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Well, it’s been a Winter to remember. Currently, it’s April 10th, and the weather is VERY fine indeed – a true Spring day – yesterday the weather was so nice, I saw folks in sandals, and yet, it’s not difficult to remember the long, cold, and shaky winter we’ve just come through. AND – there might still be more wet and cold winter weather coming our way, but for now, the horizon is bright and warm.
Just for fun, I did go to ChatGPT to see what kind of Market Report it would write for Humboldt County. It was pretty interesting, and kind of scary how quickly it was able to pull up meaningful and useful information. I had to ASK it to use stats, and it did, although they were too old to be relevant to a current Market Report… it was an interesting exercise, but you can be sure, this report is written by me – Human Realtor of Humboldt County…
So, let’s jump right into the actual stats and go from there:
Market Volume is a pretty interesting and important number. It’s a bit difficult to predict, except that in general we know that volume goes down during winter months and up during Spring and Summer.
When Volume is low, prices tend to increase because of scarcity in the market. If the volume gets too low, people begin looking elsewhere to buy, or give up for the time being. When Market Volume is high, it can bring prices down, and/or pull more buyers into the market.
Because our coastal region is an increasingly desirable place for people to live and/or relocate to, and because our area’s growth is limited by nature, we don’t tend to have a “large” inventory in general. Especially if you’re only looking at/considering move-in ready, financeable properties – which is what most buyers are looking for.
MARKET VOLUME CAN BE BROKEN DOWN INTO THE CATEGORIES OF ACTIVE/SOLD/NEW LISTINGS
In Eureka, for residential properties, the Active Volume went up in the Summer Market of 2022, and peaked in October. The peak was at $35million and has remained right around $30million since December. This number alone indicates that there might be properties sitting on the market and not selling for months at a time. For comparison, the Active Volume for April of 2022 was almost half of what it is now – at around $17million.
The NEW list volume in Eureka starting dropping (as expected) in November, and has fluctuated a bit through Winter. It’s currently up for March, and is anticipated to be higher for April and beyond. Overall, we would expect to see Sold Volume to be down for Eureka, since the active volume is up, and the stats show that. Again, this is somewhat typical of our winter season.
In Arcata, the Volume stats are difficult to use too much because one or two listings/sales can really skew the numbers in a given direction. If you want more detailed stats for Arcata, please don’t hesitate to reach out
WHAT DOES THIS MEAN FOR YOU?
Well, if you’re a buyer, it means that theoretically, you have more options of properties to purchase and maybe prices are trending down. If you’re a seller, it means that you might have more competition if you’re listing your property for sale. (Let me know if you want info on the best hacks for getting your property sold in a more competitive market.)
Overall, the market is quite stable. Interest rates have started to stay pretty steady, and in some cases, they’ve come down slightly. (Recall that one of the biggest parts of the interest rate shake up from 2022 is the rates were jumping consistently and sometimes precipitously) Lenders remain optimistic about the mortgage market, and for the most part, the buyers who were pushed out due to the interest hikes have moved on. For now, it seems that as usual, Humboldt County weathers these kinds of economic upheavals better than many parts of the state and country, protected by our rural edges and small population.
The absorption rate is an indicator of how quickly properties are selling after they’re listed. Back in April of 2022, we were still riding the wave of the covid-era/low interest market, in which homes were barely able to get listed before they were sold. The absorption rate at that time for Eureka and Arcata was only 2 weeks; Mckinleyville and Fortuna were 4 weeks and 7 weeks respectively.
Across the board, all coastal residential areas of Humboldt County have seen an increased absorption rate, because April was the low point for the last 12 months. As the interest rates began steadily increasing, and sellers were consistently testing the water with higher and higher list prices, properties were starting to sit on the market a bit longer, even during our peak (summer) season for Real Estate.
The absorption rate tends to increase during Winter months anyhow, since there are fewer properties on the market, fewer buyers, and in reality, fewer days during which house hunting is feasible. Especially with the extra-interesting winter we’ve had combined with that earthquake around the holidays.
As we move into the Spring and Summer markets, we’ll likely see the absorption rate come down.
Current Absorption rates:
Eureka/Arcata 6 weeks, Mckinleyville 6 weeks and Fortuna 10 weeks
If you’re planning on putting your property on the market this year, these timeframes are good estimates for how long your property might be on the market before you get it sold.
County-wide, the absorption rate is not a reliable number because our rural properties take quite a bit longer to sell. The County-wide absorption rate was 9 weeks in April of 2022 and is currently at 12.5 weeks. When using absorption rate, it’s best to focus on your sub-area.
SALE-TO-LIST PRICE RATIO
The big number everyone likes to watch, and probably the number most often associated with “the bottom line” is the Sale-to-list price ratio, which indicates the relationship between the listing price and the sold price. A high sale-to-list ratio is good for sellers and a low ratio is good for buyers. I prefer to look at overall trends with this ratio to get information about the larger cycle of activity happening in the market.
The stats for Eureka show trends that make perfect sense when you’re looking at what happened with interest rates over the last year.
From April – July 2022, you see the tail end of the Covid-era market, where the Sale-to-list is still heavily favoring sellers. Interest rates were still very low, and competition was continuing to be fierce. In April 2022, the rate was 104.4% and when a a robust Summer market brought more listings, the ratio went down slightly, but on average, sellers were still getting 102.5% of their list price.
