An annual Summer slowdown in the North Bay housing market is the norm as buyers focus their attention and energy on summer activities. However, local experts indicate that there might be something more to this slowdown with homes remaining on the market much longer and, in some cases, price reductions becoming necessary to sell the home.
Sales in Napa and Sonoma counties in the first five months of this year were down 11% by volume from that pace a year before, down 17% in dollar volume and down 7% in average selling price, according to the latest Bareis listing data. A healthy market typically has enough inventory to equate to one-third of the listings in any price range in escrow at any given time. A balanced market has three months of inventory, any more than that trends towards a buyer’s market.
Currently, Sonoma County inventory is sitting at two months’ supply. There were a total of 560 new sales in May, up 21.5% from a year before. But inventory of high-end homes (over $1.4 million) was 7.2 months, up 50% from a year before.
The hottest markets in Sonoma, Napa and Marin counties are Petaluma and Rohnert Park, particularly for homes listed under $1 million. They have 37% and 133% more listings, respectively, and brisk sales are keeping their inventories to just 1.5 months.
Today’s buyers are more selective and are looking for the 3 “L”s: lot, location and layout. Flat lots in nice neighborhoods that are close to shopping, schools and parks are a hot commodity, as are homes that are turnkey and do not require any major work or improvement. Buyers previously did not shy away from fixer-uppers, but these homes now have to be listed at super low prices because buyers know that the cost of construction materials have increased since the fires and tariffs. The new lumber tariff of at least 20%, depending on the mill, has added about $9,000 to the cost of single-family homes and about $3,000 to multifamily units.
Well-priced homes are still getting multiple offers and selling quickly. The current North Bay housing market is not a strong seller’s market like it has been in the last eight years, however, it is not necessarily a buyer’s market yet either. Well-priced homes are still getting multiple offers and selling quickly.