|Humboldt tends to hang on to it’s summer vibe, usually well into early November, but there is a decided chill in the air, perhaps a touch early, and along with it some actual precipitation. More than one client has told me that the extra fruit on all the trees this year means a long, cold winter…
The summer market this year was a little bit less robust than usual, perhaps because of the lingering effects of our ongoing pandemic, and perhaps because the highest prices ever have scared away a few buyers. But nevertheless, if you list a property, it’s probably going to sell right now – because there are just so few of them out there.
Nationally, the ending of the federal moratorium on foreclosures has a lot of people thinking we’re headed for another market crash, but all indications are that this will not happen, or at the very least, is unlikely. First, since the majority of people who took advantage of the moratorium were homeowners prior to the huge ~25% jump that the market has seen (nationally and locally), they have equity. This means that even if they were burdened by lots of unpaid mortgage bills, they could most likely still list their property, sell, and get out from under the situation (maybe even get some cash out too). So, the idea that the market will soon be flooded with foreclosures, is pretty much too-good-to-be-true.SIDE NOTE – If I had a dollar for every time someone referenced the 2008 market crash as evidence that the market WILL drop precipitously again, I could probably buy myself a really nice pair of winter boots. If you hear one thing from me in this market report, hear this – the lending institutions in this country have adjusted for the systems that led to that crash. A repeat is highly unlikely. We never REALLY know when a major world event could lead to some sector of economic collapse, but the 2008 crash is not going to happen again – not in that way at least.
While a rash of foreclosures flooding the market is not predicted, the end of the mortgage forbearance program still could dramatically affect our housing market. With about 1.7 million homeowners currently enrolled in the program, that means that there could be a lot of homes listed in the relatively near future to avoid foreclosure. Since inventories are so low everywhere, even a trickle of sales could affect price points by offering more homes for sale.Interest rates are another factor when analyzing how robust the market will be moving forward, and while the rates have been playing with the idea of going up lately by rising and the lowering again, people in the know, seem to indicate that they will now be rising more than lowering, and that modest increases will become the new norm. The reasoning here is that the economy has basically proven itself by withstanding the (hopefully) worst of the pandemic and the Federal Reserve’s “mortgage stimulus” program will be slowly coming to an end. Rising interest rates mean fewer buyers and less competition, but it’s important to remember that nothing is happening fast right now.
SO WHAT ABOUT THE HUMBOLDT COUNTY MARKET?
Well, we are mirroring much of the nation in that our prices are at all-time highs and this trend doesn’t seem to be going anywhere different anytime soon. We may be in a plateau of sorts, but prices do not seem to be coming down. We also have very low inventory, and in fact, nationally, inventory is at it’s lowest point since they started keeping stats in the 80’s.As far as our seasonal update, as predicted, our active list volume did go up slightly this summer – with the usual July lull offering a slight dip in activity overall. Locally, volume for residential properties in all of Humboldt County is sitting at around 194 properties. If you’re looking at only coastal Humboldt (Patrick’s Point to Scotia) then we ONLY have 84 active residential listings. Simply put, this is very low.
With the number of people moving into the area, and the potential for massive growth looming with our soon-to-be Polytechnic school, the short of it is that we need more housing on all fronts. One more note about list volume – it’s interesting to also assess how many of those 84 coastal Humboldt properties would be considered affordable for the average person. 14 of the 84 homes currently available are over $1mil. Another 13 are between $700k and $1mil. When you take out the fixers and properties needing an overhaul, this leaves very few actual residences for the average person, and as usual, the 3bed, 2bath typical family home is in highest demand.People have definitely started listing their properties at a higher price point. The sale-to-list price ratio is is hovering around 100%. This indicates that overall, properties are priced accurately, still often going for above list price, and that it’s also probably true that there are few outliers staying on the market longer and selling for slightly less because they are either overpriced, or just are more expensive properties (which tend to take a bit longer to sell.) For contrast, when the market was rising quickly, the sale-to-list jumped up to as high as 102% in May.
The Absorption rate is another interesting statistic to look at. It’s the rate at which homes are sold. Being ‘sold’ indicates the time between when the house is listed for sale and when it closes. The absorption rate peaked somewhat in July, probably due to the slightly smaller inventory and has dropped somewhat and stayed steady since then. mAs an interesting side note, the Absorption rate in October 2020 was 2.3 months, and we thought that was a quick market! As of September 2021, it’s dropped to 1.8 months. Appropriately priced, move-in ready homes are usually off the market within a week of listing.Moving forward into the Fall market, I anticipate that the market will stay steady through winter. I personally don’t see any reason why things would change dramatically. We can guess that the numbers will shift somewhat toward our usual trends, which are that prices go up slightly when less people list their properties. Since Fall and rain have arrived early, it’s easy to surmise that we might have fewer listings if the weather shifts sooner than usual, bringing us into our Winter market before it’s time.
WHAT DOES THIS MEAN FOR YOU?
If you’re a buyer, you may want to start seriously considering taking advantage of the all-time-low interest rates. While rates are not likely to rise too much too fast, the process of finding a property is taking a little longer for the average buyer because of the low inventory and competitive market. At a minimum, if you’ve been thinking of buying, checking in with a lender to assess the financial viability of it is a good idea.As a buyer, you may be concerned that we’ve reached the peak of the market and that prices are going to start coming down. As mentioned above, if the market does get a trickle of properties listed instead of foreclosure, there may be enough action to lower prices somewhat. I personally think we’re still sitting on a significant backlog of buyers that will swoop up those properties pretty fast. Also, if it takes more than a year or two for that trickle to begin, we’ll be moving quickly into “Polytechnic” territory, and there’s enough conjecture there for an entire blog post that I probably won’t write. Let’s just say, it’s going to change things, folks.Another consideration for buyers, is that if you’re planning on buying to live in a property versus rent, and if the plan is to do so for some time, you will almost always come out ahead financially. It’s pretty much universally better to pay a mortgage over renting, since some of that money would be available to you if sold, and in the meantime if you’re building equity in the property, you may actually be using your housing as an investment. (For more on this, just call me, I’d be happy to go into detail)
If you’re considering selling, it’s still a good time, and that is not likely to change locally for awhile. The housing crisis we’re facing here is real, and local agencies are taking notice, and action. These kinds of changes take time though, and probably won’t affect our market for awhile. With the growing interest in Coastal Humboldt and the seasonal fire refugees we get each year, I anticipate our market will continue to grow and be profitable. It might be a concern that if you sell now, you’ll miss out on another jump in the market… well, that’s almost impossible to predict, so I would just encourage each of you to consider your own situation. (Or give me a call and we can assess together…)Now is a good time to sell if you’re ready to sell, and if you want to hold, then that should work out fine as well – I don’t see the market dropping precipitously.
If you’re an investor, now might be a good time to consider getting in on the market. One sector that seems to have remained low is the commercial real estate market. People are often so focused on housing as investments because it’s easy to find renters, but the reality is that if you’re looking and thinking long term, our county is planning on in-fill developments and with more people and more housing, there will be a greater need for more commercial properties and developments.
As always, we love to hear from you. Email us and let me know what you think of this market report, and never hesitate to reach out with real estate questions!
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