In August, after the mortgage market became unpredictable and a bit volatile, you see the ratio drop as a correction to rising rates and a slight panic in the market to an interesting 99%. This was a frustrating time for sellers who had put their properties on the market at the peak and were suddenly encountering buyers who were reasonably wary of overpaying for properties if the market was about to crash.
Since August, sellers are still adjusting to lower prices, and buyers are having to contend with less purchase power. Interest rates are stabilized (more on that later) and we see that the market didn’t overreact too much, as the rates remained at 98% through the Fall. There was a (possibly) random spike in November, probably from one or two well over-asking sales. Now, in December, the rate stayed at 98%, indicating that the market itself was stable, but mother nature had other plans for us last Winter.
Winter of 2022-23 came on a little early and things got cold quick. People were fine with that, until good old fashioned Humboldt storms paired up with a pretty big earthquake – and the fury was on. I don’t want to overestimate how much things like weather and earthquakes can affect the real estate market, but it IS a factor. We see the sale-to-list price ratio drop again in January to 97%, down again in February to 96% and back up to 97% in March.
One could see these stats and assume that market is on a slow, downhill decline, but the fact is, we just came through a several-years long BOOMING market, where Covid and low interest rates had prices literally soaring.
Just to be clear, her are the median prices:
- Spring of 2019 – Median LIST price: $315k
- November 2020 – Sold price overtook asking price – Median SOLD price $365k
- End of 2021 – Median SOLD price $435k
- August 2022 – Market Peak – Median SOLD price $470k – What’s MOST interesting about that statistic, is that the median LIST price was even higher, at around $475k – which indicates that sellers were still trying to push the market farther and get more money.
SO, if you were considering jumping on that wave – it appears to have passed… and it was a good long stretch of quickly increasing sale prices (profits for sellers). It would have been unlikely or unsustainable for it to continue going on like that, so it’s not a huge surprise that it has come to an end.
Does this mean that you should wait to sell your property now, since you’ve missed the potential peak? Not necessarily.
Even though we’re seeing a decline in Sale prices, we’re still WAY up from where things were just a few years back. When you have a peak like there was, there will be an adjustment period. In my opinion, the Spring and Summer Market of 2023 will really dictate what the new normal is. For now, there are signs that the market is hitting something of a plateau. It’s also VERY important to look at what’s happening in the Sub-area that you’re looking to buy or sell in, because the rural inland properties and real estate market can skew the county-wide stats significantly, especially on the heels of cannabis property conundrum.
Furthermore, the available volume isn’t intensely high, so if you need to sell, at least you can do so confidently, knowing that there is still less competition than there has been historically for sellers in Humboldt County.
WHAT ARE INTEREST RATES DOING?
Well, I’ve heard different things from different lenders.
I subscribe to multiple local and nationwide lender’s market reports and in one week, I got one that said that the Fed is continuing to raise rates, and 3 days later I got one that actually quoted the Fed saying that mortgage rates are continuing downward. So, it’s interesting to be careful with where you get your information.
It’s true that stats take a little time to come out and sometimes people are reporting old stats. The market does move faster than the statistics sometimes.
Also, each lender is working with their own company and sometimes the rates set by their company do not always reflect the most recent rates from the Fed – and that can go in either direction as far as benefitting the consumer is concerned.
Rates can also vary dramatically depending on your down payment, credit score and debt ratios… Google actually has a pretty interesting mortgage rate calculator on their search page that you can play around with the compare the state average – which appears to be hovering around 7% for 30 year fixed and 6% for 15 year. I have heard repeatedly from local lenders that they are quoting rates lower than that, so if you’re considering getting a mortgage, definitely shop around first.
Also, folks are wondering when rates will come back down. I covered this topic at length in past market reports, but the bottom line is that many people have differing opinions on this.
For me, it comes down to the question of IF rates will go down, not WHEN.
It feels risky to me to assume that rates will come down, because it can lead to poor financial decisions, based on assumptions that might not come to pass. So, I encourage people to consider that rates are still quite reasonable. If you are thinking of buying (especially if it’s a home for yourself) there are still lots of opportunities to get into good properties with good mortgage rates. If rates do go down significantly, the refinancing options will present themselves, and if rates go up, you’ll be glad you invested in your family home when you did.
In conclusion, the Market is showing expected signs of balancing out after last Summer’s interest rate hikes. Buyers are more aware of their purchase power, and sellers are realistic about their asking prices. The winter slow down, extra cold and rainy weather, and protracted period of earthquakes definitely impacted our market somewhat and we are already seeing the signs that the Spring Market will be robust and healthy. Real Estate remains a quality investment, especially if it’s for home ownership and you’re investing in yourself. If you’re a seller, there is still good opportunity to get a great asking price for your property -especially if it’s in great condition and in a desirable area.
FOR MORE INFORMATION
If you enjoyed reading this report, maybe you have more specific questions and want more detailed info? Maybe you’d enjoy a conversation about your sub-area or insight on your real estate situation? We’re always here to chat about real estate, and our services are free until you decide to hire us to buy or sell.
Give us a call or email us for more information or questions!
AMI WRUCK 707-834-8965 [email protected]
BRIAN WRUCK 707-599-9218 [email protected]