Simmering Market with Fits and Starts

Simmering Market with Fits and Starts

With Summer in swing, our markets are experiencing the typical uneven activity associated with consumers taking vacations, attending weddings and reunions while making the last of their season
before children get back into school leaving us with flurries of demand that bounce throughout locales as well as price niche’s.

According to BAREIS MLS, with July in the rearview mirror, the data points indicate that Sonoma County buyers successfully contracted to purchase 364 single-family homes – 11 percent greater than the prior year. Property owners delivered 269 new offerings during the month – off 38 percent from a year earlier along with being another new historical low for this period – while buyers managed to complete
purchases on 302 dwellings – 15 percent less than a year ago.

With August now upon us, buyers will be surveying the 633 available homes remaining in Sonoma County – 17 percent fewer than in 2022 - 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. July left us with this metric reading at 48 percent in Sonoma County – just a nudge
more than last year at this time – indicating buyers are putting last year’s perfect storm of challenges behind them now and determined that the retrenching in prices locally, coupled with long-term interest
rates anticipated to trend lower, are the sign to jump back into the process of acquiring their new home – if only there were more available to acquire. All this has driven the median value to a new all-time high of $855,000.

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 just 96 new single- family offerings last month – 49 percent less than a year earlier – with buyers absorbing 122 homes in consummated contracts. Sellers brought finality to another 164 transactions during the period – 10 percent fewer than in 2022 - leaving the entire region with just 209 dwellings available for buyers to peruse this month – 36 percent lower than last year at this time along with being another new all-time low inventory mark for the period. Marin’s absorption rate stayed elevated in July at 79 percent - indicating that this market is gaining strength with regard to property values moving higher along with establishing an even more competitive environment for buyers.

Napa County’s markets are trailing both those mentioned above. July witnessed the release of only 68 new offerings to the marketplace – 40 percent less than twelve months earlier – leaving inventory levels in the shallows once more with merely 253 dwellings for home seekers to peruse in August – off another 10 percent from the depths experienced at this same time last year as well as being another all-time low for the month. Buyers placed 81 new deals into escrow – just one percent less than last year – while closed transactions tipped the scales at 76 during the month allowing the absorption rate to rest at 30 percent – indicating that this market is more in favor of sellers as well - just not at the same voracity as its North Bay neighbors.

The primary reason for the resilient, if not actually accelerating values we are experiencing, is that there are not enough single-family homes available nor being built to satiate the demands of our society.
Couple that with Millennials – the largest of any generation tracked – who are aging into their prime home purchasing years, and you start to realize this is much more of a long-term problem than some
blip on the radar. The only thing holding back runaway prices are the rising interest rates which are only tempering the demand, not abating it.

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