Sales Outpace Inventory

It is an impossible task to sell more of a commodity than you have but that is the current climate reading of our real estate markets.

According to BAREIS MLS, November’s data points indicate that Sonoma County buyers successfully contracted to purchase 396 single-family homes – just three percent fewer than a year earlier. A remarkable feat considering inventory was off 44 percent from last November plummeting to just 380 available units by months end. Couple this with property owners delivering a mere 207 new offerings in the month – 40 percent fewer than last November, the least amount ever recorded in a single-month - and you find a recipe for values to press higher. Buyer managed to complete purchases on 460 dwellings – seven percent ahead of last year even with a lack of homes to select from.

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 quickly while less is being introduced, leaving just 380 single-family homes to carry over into December – compared to 683 units during this same period last year - and with the anticipation of fewer homes debuting in the market over the next two months this could further exacerbate current conditions, especially considering the current absorption rate of 121 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. More typical of what you would see during the winter holiday low, sellers introduced just 74 new single-family offerings in November – 48 percent less than a year earlier. Buyers promptly absorbed 174 homes into consummated contracts while sellers closed out 201 transactions during the period leaving the entire region with 109 homes available for buyers to peruse in December – 56 percent less than just twelve months ago and a new all-time low. Marin’s pace highlights one of the Bay Area’s busiest markets with the absorption rate now at 184 percent.

Napa County’s markets are following suit with available monthly inventory closing out November at 158 units – 37 Percent less than this same time last year. Sellers managed to deliver just 53 new homes to market this last month – the fewest of any month ever - while buyers placed 99 new deals into escrow. Home sellers closed out another 104 sales in the period establishing a 66 percent absorption rate.

This type of market can begin to feed on itself thereby creating more deals in the shadows than in the open and demanding that buyers work with true market makers in order to accomplish their goal of acquiring a new home.