Our Market is rapidly changing.
There is a lot of speculation and talk about the current housing market. Inventory is up, price reductions everywhere, our local market is collapsing.
Here is what we know.
Rock meets bottom.
Prior to October 2017, Sonoma County housing inventory was already at critically low levels. The devastating fires that followed brought that level even lower as 1000's of residents lost their homes literally overnight.
A market within a market is formed.
As insurance companies starting releasing checks to homeowners that lost everything, cash sales generated a
"Local Micro Market"
allowing sellers in the area to test and sell homes higher and quicker as Fire Survivors scrambled for limited housing. This burst of sales, in what was already a strained market, lasted about 6 months and appears to have ended somewhere mid April to May.
Less than 50% are or will rebuild.
Obviously, not all that owned and lost a home are able to rebuild. A large number of the homes lost were under-insured or lacked "Code Replacement" coverage to cover the additional building expenses of sprinklers or other requirements necessary to rebuild to current building codes and zoning standards. Others, found it difficult or impossible to find affordable contractors and builders to rebuild in a reasonable timeline and at a reasonable cost. Many that lost properties have cashed out, sold their lots, and moved on. Others, have cashed out but are still holding onto their lots hoping to get more down the line when the level of vacant lots decreases.
Markets always correct themselves.
The low inventory prior to October 2017 would have eventually returned to normal levels over time. The fires just extended that market correction several months longer. Unfortunately, a lot of sellers and their agents felt that they could test higher numbers well into the second and third quarters of 2018. These overpriced listing are now sitting on the market longer and are slower to react to price reductions creating a stale list of homes on the market. This lack of moment in inventory and the decline of these listing prices as both shown on the above graphs.
What's the bottom line?
The bottom line is this. Homes properly priced and properly marketed still sell above list price with an average Days on Market (DOM) of 8 days. If though, you are not seeing a full price offer by the 10th day, revisit the marketing and pricing immediately. Do not wait! Give your home no more than 10 days or 2 full open house weekends in case it fell on a holiday where it affected the traffic flow. This current issue is still affecting the amount of offers and traffic even properly priced homes are now receiving since buyers are fearing another "Market Meltdown".
The market will be different next year.
As we enter the 4th quarter, the market in general slows down. Even though people do buy and sell all year round, mid November usually tends to signal the end of the market which will then pick up again sometime during the middle to the end of January. We predict that the market will continue to adjust and prices will come down while inventory of stale properties stays high. After which, we should start to see a normalizing to the market giving buyers and sellers a more balanced market well under the double digit appreciation we have seen now for the last several years. A healthy market should be about 2.5-3.5 months of inventory and an annual appreciation rate of about 5-6%. Of course, interest rates will play heavy whenever there is an increase but that does not last long and rates are still well into the affordable range and should continue to be that way for a while and well into next year.
Hope that helps!
Questions? Comments? Concerns? We are always here to help and proud to help you in anyway possible.
All the best