The Local Lowdown: August 2023

The Local Lowdown: August 2023

The Local Lowdown

Quick Take:
  • Single-family home prices were up in North Bay counties in the first half of 2023. Month over month, however, prices fell across the North Bay with the exception of condo prices in Solano.
  • Sales and new listings fell from May to June, which is common this time of year. Inventory remains depressed but has experienced some growth this year, which has helped alleviate some excess demand.
  • Months of Supply Inventory has declined significantly in 2023, homes are selling more quickly, and sellers are receiving a greater percentage of asking price, all of which highlight an increasingly competitive environment for buyers.
Note: You can find the charts/graphs for the Local Lowdown at the end of this section.
 

Prices up across markets year to date

In the North Bay, the housing market is always experiencing high demand. Even as prices rise quickly in Marin and Sonoma, coupled with mortgage rates near 20-year highs, demand is still strong. Both of these markets are good examples of what’s happening in the rest of the North Bay. Increasing demand and low, but rising inventory are driving the rapid home price appreciation that the North Bay has experienced this year. Housing prices typically work in a counterintuitive way. In a classic supply/demand problem, as supply falls and demand remains steady or increases, prices rise. Housing works a bit differently. In the first half of the year, new listings usually rise rapidly, far outpacing sales and causing overall inventory to rise from the winter lows. Demand also tends to rise in the first half of the year, and the increasing supply actually benefits the overall market because buyers can more easily find a home that suits their wants and needs. Finding the right home is far more valuable than feeling forced into a home that’s not right, so prices tend to rise in the first half of the year.
 
Year to date, single-family home prices have increased 15% in Marin, 3% in Napa, 5% in Solano, and 9% in Sonoma, which shows just how desirable the North Bay is.
 

Inventory growth slows as new listings drop

Single-family home and condo inventory, sales, and new listings rose in the first half of the year, although all remain at depressed levels. The number of home sales is, in part, a function of the number of active listings and new listings coming to market. Currently, inventory is so low relative to demand that any amount of new listings is good for the market. Potential sellers who have fully paid off their property are in a particularly good position if they don’t have to finance their next property after the sale of their home. Since January 2023, sales jumped 106% while new listings rose 84%, whereas last year, for example, sales rose 83% and new listings increased 74% in the first half of the year.
 
As buyer competition has ramped up and sellers are gaining negotiating power, sellers are receiving more of their listed price. In January 2023, the average seller received 93% of list price compared to 100% of list in June. Inventory will almost certainly remain historically low for the year, and the market will remain competitive in the third quarter.
 

Months of Supply Inventory remained under two months in June, indicating a strong sellers’ market

Months of Supply Inventory (MSI) quantifies the supply/demand relationship by measuring how many months it would take for all current homes listed on the market to sell at the current rate of sales. The long-term average MSI is around three months in California, which indicates a balanced market. An MSI lower than three indicates that there are more buyers than sellers on the market (meaning it’s a sellers’ market), while a higher MSI indicates there are more sellers than buyers (meaning it’s a buyers’ market). The North Bay market tends to favor sellers, especially for single-family homes, which is reflected in its low MSI. MSI has trended even lower over the past six months for both single-family homes and condos, meaning the market more strongly favors sellers. The sharp drop in MSI occurred due to the higher proportion of sales relative to active listings and less time on the market. The only exceptions are single-family homes in Napa and condos in Marin, both of which are closer to a balanced market.
 

Local Lowdown Data


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