THE MARKET IS SETTLING AFTER THE MID-YEAR PANDEMIC CATCH-UP
BUT SETTLING INTO A SMOKING HOT PACE!
The first half of 2020 was a disaster for real estate sales. The realization of what we were facing with the pandemic literally froze the market, especially when we were asked to stay home in March. The real estate industry acted quickly, creating protocols which allowed sellers and buyers to move forward with a high degree of safety.
As you can see in the following graph, the resultant pent-up demand hit the market like a tsunami and sales skyrocketed, setting monthly records through the second half of the year. In Marin, 2021 sales got off to a strong start in January (green line) but turned down in February - still ahead of sales in the previous 5 years but closing the gap. With the Covid-19 factor exercising less influence on sales, the market is now reacting to pre-Covid factors: primarily low interest rates and decreasing inventories. Buyers who see the predictions of rising mortgage rates in the near future are scrambling to buy. Unfortunately, housing inventories continue to fall off making it difficult for buyers to find a suitable home. And, even when they do, they have to compete for the purchase with multiple buyers. This supply/demand imbalance is resulting in shorter marketing times, multiple offers, often well above list price, and rising home prices.
Despite shrinking inventories, most industry experts predict a strong market this year. But we are unlikely to see the level of sales we experienced in the second half of 2020 any time soon.
In February, we closed 114 sales, down from 122 in January. February closings increased by 46.2% over the 78 sales in February 2020, and 32.6% ahead of the average of the previous 5 years. The fact that January sales were 49.9% ahead of the average sales for the previous five years strengthens the belief that the pent-up demand due to the onset of Covid-19 is just about absorbed by the market.
FEBRUARY MARKET TRENDS
This table charts trends in some of the most important metrics for sellers and buyers. Closed sales and new listings were down in February compared with January. The long-term trend is revealed when comparing this February to February 2020. Year-over-Year, sales were up by 46.2%, while new listings were down by 27.8%. This supply/demand imbalance resulted in a one month supply of inventory to start this year. The average sales price increased by 17.2% year-over-year, and the median price by 21.6%. The increase in the sales price to list price ratio and decrease in days on market emphasize the strength of buyer demand as we get underway in 2021.
Homes For Sale in February 2021: 110 units
Up by 4.8% compared with January
Down by 41.2% compared with February 2020
Homes Closed in February 2021: 114 units
Down by 6.5% compared with January
Up by 46.2% compared with February 2020
While the green chart above reports numbers for Closed Sales and Total Active Listings, this graph charts actual activity during the month - New (Pending) Sales and New Listings.
New Listings in February 2021: 122 units
Down by 9.6% compared with January
Down by 27.8% compared with February 2020
Pending (New) Sales in February 2021: 167 units
Up by 36.9% compared with January
Up by 56.1% compared with February 2020
This graph tracks monthly sales in low to mid-range priced homes. In the most popular price range, $1,000,000 to $2,000,000, sales decreased from 73 in January to 71 in February. In the $0 to $1,000,000 range, sales dropped from 23 to 15. The sale of homes priced from $2,000,000 to $3,000,000 decreased from 18 to 11.
Sales in the $3,000,000 to $5,000,000 price range rose from 6 in January to 13 in February. Homes priced at $5,000,000 and above increased from 2 in January to 4 in February.
The Month's Supply of Inventory is defined as the number of months it would take to sell and close escrow on all currently active listings, given the current rate of sale. A comparatively low inventory is more beneficial to sellers while a higher inventory is better for buyers.
The inventory of homes for sale increased slightly from 0.9 months in January to 1 month in February.
Knowing that we have 1 month's worth of housing inventory is not that relevant to the inventory in your city/town. In February, the housing supply varied from 0.4 months in Mill Valley to 5 months in Fairfax. Last month, inventories were down in 4 cities/towns, up in 7 and remained the same in 2.
Viewing the supply of homes for sale by price range, February inventories varied from 0.5 months in the $0-1,000,000 range to 3.8 in the luxury market of homes priced at $5,000,000 and above.
The Absorption Rate is the percentage of listings that sell each month. In February, 151.8% of the active listings were placed into escrow. That was up from 116.2% in January and up from 57.2% in February 2020, again the result of shrinking inventories and growing demand.
In February, Marin County single-family homes sold on average for 104% of the list price at the time offers were accepted, and 101% of the original list price indicating that, on average, it required a 3% price reduction to obtain acceptable offers. It also indicated that with an increase in multiple presentations, buyers are offering more to obtain a property.
Last month, the number of days from listing date to sale date, with all contingencies removed, decreased from 48 days in January to 41 days in February. The long-term trend is found by comparing this February's 41 days with last February's 58 days. That is a decrease of 29.3% year-over-year.
HOME PRICE APPRECIATION RATE
In February, the average list price of a Marin County single-family home was $3,306,000, up from $3,557,000 in January. The average sales price was $1,960,000, up from $1,660,000.
