absorbed 212 homes in consummated contracts while sellers brought finality to another 217 transactions during the period – very similar to last year - leaving the entire region with 373 dwellings available for buyers to peruse in June. Marin’s absorption rate for the month slipped ever so slightly to 58 percent - indicating that this market could still experience price escalations coupled with multiple offers.
Napa County’s markets still trail both those mentioned above when it comes to activity. May witnessed the release of just 94 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 308 dwellings for home seekers to peruse this June. Buyers placed 86 new deals into escrow – just one more than last year – while closed transactions tipped the scales at 81 during the month – seven percent fewer than last year. The combination of new releases coupled with buyer activity has the absorption rate a bit lower this month at 26 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.
As a practitioner you can feel the market energy shift as interest rate move up and down, hereby foretelling that we have huge pent up demand looking to jump into the market provided they can get the relief buyers feel they need in the interest rates they are looking to strike at when purchasing their new home. Couple this with the emotional political climate which can either subdue the desire or encourage buyers into action or extended indecision. One thing remains true though all of this, finding the right home is not a very easy task, so when you do, you should act on it as nobody wants to buy a home they just “kind of” like just because they get what they feel is a great interest rate at the time.
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