Economically our markets look ripe for a few points of price increases through June. So, what happens next? Well, ask any economist, the further out you seek assurances the cloudier the forecast and broader range of possibilities that can unfold. Considering Robert Eyler, our esteemed Sonoma State Economics Professor, as well as Selma Hepp, the wonderkid economist at Compass, the collective thoughts are that we are strong though we may feel some recessionary market forces as we near 2021 to which the scale is undetermined though not thought to be hugely detrimental due to the fundamentals here locally. These fundamental are bolstered by the immense effort and funds being poured into the rebuilding of lost portions of our community – which will trickle through our economy more so than markets outside Sonoma County.
Having finally shrugged off the continuous compressions that have hampered our markets flow of commerce from the prior seven years, Sonoma County sellers continue to add supply to a market badly in need of it – though at a decelerating rate from just the year prior. The region typically sees definitive growth in inventory as each new year unfolds with peaks typically showing in spring and summer months while valleys appear in fall and winter. According to BAREIS MLS, with two months in the books for 2019, we saw Sonoma County buyers successfully contract to purchase 276 single-family homes in February – two percent less than a year earlier. This February, property owners launched 207 new properties during the period coming off a year ago where a whopping 417 new listings came available as sellers were pulled into participation from the burning demands of fire victims. Transactions were completed on 214 dwellings during the period – 16 percent less than in 2018 – leaving 597 dwellings to carry over into March and representing a 23 percent climb in inventory from this same period a year earlier while also showcasing an unusual weakening in supply from January inventory levels. The cumulative effect indicates a market strengthening from last Summer’s doldrums with an elevated absorption rate of 36 percent – supporting the theory that the sluggishness witnessed this last year has been abated by lowered interest rates, a pull-back in prices and renewed requirements from buyers.
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 of time. Conversely, an absorption rate below 15 percent is indicative of a buyer’s market, meaning homes are selling more slowly.
Marin County’s marketplace is indicating similar trends as their neighbor to the North with only 101 new offerings arriving to the market this February. Buyers latched onto 122 newly consummated deals – two percent greater than in 2018 – while sellers closed out another 95 transactions. This left the entire region with 251 homes as offerings to buyers in March – encouraging home seekers, with a current absorption rate of 38 percent, to get in control of their new home early this year.
Napa County’s markets have steadily shifted closer to balance year over year as the chasm between sold properties and available properties continues to widen. Sellers delivered 69 new homes to the market – 40 percent less than in 2018 - while buyers jumped on board contracting for 69 deals during the month – 19 percent less than a year earlier. Completed transactions for the period tipped the scales at 64 single family homes – a 15 percent slip in volume from 2018 – while activity during the month allowed March to open with an availability of 278 dwellings – a 48 percent increase in the available supply for buyers to select from and further pressuring the absorption rate to steady near balance with a stabilizing reading of 23 percent.
So, what are your plans for this year? Buying that next home? Building your new one? Selling your property? Let’s chat!
