Climbing interest rates, supply chain issues, the local economy/business slowdown and lack of new home construction have all had an impact on the North Bay’s home sales, according to the California Association of Realtors, signaling a changing real estate market.
All these factors will likely lead to a shift to a more balanced market, rather than a housing crash. The same factors that were in play during the last housing crash are not an issue in today’s market, with most homeowners having a large equity cushion in their homes due to the significant price appreciation that has occurred over the last few years.
Though still a seller’s market, sellers are no longer seeing multiple offers within days of hitting the market. Buyers are still buying, just not at the frenzied rate that we’ve seen since the beginning of the pandemic.
Buyers are approaching the market differently. They are realizing that they do not need to put in an offer on the first thing they see. With interest rates having doubled since the start of 2022, a payment on a $750,000 loan amount would have been $3,100 per month in January. At today’s interest rates, that same loan payment would now be $4,500. This has the potential to price out many first-time buyers.
In spite of the many challenges facing the housing market, Sonoma County’s median price increased to $845,000, a 12% increase from 2021. With inventory continuing to be a major obstacle, demand will still outpace supply, and experts are predicting that home prices will flatten rather than decline.