Steady, Though on the Precipice of Assault
Market activity continues to increase as our year has come along and the only thing tempering it from even greater demands are that the Federal Reserve continues to hold interest rates at their elevated levels lying in wait for inflationary conditions to abate.
According to BAREIS MLS, a quarter of the way through the year now, we find our markets are following through on the brisk start we witnessed in January. The data points indicate that Sonoma County buyers successfully contracted to purchase 303 single-family homes – three percent behind last March. Property owners delivered 293 new offerings during the month – off 19 percent from 2023 along with being another new historical low for the period – while buyers managed to complete purchases on 283 dwellings – exactly on par with last year at this time.
With April now upon us, buyers will be surveying the 493 available homes remaining in Sonoma County – an encouraging 28 percent more than in 2023. As the year continues to take shape, buyers will be making determinations on these offerings, along with the debut of new ones, as to purchasing now, or not, and this will show up in a common market measure - the absorption rate. March’s market participants drove us to a 57 percent reading as Sonoma County remains buoyant with activity lifted by steady demand from the core Bay Area region along with additional relocations to the wine country from out of state buyers.
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 133 new single-family offerings in March – 38 percent less than the 215 units that debuted during the same period last year, which was an all-time low record even then. This woefully lacking inventory introduction could exacerbate a staunchly more competitive environment for both new and existing buyers in pursuit of making Marin their home in 2024. Buyers absorbed 170 homes in consummated contracts while sellers brought finality to another 119 transactions during the period – 17 percent behind last year - leaving the entire region with 218 dwellings available for buyers to peruse as we break into April. Marin’s absorption rate steadied at 55 percent - indicating that this market may experience price escalations as more suitors become available for each prospective offering even with interest rates trending more level at present while certainly making acquiring your new home in 2024 an even more competitive task while pushing would be home seekers northwards into Sonoma County to achieve their property ownership goals.
Napa County’s markets continue to trail both those mentioned above when it comes to activity. March witnessed the release of 95 new offerings to the marketplace – 11 percent less than twelve months earlier along with being another new monthly low. The lack of willing sellers is leaving inventory levels in a trough once again with 223 dwellings for home seekers to peruse this April. Buyers placed 96 new deals into escrow – nine percent greater than in 2023 – while closed transactions tipped the scales at 64 during the month – 19 percent less than last year. The combination of new releases coupled with buyer activity has the absorption rate a bit higher this month at 29 percent – indicating that the previous months that made buyers feel like they would be yielding more control over market terms has once again given way as it trends towards the control of sellers.
Overall, according to a majority of economists, we expect to encounter a greater volume of transactions in 2024 after last year saw volume levels shrink to a 30-year low. That’s asking a lot of our regional markets since new offerings will have to primarily come one at a time as the lack of significant new construction continues to be one of the major market impediments we face in the North Bay.
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