The Feel of the Marketplace

The Feel of the Marketplace

Our world revolves around data. Taking it in, organizing it then distributing the results to reveal the past – not the future. As a practitioner you look at the buyers in the marketplace to assess the mood of the markets along with whether or not the historic trends in place will follow through in the ensuing period. When you spot compounded behavioral patterns and disjointed discussions parting from the trend the data shows, then you know you the energy of the market is adjusting.

The Santa Rosa metro region is still working to accommodate the demands of the greater Bay Area along with its’ own, and according to BAREIS MLS – now with May in the rearview mirror - the data points to a marketplace still absorbing homes at higher than typical seasonal level with only 150 single-family homes remaining for sale in the city and its environs – 43 percent less than this same time a year ago. Exacerbated buyer activity has claimed another 190 single-family homes during the past month – a rate 23 percent less than a year earlier – still truly remarkable considering the shrinkage of inventory available for purchasing and demonstrating the percentage of sales in relation to inventory is still significantly higher than last year at this time.

The entire municipality introduced merely 170 new listings to the market over the last month – 41 percent fewer than in 2021. The most recent period also found Seller’s handing over keys on 156 completed sales – 28 percent behind last year and held back due to the lack of homes for buyers to select from. With the lack of a credible supply, the statistics will be artificially hampered since a significant portion of unsatiated demand is going unmet each month as more properties continue to be absorbed while fewer sellers enter the “open” market – this will eventually point to a false reading of sales shrinking as when sales fall due to lack of supply it is a totally different story than when they fall when inventories are bountiful.

This compression is affirmed by Santa Rosa recording its’ Months’ Supply of Inventory (MSI) at 1.0 – resting just above the all-time tightest reading recorded. This can be attributed to the fundamental shift in population migration from the greater Bay Area along with the cost of money – for now - in our current economy coupled with a lack of property owners interested in leaving the area.

MSI is the metric that indicates the number of months it would take to sell the current inventory at the current rate of sales. An MSI ranging from 4.0 to 6.0 is indicative of a balanced market, with lower numbers increasingly favoring sellers and vice versa.

Within the city, Northeast Santa Rosa – the North Bay’s most active submarket - saw the introduction of 64 single-family homes in May - 44 percent fewer than this same period a year ago. The supply of homes was met with enhanced demands during the period as there were only 61 dwellings for home seekers to consider by months end – 40 percent fewer than the depths we were experiencing at this time last year. Buyers still managed to absorb 71 homes into contracts while sellers received closing checks on another 57 properties – resulting in an MSI of 1.1.

Southeast Santa Rosa saw the supply of listed properties rest at 28 by the end of last month. This submarket debuted 27 new homes in the period while buyers garnered accepted offers on 35 additional dwellings. This coveted corner of the city experienced 36 formal transfers in May culminating in an MSI reading of 0.8.

Oakmont is still seeing Intense buyer activity that has left this region with only 17 homes available for sale as May concluded. Property owners launched 21 new offerings in the period while buyers inked out 23 new deals. Sellers completed another 15 transactions during the month – 33 percent fewer than the prior year - leaving this niche market with an MSI of 1.1.

Northwest Santa Rosa saw buyers swoop in to gain control of 43 more deals, leaving just 34 single-family homes available for sale at months end. Sellers committed 44 additional offerings to the markets while another 35 homes completed the closing process. Steady, intense activity has been holding MSI under a one-month supply for well over year and, as of this month, it has finally crept back up to 1.0.

Southwest Santa Rosa sellers managed to deliver 14 new offerings to the market this past month only to see consumers place 18 more dwellings into contract. Newly minted homeowners captured keys on 13 closings, leaving just 10 homes available for buyers to peruse in June while establishing an MSI of 0.8.

As the Federal Reserve works to raise the costs of money to deter the desire of buying – anything – our markets look to sort through what that means on the street. The higher cost to borrow is being used to abate demand long enough for supply to come into balance. The problem with commodities - like real estate - is that supply does not show up in large quantities to satiate demand, which is also why real estate has offered strong long-term results cycle after cycle, decade after decade.