June 2023 Market Update Sonoma County

Happy June!  

Can you believe we are almost half way through the year?! And a crazy year it has been. After a slight cool down last October through December, January came in hot with the help of reduced (6%) interest rates. We have been riding that wave ever since with the help of extremely low inventory. For comparison, during May of 2018 there were 600 more homes listed in Sonoma County than there were this May. That's a huge piece of the market that's missing for today's perspective buyers. 

Since mid-May, when the U.S. Debt ceiling discussion took center stage, interest rates have been hovering back around 7%. For most price points, it has seemed to slow things down just slightly, with the exception of the entry level homes (think 3 bed, 2 bath anywhere in a decent location here in Sonoma County.) Entry level homes priced below $850k are almost always getting at least 2-3 offers in the first week.

At their June Meeting, the FOMC "The Fed" decided to pause increasing the federal funds rate. They stated that they will be closely measuring what the impacts have been from the previous 10 interest rate hikes and may resume hiking interest rates later this year. Historically, once the Fed has stopped hiking rates they usual stop for good. Let's hope that's still the case this time!   

Pricing is also a huge factor in how quickly things are selling. If you price at or just below the perceived market value, chances are you will get those 2-3+ offers right away. If you try to shoot for the starts you may get your price, but probably not as quickly.

That all being said, it is still a fast paced market. Only the serious, qualified buyers who are ready to act quickly are having the most success. If you are thinking about selling or making a purchase, I am here to help! Let's get together and create a plan. Shoot me an email to schedule a 30 minute meeting. nicola@vanguardsonoma.com

Number of Sales

Inventory shot up last month....Hallelujah! But the days on market actually went down (see orange bars in the graph directly below.) That means that the homes that are coming on are selling faster, further proving the resilience of the Sonoma County Market despite the elevated interest rates. We are also in our busiest Summer months when we tend to sell the highest number of home sales per month.

Days on Market and Sales Price to List Price Ratio

The sales price to list price ratio once again hit over 100% last month. We have not seen it go that high since last June when prices peaked. Interest rates at that time were 5%, last month they were just below 7%. If you are trying to purchase a home under asking price, those situations are few and far between, unless you are looking in the luxury market
over $2 million. 

Curious who is out there buying homes right now?

Younger Boomers lead the pack as the largest share selling homes right now and are about even with Gen Xer's as the largest share of buyers. This comes as no surprise since Boomers and Gen X are more likely to already own a home with substantial equity and are therefore insulated from the effects of higher interest rates. Its the first time buyers (unless they have help from mom and dad) who are struggling to purchase in today's market where both prices and interest rates feel elevated.

Housing Inventory

           How do you know if its a seller's market or a buyers market? Simple, months of inventory. Remember when the media told us that higher interest rates would result in more supply? The reality here is quite the opposite. The lack of inventory is keeping our prices stable, despite less than average demand. Currently our inventory is staying right around the 2 month mark. This means that if no homes were listed, everything would be sold in 2 months. For a balanced market, we would need to see inventory somewhere between 4-6 months.

Sonoma Compared other Bay Area Counties

Sonoma County prices are down from their peak last June, but only by a small margin and prices are once again on an upward trajectory. If you compare Sonoma County to other Bay Area counties, we had the smallest price decline year over year. The largest price change in the Bay Area was in San Francisco where prices are down 17.9%!! This is proof that you cannot compare real estate prices across the board. Real estate is highly local.

If you would like a more detailed report on your specific neighborhood, please let me know. I'm happy to share more info

Interest Rates...

Considering that interest rates have ping ponged between 6.00% - 7.00% since September of 2022, nothing has really changed. The ride continues. With the news of inflation heading in the right direction and the Fed pausing their interest rate hikes, we hope to see interest rates come down and stabilize.

Mortgage interest rates historically are about 150 basis points above the 10 year treasury yield (linked here). Currently, because of the volatility in the market they have had about a 300 basis points spread. This should come back down once things normalize, so its not out of bounds to think that rates could be sitting at about 5.5% at the end of the year. 

The interest rates above are averages as of 6/21/23 according to www.mortgagenewsdaily.com. Contact your lender to learn what you can qualify for.