Many people are asking me about what is happening in the real estate market these days so I wanted to take a moment to analyze the current data.
It is fascinating to read and watch and hear all the “experts” comments about the economy and more specifically about the real estate market. One could be very alarmed by the talk especially coming off the crazy market conditions – low interest rates, minimal inventory, the very few days on market, and overbidding – that have been the norm for over two years. That talk of plunging price appreciation, soaring price reductions, accelerating interest rates and increasing days on market might make even chicken little think the “sky is falling”. It is really hard to put things in perspective when considering what the market has been like these past two plus years.
There is no doubt that the market is changing as evidenced – not only anecdotally, but also by recent data. It is true that in the Napa Valley, we see that the number of pending and closed escrows are down substantially year over year in October, by 26% and 59% respectively, but, interestingly, the median price of closed sales was actually up 32% from $742,875 in October of ’21 to $982,500 this year. This does fluctuate, of course, depending on the types of homes sales that occur and the abundance of, or lack of, luxury sales can make a big difference.
Perhaps more indicative of the changing market is the decrease in the number of pending sales - down 38% and the number of closed sales - down 49% when comparing May of this year – which effectively was the beginning of interest rate hikes – to October. Another factor to consider is the increase in “months’ supply of inventory” which has increased to 3.4 months from approximately a month and a half. This increase in inventory is more reflective of a balanced market but still indicates an under supply.
So…is the sky falling? We don’t think so. Are we experiencing a changing market in Napa…yes. But it really should be remembered that our inventory is still very low; we live and work in one of the most beautiful and sought-after places in the world; and life circumstances will always require people to buy and people to sell their homes. As we enter the traditional holiday season, we can anticipate that things may be a little softer for a while. Still, buying and selling continues, though at reduced levels, and this can be an excellent time for buyers to negotiate prices. Sellers who need to sell now can be assured that demand is still present, at the right price. And, just as with the end of winter, spring will most likely bring a whole new perspective on the market.
Please note, all information is for single family residences in Napa County as reported to BAREIS, the local multiple listing service through Broker Metrics.