Sonoma County is currently experiencing a Seller’s Market, despite the rise in interest rates. But what does that mean?
Market strength is generally determined by housing inventory, or “months of inventory.” What’s that all about? And how does it affect you as a buyer or a seller?
What is "Months of Inventory?"
The number of months of inventory that represents a balanced market can vary. As a general guideline, a balanced housing market is considered to have around 4 to 6 months of inventory. This concept refers to the theoretical amount of time it would take to sell all the homes on the market based on the current sales pace, assuming no new listings are added. It is calculated by dividing the total number of homes for sale by the average monthly sales rate.
In a balanced market with 4 to 6 months of inventory, there is generally a healthy balance between buyers and sellers. This level of inventory allows for a reasonable number of choices for buyers without an excessive oversupply of homes. It also provides sellers with a decent pool of potential buyers, without facing intense competition or extended listing periods.
Conversely, a market with fewer than 4 months of inventory is often considered a seller's market, characterized by limited supply and high demand, potentially leading to rising prices and faster sales. Sonoma County falls into this category.
A market with more than 6 months of inventory may be considered a buyer's market, where supply exceeds demand, potentially leading to slower sales and more negotiable prices.
How Does This Market Affect Buyers?
With rising interest rates, potential new homeowners are entering the market excited but feeling concerned that their monthly payments might not stretch far enough to buy the home of their dreams. With more Sellers choosing to stay put and enjoy their current low-interest rate rather than selling, there are fewer homes on the market, sometimes resulting in extended home searches.
How Does This Market Affect Sellers?
It’s a “seller’s market” but being a seller is hard, too. For various reasons, not all homes sell at a brisk pace. While a homeowner may sell their home faster for a good price, the real struggle begins when they need to find a home that fits all their needs in their specific time frame while juggling the realities of higher interest rates.
How Does This Affect Real Estate Investors?
This is a great market for experienced real estate investors to improve their existing property portfolios. With rising property prices, it’s been an opportune time to sell investment properties that aren’t performing as well as others. This is a great time to sell assets, recover costs and potentially make a profit sooner than anticipated.
Keep in mind that these general guidelines can vary depending on the specific dynamics of a neighborhood housing market. Give us a call today for an up-to-date assessment of current market conditions in a particular area. We are here to help!