Sellers often use the price-per-square-foot (PPSF) of comparable properties to arrive at a competitive list price for their homes. Buyers use the PPSF to compare the affordability of alternative areas or homes. This graph plots the PPSF for January and February 2021, and the average of the two in the 13 core Marin cities/towns, and the county. Averaging the two months, the highest PPSF, and so the least affordable area was Belvedere at $1,704. The most affordable area was Novato at $521. The table below lists all of the numbers used to create the graph plus rankings from highest PPSF to lowest.
The price-per-square-foot by price range went from $624 in the $0-1,000,000 range to $1,510 in the $5,000,000 market.
MORTGAGE INTEREST RATES
The table below shows mortgage interest rates as of March 9, 2021.
Here are the current projections from Freddie Mac, Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors. The average opinion of these four industry leaders shows rates slowly increasing from 2.95% in Q2 2021 to 3.22% in Q1 2022.
In lieu of any unforeseen events, the roller coaster ride we experienced in 2020 should be behind us. The pent-up demand from the first half of 2020 seems to have been absorbed and we are settling into a more traditional seasonality. Yes, the market is HOT - thanks to continued low mortgage interest rates and shrinking inventories. The only restraint on even greater sales is the lack of inventory. According to Lawrence Yun, Chief Economist at NAR, "Sales easily could have been even 20% higher in 2020 if there had been more inventory and more choices." So, why are so many sellers sitting on the fence during this extreme seller's market? Some are concerned that if they sell now it will be difficult to find a replacement property (Catch 22?). Some may just want to avoid making a major change in the midst of so much economic, political and health safety turmoil. What will it take to attract more sellers into the market? According to David Berson, Chief Economist for Nationwide Mutual, "As the Covid-19 vaccine becomes more available and the economy improves, more homeowners, realizing the equity gain in their homes, will list their existing homes, and that could help alleviate housing shortages." Of course, as interest rates increase, some sellers will fear "missing the boat" and list their homes. The flaw in that thinking is that they don't act when demand is very high and the inventory of available homes is low - then list when demand weakens and more homes are flooding the market.
To would-be purchasers, concerned that buying now will cause them to overpay for a home, Mark Fleming, Chief Economist at First American, suggests that "House buying power continues to exceed the median sales price - that implies housing is not overpriced today." Buying power remains strong as low-low rates mitigate the cost of rising prices.
The last year has been one of, if not, the most challenging time we have lived through. The good news is that the vaccines are flowing, schools are opening or will be soon, and people are getting back to work, improving the state of our economy. We're not there yet, but we are definitely on a path to recovery.
AUGUST 2 - 6, 2021
WHAT YOU MAY HAVE MISSED THIS WEEK:
Marin Enacts New Mask Mandate
"Marin County on Monday jointly announced with six other Bay Area counties and the city of Berkeley revised health orders that include a new mask mandate amid a delta variant-fueled coronavirus surge. The new orders require everyone to wear facial coverings indoors regardless of vaccination status. The order went into effect at 12:01 a.m."
CONTINUE READING ON PATCH
Marin schools to require vaccine status verification
"Marin school employees and students 12 and older will be required to supply proof of COVID-19 vaccination status this fall, county officials announced Wednesday. Those who have not been immunized will be required to be tested weekly for coronavirus infections."
CONTINUE READING ON THE MARIN IJ
Bay Area air quality: Shift in wind may bring wildfire smoke
"Smoke drifting southward from fires raging in the state’s north will likely bring hazy skies to North and East Bay residents to close out the week, prompting authorities to issue an air-quality advisory for Thursday and Friday. Data from meteorologists and other sources led Bay Area Air Quality Management District officials to issue the alert Wednesday due to the River Complex, McFarland and Monument fires. Residents in Marin, Sonoma and Napa counties may see initial effects earlier, with some Solano, Alameda and Contra Costa residents following on."
CONTINUE READING ON THE MARIN IJ
Mill Valley Company Marries Premium Tequila With Convenience
"Premium tequila, meet 21st century convenience. That's the idea behind a Mill Valley-based beverage company's new ready-to-drink Margarita. Salt Point Canned Cocktails announced the launch of its new drink last month on National Margarita Day (July 24)."
CONTINUE READING ON THE PATCHMISCELLANEOUS
Mortgage Rates Dip
"With global market uncertainty surrounding the Delta variant of COVID-19, we saw 10-year Treasury yields drift lower and consequently mortgage rates followed suit. The 30-year fixed-rate mortgage dipped back to where it stood at the beginning of 2021, and the 15-year fixed remained at its historic low. This bodes well for those still looking to refinance, renovate or even purchase a new home."
CONTINUE READING ON FREDDIEMAC
Changing Homes Changes Lives
Bowman Real Estate Group has just completed our 4th home for Home For A Home, a local non-profit. With these donations, we are building homes in some of the poorest areas of Guatemala. They provide a huge improvement from the conditions most of our recipients are living in, often dramatically improving their lives and creating safer environments for raising their children.
In honor of each of our clients’ transactions, we make a donation to fund the construction of these homes for families in critical need. We feel fortunate and grateful to be able to participate in this program.
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