The Market Has Changed, Once Again
Last year’s perfect storm of unrelenting interest rate increases coupled with a marketplace that had zoomed upwards in value since the start of the pandemic along with the world re-opening and people seizing the opportunity to recapture the life experiences that they had put on pause, has run its course.
According to BAREIS MLS, with February in the rearview mirror, the data points indicate that Sonoma County buyers successfully contracted to purchase 222 single-family homes – 30 percent fewer than the prior February. Property owners delivered 173 new offerings during the month – off 64 percent from a year earlier along with being another new historical low for this period – while buyers managed to complete purchases on 175 dwellings – 32 percent less than a year ago.
With March now upon us, buyers will be surveying the 326 available homes remaining in Sonoma County – 50 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. February left us with this metric reading at 54 percent in Sonoma County – which is 35 percent greater than last year at this time – indicating buyers are putting last year’s perfect storm of challenges behind them now and determined that the 10 percent 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.
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 62 new single-family offerings last month – 71 percent less than a year earlier – with buyers absorbing 94 homes in consummated contracts. Sellers brought finality to 85 transactions during the period – 31 percent fewer than in 2022 - leaving the entire region with only 97 dwellings available for buyers to peruse this month – 69 percent lower than last year at this time along with being another new all-time low inventory mark. Marin’s absorption rate skyrocketed to 88 percent in February which is 126 percent greater than this reading just a year ago indicating that this market may be poised for recapturing some of its value lost over the last year.
Napa County’s markets have not seen the same uptick as those above – yet - and appears to be functioning in a more lagging format. February witnessed the release of 60 new offerings to the marketplace – 49 percent less than twelve months earlier – leaving inventory levels in the shallows once again with merely 131 homes for home seekers to peruse in March. Buyers placed 63 new deals into escrow – 31 percent less than last year – while closed transactions tipped the scales once again at 38 during the month allowing the absorption rate to steady at 29 percent – still indicative of a sellers’ market, and if this market is truly just lagging Marin and Sonoma County, then expect this metric to start rising over the ensuing months.
The early signs of greater buyer engagement that we witnessed over the last two months is now showing up in the data, this marketplace could see an early bounce back in values from last year’s retrenchment, maybe not necessarily reclaiming the full 10 percent loss in value over the last half of last year but certainly not a further decline either and maybe this will help unlock inventory that property owners have been holding onto.
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