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If you pay attention at all to the real estate market, in general, you’re likely aware of 2 basic points – that mortgage rates are continuing to rise and that sales have slowed. The effect is being felt everywhere.
Luckily, in Humboldt County, we typically don’t ride as high on the upswings, and also don’t dip as low when things change in that direction. We’re somewhat insulated from the bigger state and national mood swings that the market entertains.
MORTGAGE RATES ARE DRIVING THE MARKET CHANGES RIGHT NOW
It’s not a new idea that mortgage rates dramatically affect what is happening with the real estate market, at any given time. However, right now, things are still somewhat atypical, as we are seeing rates not seen in some time, and after so many years of low rates, buyers and sellers alike are having to rethink how they will invest, divest or otherwise participate in the real estate market.
Some historical mortgage rate data for perspective:
Rates started climbing in Mid-December , 2021. There were precipitous rises beginning in March 2022, and they continued rising steadily until there was a quick drop in August. By October and November, we were seeing rates in the high 6’s to low 7’s and then remained in the 6’s until August of this year, when they began rising again. As of October 12th, the rate was 7.57% – not seen since the year 2000. It’s difficult to know where rates will stabilize, or if they will continue to rise, which makes things difficult for buyers and sellers alike.
How are these rate changes affecting the market?
Everyone is feeling the pressure.
In CA, rates have gone up 25.3% since May 2023, while Home prices have only increased 3%. This means that while buyers are paying quite a bit more on their monthly mortgage payments, sellers aren’t realizing those gains as much as banks are. It’s still interesting to note that home prices are STILL UP overall, though!?
Additionally, statewide, home prices are continuing to stay high for the 4th month in a row, it’s not just a quick phenomena. In fact, price growth for all properties has continued in an upward trend. Price per square foot also rose this month and is over $400 for the 4th month in a row. It’s possible that this is an effect of the “summer market” and higher demand. Only time will tell, but for now, the sellers aren’t having to let their properties go for a lot less even though rates are still climbing. This is also true of Humboldt County.
Interestingly, sales at the more affordable price points are slowing faster than in the highest price points, although pending sales are lower in ALL price segments. This is possibly because in the lower price points, buyers have to be more careful with their money and financial decisions. Perhaps there are just less buyers in that price point now that rates have made it so that they’re getting “less house” for their money. In the higher price points, buyers can afford the rate fluctuations, and usually have more resources to make up for the differential. In short, they can “afford it” if they want to.
Pending sales may be down because less properties are coming on the market. Statewide, the housing supply has dropped in more than half the state. Humboldt remains one region where there’s been a slight increase in active listings.
A FEW STATEWIDE STATISTICS
Median Sales Price: $859K
Existing Home Sales are down 29.2% YTD
Median Days on the market 18 days
Statewide sales have been on a steady decline since May 22, reaching a low point in Jan 2023 that rivaled the dip seen in September of 2007 and (briefly) immediately after the pandemic lockdown in early 2020.
Since sales of homes in the lower price point are slowing faster than in the more expensive properties, sales of homes in the higher price points are accounting for an uptick in prices statewide despite the overall “slowing” of the market.
WHERE DOES THE HUMBOLDT COUNTY MARKET FIT INTO ALL OF THIS?
There are 444 residential properties on the market, 213 of which are in Coastal Humboldt – the most active area of our local market. Half of those (105) are over $500k in price and 23 are over 1mil.
153 are in Southern Humboldt and 35 are in the Willow Creek Area.
Sale-to-List Price Ratio
For our purposes, we are looking at the sale price compared to the original list price. This number indicates if properties are selling at, above, or below the price they are put on the market for.
Eureka has remained stable in the last few months, with properties selling from 96.4-95.3% of their original list price.
Arcata is still its own unique market, with prices going for 98.9 to 99.6% of asking price. Please note, as covered in market reports from the past, that Arcata doesn’t have a ton of market activity right now, and one or two properties can skew the Arcata statistics dramatically.
Mckinleyville is slightly more “volatile” with the ratio going anywhere from 96.8%-100.2%.
