Market Pressure Forces Values to Rise
Oxford’s English dictionary states that “market pressure” is simply constraints placed on trade by the level of demand in the market. Essentially, when robust demand outstrips the supply – in our case of willing sellers – you create the situation we find ourselves in presently.
According to BAREIS MLS, Sonoma County had exactly 242 single-family homes left for sale as 2021 concluded – 52 percent fewer than this same period last year and a new historic inventory low. Sellers delivered just 128 new listings to the market during the month – 55 percent less than in 2020 - and, if this trend continues, sales will have no choice but to fall as inventories continue to be depleted and options are drying up for purchasing. This December, buyers gained control of another 270 new deals – 23 percent off from a year earlier though due only to available inventory being down by more than half. In support of these metrics, completed sales tipped the scales at 398 this last month – 11 percent fewer than the prior year - due to the lack of sellers participating in the marketplace.
The continued pace of the markets can be measured by the months’ supply of inventory (MSI) and, with vastly growing demands from buyers in our region along with extremely attractive interest rates driving our markets, the data shows MSI down to 0.6 as of last month – a new all-time low reading highlighting buyers more than ever outnumbering sellers. This display of liquidity and activity is among the highest in the seven Bay Area counties we track and, in part, due to the native demands of households, unique to our region, who are still replacing the 6000 plus homes they lost in the Tubbs, Nuns, Kincade, Glass and Wallbridge Fire calamities.
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 32 homes reported for sale as December ended – 55 percent less than this same period a year ago. This region experienced the addition of just six new listings during the period – 78 percent fewer than last year - while buyers garnered accepted contracts on 26 more properties. Sellers in the valley awarded keys to another 29 new homeowners steadying the MSI at 1.1.
Healdsburg witnessed just four new listings arrive to the market last month – the fewest ever. Buyers absorbed 17 homes in new deals while sellers closed out another 24 transactions leaving this submarket with 34 homes for presentation to buyers in January, along with an MSI of 1.4.
Petaluma’s Westside only attracted five new sellers in December which caused available inventory to plummet to seven homes remaining for sale by year’s end. Buyers grabbed eight new deals in the period while sellers closed out 23 purchases causing MSI to tighten further to 0.3 – that is less than a two-week supply of inventory and a new record as well.
Across town, Petaluma’s Eastside supply of inventory is still being measured in weeks not months. The year wrapped up with merely nine available homes for buyers to consider - inclusive of the seven additional offerings unveiled during the period. Home shoppers placed 13 more dwellings into contract while sellers also completed 21 transactions. With an MSI of 0.4 - less than a two-weeks supply of homes available – continue to expect values to rise to encourage more sellers into the market.
Sebastopol property owners delivered just five new listings in the final month of 2021 - falling significantly short of demand as buyers captured another 14 deals during the period. Sellers closed out 21 more sales leaving just 13 single-family homes available for buyers to peruse in January while highlighting an MSI now at 0.6.
In our case – as is with most other desirable locations across the state and country - Market pressure is hard to alleviate from the supply side of the equation as we cannot build new homes quickly enough to balance the demands of buyers. This leaves existing homes as the primary source of inventory – which means you must dangle a bigger carrot in front of property owners to tempt them into the marketplace.
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