What’s Around the Corner?
The initial weeks of market transitions are always cloudy as the data being viewed typically looks back in time while practitioners on main street sort the more present energy of the marketplace being able to put their finger on the pulse of what is happening. Sure, it’s only anecdotal evidence, but it gives them a gut feeling – especially if they have been involved for long periods in their profession having encountered multiple economic cycles.
According to BAREIS MLS, May’s data points indicate that Sonoma County buyers successfully contracted to purchase 492 single-family homes – 22 percent fewer than last year at this time. Property owners delivered 416 new offerings during the month – 40 percent fewer than last May – while buyers managed to complete purchases on 396 dwellings – 30 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.
As players in the market absorb the blows of lower inventory 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 is taking place, as it does each year, and we expect more new inventory to come into the market each month from now through August. That said, we also expect higher demands from buyers in this same period so when the dust settles in the Fall, we will truly see the results of the market influences. For now, June is upon us, and buyers will be surveying the 504 available homes remaining and making determinations for themselves as to purchase or not and this will show up in a common market measure - the absorption rate. May left us with this metric reading at 79 percent in Sonoma County.
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 rapidly, 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.
One of smallest of the seven Bay Area Counties population wise, Marin, is still one of the hotter marketplaces. With May in the rearview mirror, we should see sellers awakening to participate once again – especially if they worry that prices are not continuing to skyrocket upwards and that some buyers may drop out of the near-term market. Marin property owners introduced 185 new single-family offerings in the period – 37 percent less than a year earlier – with buyers promptly absorbing 231 homes in consummated contracts. Sellers brought finality to another 230 transactions during the period leaving the entire region with just 174 homes available for buyers to peruse in June – 16 percent less than last year at this time. Marin’s pace still highlights one of the Bay Area’s most hurried markets with the absorption rate now at 132 percent – exactly where it was a year ago.
Napa County’s markets - being another ripple in the pond out - may already be feeling some effect from the governments’ action to raise the cost of borrowing. Available monthly inventory at the end May stood at 195 units – 17 percent less than this same time last year. Sellers managed to deliver just 87 new offerings to the market in the period while buyers placed 117 new deals into escrow. Home sellers closed out another 103 sales during the month establishing a 53 percent absorption rate.
True, experienced professionals are worth their weight in gold and exactly who you should be looking for to guide you through the changes afoot in the marketplace. Now is not the time to “try-out” an unproven Realtor, now is the time a savvy professional shines.
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