Peeking Behind the Curtain
As the curtain opens up to unveil the changes afoot in market conditions, we are starting to see that show up in the data we track now as these “look back” metrics are catching up with what main street practitioners and active buyers have known for the last 60 days.
According to BAREIS MLS, June’s data points indicate that Sonoma County buyers successfully contracted to purchase 401 single-family homes – 33 percent fewer than last year at this time. Property owners delivered 341 new offerings during the month – still off 50 percent from than last June – while buyers managed to complete purchases on 416 dwellings – 36 percent less than a year ago – showcasing the confluence of both less available homes to buy and the impact that higher interest rates are making on buyers in the marketplace, further exemplifying the change in market conditions that have taken hold so abruptly, though artificially due to the Federal Reserve’s aggressive action to retard inflation.
As players in the market digest information and sentiment levels, the data also shows that the Federal Reserve’s policy of pressing interest rates higher is having a measured impact - not only in tempering the heated real estate markets but across the spectrum of our economy - essentially working to retard demand enough in each sector to allow supplies to come into balance.
The natural “bell curve” of our market is taking place, as it does each year, and we expect heightened – though welcomed - new inventory to come into the market each month from now through September. For now, July is upon us, and buyers will be surveying the 586 available homes remaining - 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. June left us with this metric reading at 71 percent in Sonoma County – still off the charts high, though 15 points lower than just last month.
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. Conversely, an absorption rate below 15 percent is indicative of a buyer’s market, meaning homes are selling more slowly.
Marin County’s market finally saw inventory crest higher than where it was last year at this time – further supporting the mood on main street of a market in transition. Marin property owners introduced 184 new single-family offerings in the period – 30 percent less than a year earlier – with buyers promptly absorbing 205 homes in consummated contracts – less than last month and 29 percent less than last year. Sellers brought finality to another 232 transactions during the period - also 30 percent fewer - leaving the entire region with 260 homes available for buyers to peruse in July – 27 percent higher than last year at this time. Marin’s pace still highlights one of the Bay Area’s most hurried markets with the absorption at 89 percent. That said, as aggressive a pace this is it is amazingly 100 percent less than last June, echoing how much buyers appetites have been impacted by the Federal Reserve’s actions.
The last 60 days have brought about similar turns in Napa County’s markets as well. Available monthly inventory at the end June stood at 215 units. Sellers managed to deliver 109 new offerings to the market in the period while buyers placed 98 new deals into escrow – 29 percent fewer than last year. Home sellers closed out another 105 sales during the month allowing the absorption rate to slip further to 48 percent.
To navigate your way through a dynamic marketplace in flux requires the guidance of a seasoned professional…this is not the time to turn to the inexperienced that have never worked through marketplace transitions or go it alone. This is exactly the market that unveils the fortitude and aptitude of who is serving you.
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