No More Free Money

The Hawk’s at our Federal Reserve are seeing the early signs of their aggressive rate moves start to deliver data points, though until they unearth a trend indicating a decelerating economy that leads us to a soft landing, the Federal Reserve will look to stay on plan to thump our nation into this artificial submission by showing their hand for monetary policy over the ensuing months.

According to BAREIS MLS, August’s data points indicate that Sonoma County buyers successfully contracted to purchase 379 single-family homes – 42 percent fewer than last year at this time. Property owners delivered 284 new offerings during the month – off 52 percent from last August – while buyers managed to complete purchases on 337 dwellings – 47 percent less than a year ago – showcasing the confluence of both historically low inventory levels and the impact that higher interest rates are making on buyers in the marketplace while further exemplifying the change in market conditions that have taken hold so abruptly.

With September now upon us, buyers will be surveying the 631 available homes – 42 percent fewer than in 2021 - remaining in Sonoma County, along with the debut of new ones, and making determinations for themselves as to purchasing now, or not, and this will show up in a common market measure - the absorption rate. August left us with this metric reading at 53 percent in Sonoma County – still off the charts high.

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 County’s market saw inventory dip to its lowest point in any given year or month within the year in August. Marin property owners introduced 99 new single-family offerings in the period – 57 percent less than a year earlier – with buyers absorbing 166 homes in consummated contracts – a rarity to see lesser sales happening during a time of year when we traditionally experience the peak of annual activity. Sellers brought finality to 174 transactions during the period - 33 percent fewer than in 2021 - leaving the entire region with 230 homes available for buyers to peruse in September – 45 percent lower than last year at this time. Marin’s pace still highlights one of the Bay Area’s most hurried markets with the absorption at 76 percent.

Napa County’s markets are having results in-line with the balance of the Bay Area as well. Available monthly inventory at the end August stood at 265 units. Sellers managed to deliver just 88 new offerings to the market in the period while buyers placed 93 new deals into escrow – 31 percent fewer than last year. Home sellers closed out another 90 sales during the month allowing the absorption rate to hold at 33 percent.

The last three months have been the only time in my 32 years of tracking the markets that both sellers and buyers essentially bowed out at a time when both have always been running at peak activity levels during this period every year. There is no mystery in it now that we reflect on the confluences that created it and likely we will never see this anomaly take place again.