These past 2 years have been a game changer. Not only have our lives had the opportunity for transformations, we have also watched the markets do so as well. Observing the housing market, stocks and inflation swell to immense values, it seems that some may be waiting for history to repeat itself. History doesn’t repeat itself as much as it creates anew. Everything collectively has just been turning a very large corner….into a new chapter and a housing market that has also shifted.
Current Housing Market Momentum
Since I did my last housing market update, the beginning of the 2nd quarter, the inventory has more than doubled from where it was in March/April.
Now sitting at approximately 650+ active listings (which does not include contingent or pending listings), this is almost double from the 350+ from back in March of this year. With all single family homes currently on the market in all statuses, we are at 1065 listings for all of Sonoma County. In comparison to January 1, 2020, the numbers almost identically match to the market we were in 2 months prior to Covid.
This means our housing market has returned…
As we finish up our summer and head into fall, it is my belief we will watch the housing market pick up even more momentum, especially as we watch more inventory come on the market daily.
Here are the current numbers as of August 10th, 2022
Information from Bareis MLS
Paradigm Shift – The New Market
Anytime a market runs at a high elevation for an extended period of time and then the market shifts out of that, it takes time for the masses to follow suit. Almost like coming off of a high (not that I would actually know), but a new reality slowly begins to set in. This is what is currently happening with our housing market. The housing market though, these past two years, due to the pandemic along with some FOMO, had swells so high, that it may take some time for this new reality to completely set in. The market is rebalancing.
Overall, we have had a steady run up of home prices that goes back to 2012, when the rates were dropped to 3% range to stimulate the housing economy after the wake of the 2008 recession. That housing boom which went from 2012 -2019 climbed more than 50% in values. What we have seen is almost a 40% increase in appreciation during the pandemic in just 2 years. With that in mind, home prices shifting now should not come as a surprise.
As I mentioned that with the increase of inventory coming on the market, time on the market pushing out longer and consistent price reductions verifies we have definitely moved into a new market. Also changing is the fact that instead of bidding wars, some of which exceeded $100,000 plus over asking, it has now shifted to $100,000 price reduction for some properties.
Bottom line, buyers are gaining more leverage than they had these past two years as a threshold of willingness to overpay certain prices has definitely been reached.
So, for sellers, the best way to approach this market is to be ahead of it. This means you will need to price it competitively, so a buyer will want to purchase it. Do not ask an unreasonable price for your home or dirt, because we are now in a different market and it could just sit with no movement.
Reading The Psychology
Let’s just say the word. Money. It can drive us, always wanting more, many times for comfort and freedom, which is not a bad thing. On the flip side, we can be terrified of losing it and having nothing (or believe that to be so), which can generate other behaviors as well as influences our choices.
Our security is not only our comfort but if we are not careful, can also be our prison.
The reason I bring up the relationship with money is that it can dictate our choices. For selling, fear of it or losing it, will have you wanting xx amount of dollars for your home and not budging, despite what the market is bearing. Ultimately, your fears will subjugate your movement forward, which far greatly impedes your quality of life as well as adds stress.
For others, fear of spending it will have you missing out on opportunities that may be perfect for you, which though may be daunting, will help you level up. Growth works like that. It stretches you.
Fear of missing out otherwise known as FOMO was also one of the contributing factors to the latest and largest market appreciation time frame run we have seen since the housing boom since 2012-2019.
People Move Markets
Remember this, the biggest market adjustments can occur with people.Plain and simple. The 2008 recession, though initiated by a financial crisis with many institutions at fault, run by people, individuals were acquiring homes at an enormous rate due to the poor lending practices, which brought about Dodd Frank and stricter lending guidelines to prevent this financial mess from happening again. If it seems to good to be true, sometimes it is.
Here are my thoughts: Without people making choices or taking action, the markets can slow down, especially as people contemplate their choices. The same occurs when decisions are, to move forward in a market, which can quickly speed it up, as these past two years did.
Another reminder is that many people did capture the low interest rates and refinanced their homes to a much lower payment. This will also affect whether people will make a decision to move, now that rates are higher, knowing that a move will most likely increase their monthly housing payment. Contemplation of movement will have many weighing these two – money and happiness.
As I have witnesses market changes over the past 30 years, it takes times for a shift to really sink in. As this new market sinks in and more choices are being activated that are in line with this current market, the masses will slowly follow. As people watch others making moves, somehow gives permission for others to follow suit.
Be a Realist But Still Have a Vision
Being a realist in this market is accepting exactly where the market currently is. This advice bodes well for sellers really wanting to start a new chapter, either in a new home or a new location. Riding the market down when selling, is not only excruciating for everyone involved, it delays all good things.
For buyers, being a realist is accepting the fact that the market will not crash. Prices will adjust, but the Sonoma County market did level up this past run, now being a highly sought after area for many people. That has been the biggest change for our area.
In this market, the sellers that will move the quickest will be the ones who operate ahead of this market. If homes in your area go for certain price range, pricing yours to be competitive will get your home sold. This is how “normal” markets operate. Overpriced homes will just continue to sit on the market.
Regarding having a vision means despite the current reality of the market, things always change as well as grow. What is now, won’t necessarily be what is later. As long as you can hang on through market adjustments, you will do fine in the long run, as values always ultimately appreciate. Market changes always teach us how to better navigate.
Heading Into Fall
As we move through summer into the fall season, it is my thought, we will witness our market balance out by the end of the year. The interest rates, though higher than the alleviation rates of 2-3%, are still quite low, hovering in there low 5’s.
The housing market in all of the bay area has always come back fairly quickly. As I mentioned, Sonoma County has definitely earned its place as one of the more desired location to live. The fact that we actually do have inventory, unlike some other markets in California, which are extremely low, bodes well for a healthier housing market. Since our number now closely represent where we were in January of 2020 is why I believe our season of movement will only increase as head into fall. As long as buyers and sellers balance their needs with each other, we should adjust just fine.
There are many different financial levels of clients looking to do something in this housing market, both to buy and sell, each deciding their own good timing. Though nobody can really predict what the housing market will do in the long term, (I have heard of 3 predicted shifts these past 5 years from well respected leaders that didn’t come to fruition), the one thing that is true is that having a home is a desire for each and everyone one of us. Real estate will always adjust. But when you look at the history of real estate, it always appreciates over time.