North Bay Market

The Big Story

Quick Take:

Median monthly principal and interest payments remain near the highest levels we’ve seen in the past year.
Mortgage rates have begun to drop, as we near the highly anticipated rate cut from the Federal Reserve.
Existing home sales remain slightly higher than they were last year, while we observe nearly a 16% year-over-year increase in available inventory.
We may see rates start to drop sooner rather than later!

Note: You can find the charts & graphs for the Big Story at the end of the following section.

*National Association of REALTORS® data is released two months behind, so we estimate the most recent month's data when possible and appropriate.

Median monthly payments remain high, for now

At $2,235 per month in principal and interest payments for the median homeowner, housing costs are near the highest points we’ve seen in the last year. As we all know, this is driven primarily by the fact that interest rates have remained high for quite some time, and home prices have not fallen by much over the past few years. However, existing homeowners might be able to save some money in the coming years/months, as Federal Reserve Chairman Jerome Powell mentioned in his speech at Jackson Hole that the Fed is keen on cutting rates in the near term. This, of course, would translate into lower P&I payments for new and existing homeowners alike.

Are there rate cuts on the horizon?

As we mentioned in the previous section, the Fed Chairman mentioned in a speech at Jackson Hole that we’re likely to see cuts to the federal funds rate in the not-so-distant future, which would, of course, be great for the largely stagnant housing market that we’ve been in recent months/years. For prospective buyers, now might be a great time to lock in a great home at a relatively low price. If real estate values perform the same way as the last time we saw substantial decreases to mortgage rates, now might be an opportune time to lock in a home before values surge, then refinance once rates have bottomed out!

Mortgage rates have already started to decrease a bit

Although mortgage rates were in the mid to high-6% range throughout July and August, they’ve started to come down since the Fed Chairman’s speech. At the time of writing this newsletter, the average mortgage rate was 6.35%, according to Freddie Mac. Although this likely represents the market pricing in the rate cut before it even happens, if the Fed is entering a rate-cutting cycle, then there will be more rate cuts to come. If you want to keep an eye on where mortgage rates are going, then it’s particularly important to pay attention to any commentary out of the Fed, as well as economic data that’s published surrounding employment and inflation, as the mandate of the Fed is to control inflation and promote healthy employment.

Inventories are relatively high right now, but we might see that change in the near future

Over the course of the past few months, we’ve seen inventories remain at an elevated level on a year-over-year basis. However, with the recent drop in interest rates and the prospect of lower interest rates in the near-term future, we might see some of the built-up inventory begin to move, as housing becomes more affordable. Over the coming months, it’ll be important to pay attention to inventory levels, as they’re often leading indicators of price movements over time!

It’s important to note, though, that all of this is just what we’re seeing at a national level. To learn more about your local market, be sure to check out the Local Lowdown below:

Big Story Data

The Local Lowdown

Quick Take:

The single-family home market remains relatively strong, with year-over-year growth in most counties.
Inventory levels have seemed to normalize, as they drop dramatically from their summertime highs.
Although inventories are normalizing, listings are still spending more time on the market on a year-over-year basis.

Note: You can find the charts/graphs for the Local Lowdown at the end of this section.

Single-family home values remain strong, while condo values remain relatively volatile

In the single-family home market, we saw quite a bit of growth on a year-over-year basis. Home values in Sonoma, Marin, and Solano Counties increased by 1.29%, 2.47%, and 4.17% on a year-over-year basis, respectively. However, median sale prices in Napa County actually decreased by 8.67% on a year-over-year basis. This increase in median sales prices that we’ve seen can more than likely be attributed to the fact that inventories are finally beginning to move in the North Bay. On the other hand, condo values were a bit more volatile, as usual. We saw increases of 6.98%, 20.07%, and 29.76% on a year-over-year basis in Sonoma, Marin, and Napa Counties, respectively. The median sale price for condos in Solano County decreased by 11.43% on a year-over-year basis.

Inventories are beginning to move throughout the North Bay

Like many areas in California, housing inventories were building in the North Bay at a considerable rate throughout the first half of this year. However, it looks like the North Bay has largely recovered from this recent buildup. Right now, there are 0.73% fewer active single-family homes when compared to last year. When we turn to the condo market, there are slightly more listings on the market (2.75% more) on a year-over-year basis. This means that the market is gaining some traction as we head into the fall season.

Despite dropping inventories, listings are still spending quite a bit of time on the market

Although we are seeing inventory levels normalize, the amount of time that listings are spending on the market has largely not seen this normalization yet. The average single-family home listing in Sonoma County is spending 46 days on the market, representing a 27.78% increase on a year-over-year basis. Likewise, we saw 19.35% and 20.93% year-over-year increases in time on market in Solano and Napa counties, respectively. Marin County did buck this trend, though, with the average listing spending 29 days on the market, representing a 6.45% decrease year-over-year.

Marin becomes a balanced market, while others remain buyer’s markets

When determining whether a market is a buyers’ market or a sellers’ market, we look to the Months of Supply Inventory (MSI) metric. The state of California has historically averaged around three months of MSI, so any area with at or around three months of MSI is considered a balanced market. Any market that has lower than three months of MSI is considered a seller’s market, whereas markets with more than three months of MSI are considered buyers’ markets.

Despite the fact that we’ve seen the North Bay become a buyer’s market over the course of the past few months, we’re currently seeing the trend reverse, as inventories decline. With 3 months of active inventory, Marin has become a balanced market, while Solano, Sonoma, and Napa Counties trend downward, with 3.3, 3.9, and 7.6 months' worth of single-family home inventory on the market, respectively. Likewise, the condo market is entirely a buyer’s market, with 4 months of inventory on the market in Marin County, 4.3 months in Sonoma County, 5.2 months in Solano County, and 7.5 months in Napa County.