Too Much Inventory = Price Declines
Sonoma Country readers... did you see that? If you weren't fortunate to be living here between 1992-1997 when home values declined, it looks like you may be lucky enough to see a repeat performance, or maybe it will be different this time....
"Bay Area home values are expected to decline next year because of rising interest rates, a glut of homes on the market and lower affordability levels, a housing economist said Thursday."
"Ken Rosen, chair of the University of California, Berkeley's Fisher Center for Real Estate & Urban Economics, said at a conference attended by dozens of real estate professionals.
Rosen did not provide exact numbers on how much he expects home prices to decline next year, or give a forecast for sales volume."
'"The decline (in home price appreciation) will happen because unsold inventory is getting so high," he said."
"In coming up with his outlook for next year, Rosen cited an increase in the number of homes on the market as measured by what's known as the unsold inventory index."
"The index is the number of weeks or months it would take to sell the supply of homes on the market in an area at current prices."
"California Association of Realtors chief economist, Leslie Appleton-Young said, "Only one factor can lead to a significant decline in prices, and it's too much inventory."'
"While home price appreciation has been slowing in recent months, the Bay Area is still one of the most expensive housing markets in the country."
"Only 12 percent of Bay Area households could afford the median price of $712,940 for an existing single-family house in December, according to association figures. In December 2004, the figure was 13 percent."
"If fewer people can afford to buy a home, that results in more homes on the market, which can lead to lower prices. Rosen said shrinking affordability levels are linked to household income being outrun by high housing prices."
'"Housing prices have risen dramatically relative to income. Low interest rates and easy credit is what caused housing prices, relative to income, to rise so fast," he said."
"But, Rosen noted, interest rates have started to rise in the last few months, which is slowing home sales."
'"We are going to see the market soften," he said."
Sonoma County MLS: 2828
Price Reduced: 564
Sonoma County sample listings progression
3/20/06 = 1742
3/26/06 = 1766
4/03/06 = 1888
4/19/06 = 2828
Sonoma Valley MLS: 291
Price Reduced: 66
Sonoma Valley listing progression
2/14/06 = 172
2/14/06 = 183
2/24/06 = 193
2/25/06 = 200
2/27/06 = 214
3/01/06 = 219
3/04/06 = 220
3/12/06 = 230
3/20/06 = 236
3/26/06 = 238
4/03/06 = 268
4/19/06 = 291
In the past 30 days:
Sonoma Valley home values declined: -2.4%
Sonoma County home values declined: -3.6%
Home Sales in the County for March 2006: 459
March sales still fell 13 percent from March 2005 levels.
According to the Press Democrat article they claim there is a 3.5 month supply of homes on the market signifying a more "normal market." Someone's got to call BS on that... at the rate of sales using the March sales number we actually have a 6.16 month supply of existing houses on the market.
"Sales began to slow in September as buyers increasingly found themselves priced out of the market, the result of high prices and rising interest rates. Since then, prices have bounced up and down, leaving no clear indication of where the market is headed.In March, the median price rose to $575,000, up more than 3 percent from February. But it was level with the median price a year ago."
"One sign of the change in the market: The typical home sold for $4,000 under its asking price in March, Connell said. A year ago, homes normally sold for $5,000 above the asking price."
""You might need a couple of price reductions to get it sold," he said.Laws agreed that pricing is more critical now than it was a year ago, when bidding battles could drive up prices."If someone priced their home with last year's mentality of 'I'll get what I want,' it's not going to happen," Laws said. "Homes that are overpriced simply need a price reduction to become attractive, and yet attractively priced homes still get multiple offers."'
""There's much more negotiating between buyers and sellers now. Buyers are just much more conscious that they have more to choose from than a year ago," Connell said."
"More homes are staying on the market longer before selling. The supply of homes also is building as more homeowners look to sell during the busy sales season."