The Fortuna market does normally fluctuate slightly, and that is indicated in these statistics, with properties selling at 96.3% in July, jumping to 100.1% in August, and then plummeting down to 91.3% in September. Again, while Fortuna has a good sized inventory, it doesn’t take much for one or two closed properties to dramatically affect the numbers.
To repeat, with such small markets, it’s important to note that these stats aren’t “overall” market indicators. Drops in Sale-to-List price are expected this time of year, as we see end of summer price reductions and people wanting to wrap up the sale of their property and perhaps willing to make concessions in price point.
Furthermore, with increased rates, and Humboldt’s somewhat unique position of having a healthy inventory of properties available, buyers are becoming more savvy, and are implementing the (somewhat expensive) negotiating power they’ve gained.
Houses are definitely taking longer to sell in recent months, but the statistics in this regard are stable. You can for sure say that the days of selling your property within the week are more-or-less gone. Anyone considering putting their property on the market should do so with the awareness that it will likely take time to get it into contract.
Eureka homes are selling in 2.1-2.3 months
Arcata 1.8 – 2.3 months
Mckinleyville 1.94 – 2.36 months
Fortuna 3.07- 4.23 months.
What does this mean for you?
As a seller, the process may be longer than expected, and if you’re occupying your property while you sell, you or your tenants may need to entertain a protracted period of showings. Some buyers may request second showings or more information before submitting offers as well. Ideas for how you can make your property stand out amongst the others? (If you really want to know, you should definitely call me for the full rundown)
- Consider conducting inspections prior to listing
- If you’re in Eureka, complete your sewer lateral requirements before hitting the market
- Choose a Realtor with an excellent marketing package – as well as someone you’re keen to work with for awhile.
- Take time and effort preparing your property for sale, including cleaning up, staging, etc.
- Consider structured price drops if you want to try listing high
If you’re a buyer, what this means is that you can probably be more choosy. You may not have to rush to get your offer in immediately (This obviously varies depending on the property) and you might be able to leverage yourself between multiple properties of interest since sellers aren’t typically inundated with offers right now. Also, buyers have more negotiating power overall, so consider going ahead and asking for what you want in your offers!
County wide – the Average list price for new properties in September was $544K and the average sold price was $467K. Keep in mind that broad statistics like these don’t necessarily apply to your individual home or property. The greatest part of Humboldt County Real Estate is that we have such a huge variety of interesting and unique properties – each of which truly needs to be assessed on it’s own.
The main takeaway on list price though, is that prices aren’t coming down as one would generally expect during a slowing period in the market. There are likely many reasons for this, but expect to see sellers holding the line on asking price and not making tons of price drops. Additionally, if a seller doesn’t “have to” sell, you might not be able to get your “lowball” offers accepted.
Life circumstances constantly dictate that people will more or less always be needing and wanting to buy and sell property and investments. If a global pandemic didn’t stop the real estate market, you can easily imagine that what we’re seeing with mortgage rates isn’t going to either. Things will keep changing and may or may not stabilize. It’s not uncommon for us to have clients from the last several years who decided to wait to buy because they thought the market would crash or that there would be a foreclosure crisis, and several of those folks have lost out on tons of equity, or are completely unable to buy at all anymore. Likewise, some sellers waited to put their properties on the market, assuming that demand wasn’t going to waiver, and never imagining that interest rates could do what they’ve done in the past year and a half. This has affected some seller’s bottom line.
If you’re needing to conduct a transaction in real estate, don’t fret that you’re coming into the market at the “wrong” time. Timing the market can make a big difference in the financial part of a purchase or sale, but for most people, it’s just luck that lands them in the right place to buy or sell during those times. It’s not worth playing around with obtaining secure housing or getting out from under a property, because the statistics are showing us that things are in flux, and no one really knows what property values OR interest rates are going to do in the coming months!
As always, for more detailed information about your region/area or subject property, we’re only a phone call away. Your questions, comments, thoughts, critiques, etc are always welcomed!