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The Local Lowdown: June 2023

The Local Lowdown: June 2023

The Local Lowdown

Quick Take:
  • Active listings in the North Bay continued to rise in April for single-family homes, showing signs that inventory will follow normal seasonal trends, albeit at depressed levels.
  • Single-family home prices were up year to date through April 2023 in the North Bay with the exception of Napa. Notably, the median single-family home price rose over $300,000 in Marin County over the past four months, highlighting that a healthier market can boost prices significantly despite higher mortgage rates.
  • Months of Supply Inventory has declined significantly in 2023, and sellers are receiving a greater percentage of asking price, both 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.
 

Home prices boosted by a healthier market

Marin County is most notable this year due to its rapid single-family home price appreciation after a 34% price decline from its peak last April. It’s also a good example of what’s happening in the rest of the North Bay. Last year, single-family home prices peaked in April as buyers rushed to lock in a lower mortgage rate. The Fed announced rate hikes at the end of 2021 that would swiftly affect rates in 2022. The average 30-year mortgage rate rose 2% in the first four months of 2022, crossing 5% for the first time since 2011. That 2% jump caused the monthly cost of financing to increase 27%, so buyers rightly rushed to the market. As rates rose higher, the market cooled and home prices fell in large part to accommodate the higher cost of a mortgage. Both supply and demand were lower than normal in the second half of 2022. In 2023, demand started to rise again despite elevated mortgage rates and was met by a high number of new listings. Price increases this year have been largely a function of more homes coming to market and inventory growth, which is counterintuitive to supply and demand. Supply was so low that more homes were able to better match buyers to a desirable property, giving sellers more pricing power. Year to date, single-family home prices have increased 21% in Marin, 4% in Solano, and 8% in Sonoma. Napa did not follow the same inventory and sales patterns as the rest of the North Bay, and prices declined 2% this year.
 

Inventory grew as new listings came to the market

Single-family home inventory, sales, and new listings all grew this year, which is the typical seasonal trend. However, all those metrics are far below typical historical levels. The number of home sales is, in part, a function of the number of active listings. Sales as a proportion of active listings has grown significantly, emphasizing the increasing demand in the area. Even with higher interest rates, which only reduces the number of potential homebuyers, seasonal demand far outpaced available inventory. Over the past three months, sales jumped 67% while new listings increased 81%, both of which indicate a healthier market.
 
Sellers are gaining significant negotiating power. In January 2023, the average seller received 93% of list price compared to 100% of list in April. Inventory will almost certainly remain historically low for the year and will likely only get more competitive in the summer months.
 

Months of Supply Inventory continues to indicate a firm 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). MSI dropped over the past three months, falling below three months of supply in March and declining further in April. The sharp drop in MSI occurred due to the higher proportion of sales relative to active listings and less time on the market. MSI for single-family homes in Napa was the one exception, indicating a balanced market.
 

Local Lowdown Data

 

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