Summering Weighs on Market
American’s are holidaying like at no other period in history: visiting family, seeing the globe and inhaling life while realizing the fragility of it and what they have endured over the last few years.
According to BAREIS MLS, July’s data points indicate that Sonoma County buyers successfully contracted to purchase 333 single-family homes – 46 percent fewer than last year at this time. Property owners delivered 314 new offerings during the month – off 48 percent from last July – while buyers managed to complete purchases on 348 dwellings – 41 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 while further exemplifying the change in market conditions that have taken hold so abruptly - though due artificially 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 has been disassembled both by this action and American’s choosing to broaden their “summering” more than ever before, grasping at the past few years of missed travel, celebrations, reunions and weddings.
For now, August is upon us, and buyers will be surveying the 625 available homes remaining in Sonoma County - 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 56 percent in Sonoma County – still off the charts high, though at its’ lowest since just before the pandemic.
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 County’s market 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 122 new single-family offerings in the period – 50 percent less than a year earlier – with buyers absorbing 184 homes in consummated contracts – a rarity to see lesser sales happening during a time of year when we traditionally experience a peak in completed transactions. Sellers brought finality to 171 transactions during the period - 31 percent fewer than in 2021 - leaving the entire region with 247 homes available for buyers to peruse in August – 18 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 69 percent.
Napa County’s markets are having results in-line with the balance of the Bay Area as well. Available monthly inventory at the end July stood at 231 units. Sellers managed to deliver just 75 new offerings to the market in the period while buyers placed 92 new deals into escrow – 26 percent fewer than last year. Home sellers closed out another 75 sales during the month allowing the absorption rate to slip further to 33 percent.
What impact will “summering” for an extended period have on the markets? We will find out once September and October come to an end, so hang onto your mojo and get prepared to make the deal you want while the window of opportunity is open.
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