Sales Continue to Outpace New Inventory

Buyers are purchasing more homes than are available on the open market, we must acknowledge that this pace is unsustainable while inevitably providing broader pressure for prices to rise which in-turn may draw more sellers into the market - provided they feel like they have a reasonable chance to execute the move they want.

With another year behind us, according to BAREIS MLS, December’s data points indicate that Sonoma County buyers successfully contracted to purchase 270 single-family homes – 23 percent fewer than a year earlier. A remarkable feat considering inventory was off 52 percent from the prior year. Couple this with property owners delivering a mere 128 new offerings in the month – 55 percent fewer than last December and now the least amount ever recorded in a single-month - and you find a recipe for values to press higher. Buyers managed to complete purchases on 398 dwellings – 11 percent off from last and only due to the lack of inventory available.

The compression within our markets is easily understood by realizing that the spike in buyer demands coupled with reluctant sellers over time creates a chasm that inevitably forces prices higher to tempt sellers to market. This prolonged immense activity has created a hurried pace causing available inventory to sell promptly while less new offerings have been showing up in each of the preceding 12 months, thereby leaving us with a mere 242 single-family homes to carry over into the new year – compared to 499 units during this same period last year - and with the anticipation of fewer homes debuting in the market over the next month or so this could further exacerbate current conditions, especially considering the current absorption rate of 165 percent.

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.

One of smallest of the seven Bay Area Counties, Marin, is one of the few hotter locations - at least on a percentage basis - than Sonoma County. Typical of what you would see during the holiday season, though now registering a new all-time low, sellers introduced just 36 new single-family offerings in December – 64 percent less than a year earlier. Buyers promptly absorbed 88 homes in consummated contracts while sellers closed out 151 transactions during the period leaving the entire region with just 50 homes available for buyers to peruse in January – 68 percent less than just twelve months ago as well as being a historic low. Marin’s pace highlights one of the Bay Area’s most hurried markets with the absorption rate now at 302 percent – another record!

Napa County’s markets are following suit – though at a lesser pace - with available monthly inventory closing out the year at 122 units – 33 Percent less than this same time last year. Sellers managed to deliver just 23 new homes to market this last month – the fewest of any month ever - while buyers placed 65 new deals into escrow. Home sellers closed out another 115 sales in the period establishing a 94 percent absorption rate.

With 2022 upon us, we expect more of the same to occur this year and it will take willing sellers participating in the markets to continue the flow of commerce at hand. We do expect statistics to point towards lower sales though this will be a false reading of the health of our marketplace as it will be due to lack of inventory causing the hold back and not an absence of demand.