Markets Looking to Establish Firm Footing

Markets Looking to Establish Firm Footing

Those seeking a new home or real estate investment that requires financing are more impacted by interest rates – of course – than those using cash resources for such. When you think about it this way and realize that buyers that are hoping for lower interest rates are really hoping for bad economic or geopolitical news to come to light in order to make their contrarian purchase strategy less costly, its an unusual hope when you think about it in its entirety this way and really does not calibrate any personal jeopardy one may suffer in the wake of what is being hoped for.

According to BAREIS MLS, with February’s data now tabulated, there is trend affirming momentum taking hold. The data points indicate that Sonoma County buyers successfully entered agreements to purchase 249 single-family homes in February – 2% ahead of last year at this time. Property owners delivered 235 new offerings during the month – 28% fewer than a year earlier along with being another new historical low for the period. Buyers managed to complete purchases on 224 dwellings – 12% ahead of the 200 units that transferred ownership just a year earlier.

Now on the edge of our Spring market arrival, buyers will be surveying the 674 available homes remaining in Sonoma County – a welcomed 60% bounce above the 30+year low we experienced last year at this time. As the new year continues to open, buyers have reignited the home buying process once again and will be assessing the current offerings, as well as new ones, and determining whether to purchase now or not. This will show up in a common market measure - the absorption rate. February’s activity left us once again with an elevated reading of 33% - meaning that unless a robust amount of new inventory shows up without buyers jumping on it, this could lead to market forces that cause prices to experience an uptick as our year pushes forward. 

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 90 new single-family offerings in February – another all-time monthly low and 48% less than a year earlier. These very weak new delivery numbers will continue to compound the challenges for buyers in Marin County and will continue to create a more competitive environment for both new and existing buyers in pursuit of making Marin their home in 2025. Buyers absorbed 115 homes in consummated contracts -20% ahead of last year - while sellers completed sales on 102 dwellings during the period – 19% ahead of a year earlier - leaving the entire region with 235 dwellings available for buyers to peruse this March. Marin’s absorption rate for the month steadied once again at 43% - indicative of the sellers’ market the region has been in since 2011.

Napa County continues to lag the demands seen in both Sonoma and Marin, and this month once again is a market in balance – where it spent half of last year. February brought the release of 90 new offerings to the marketplace – 10% less than last year – leaving 309 homes available for buyers to peruse at the outset of March. Buyers placed 61 new deals into escrow – 9% more than in 2024 – while closed transactions tipped the scales at 50 during the period – 6% fewer than last year. The combination of new releases coupled with buyer activity has pushed and pulled from Seller favor to balance then back over the last 12 months and as of February stood at 16% - a balanced reading once again.

A well know saying I use is “it’s messy in the middle.” By this I mean, when change or a state of flux happens it will undoubtedly feel out of sorts…just like when you first start going to the gym and go through those early painful workouts as you establish a new healthy pattern and pathway. Time to get fit for the market ahead!