It’s Summer 2022, and if you follow the housing or lending market for housing, you probably have heard about the shift that happened last month, June 2022.
Most people know that interest rates have been rising, but several weeks ago, rates took a precipitous hike overnight, in what one lender I know called the single biggest daily increase in interest rates in his 30 year career. Indeed, the way rates have been rising is unrivaled since the 80’s. For more background on the history of Mortgage banks, check out this link.
HOW DOES THIS AFFECT THE MARKET?
One important thing to note is that fluctuations in interest (mortgage) rates are typically used to adjust the economy overall in this country. The recent, and also precipitous rise of inflation and the cost of living has definitely encouraged this situation.
While consumers are unilaterally impacted by cost of living increases, there is also a secondary effect on the Real Estate Market – simply that if your every day expenses are suddenly costing more, in reality, you are simply able to afford less. Unless your income somehow keeps pace with the inflation rates, you’re financial health can be impacted by it, and in the housing market, that translates to an immediate change in who can qualify for, or afford a loan.
In addition, when the rates literally went up overnight, there was another immediate and significant ripple through the Real Estate Market, namely, surprise.
Usually, the slow increase of interest rates mean that a home buyer can shop around for property while being reasonably assured by their lender of what the mortgage payment would be. It is extremely unusual for an estimation of that to change dramatically overnight, like it did.
As a result, some buyers were immediately unable to afford the loan anymore. This translates to buyers in the lower and lowest price ranges exiting the home search process, freeing up some inventory, theoretically, for people who could afford to spend more.
Also, there was a lot of chatter and conjecture online about what the bold move means for our economy in general, for the housing/mortgage market and wether or not it’s indicating that we’re heading for a recession. That kind of press makes everyone to more or less have the same thought – “Is now actually a good time to buy? Or should I wait. Are prices about to drop?”
I’ll get to that in a minute… but one other important factor to consider is that locally, we have significantly more activity in our market during the summer. There are more buyers, yes, but most importantly, there are more sellers/listings. We had a robust Spring market, which can be hit-or-miss, but by June, our Summer market was in full swing, with a good number of properties coming on the market daily.
Since interest rates had been steadily rising, buyers were already starting to wonder if they should wait for a minute to see what might happen, but once rates shot up overnight, everyone seemed to pause for a second. Add that to the increase in listings for Summer, all put up on the market at the highest price points/property values that Humboldt has ever seen… and…. now we have properties sitting on the market for longer than they have in some time.
COASTAL HUMBOLDT COUNTY MARKET STATS JUNE 2022
There are currently 365 residential properties listed for sale in Humboldt County.
173 are from Scotia to Mckinleyville
153 of those are NOT ‘Fixers’
14 of the 153 are under $300k
66 are under $500k
23 are over a $1m
VOLUME
It’s typical to see a rise in the volume of listings during the spring. Overall Active List volume hit it’s low point in January 2022 at around $155mil but has risen steadily since then to $245mil. Interestingly, June stats do show a slight dip from the upward trend we would expect to see in SOLD sales volume. This could be an early indicator of things to come, or an adjustment that happened after interest rates rose extremely sharply in June.
Comparatively, there are plenty of properties to choose from right now.
SALE-TO-LIST PRICE RATIO
The sale to list price is an interesting monthly indicator of what’s happening in the market. It can reflect local trends/situations or it can be representative of larger economic ripples and changes. In this case, March 2022 brought a very robust and slightly early spring market to Humboldt County real estate. April followed suit, and interestingly matched the other significant peak in the market over the last 12 months – September of 2021 – an indicator of a very strong spring market for sellers. May and June saw more properties being listed and in June 2022, the Sale to list price dropped below 100% for the first time since the January/February, which shows either a glut of properties, properties listed over value and/or the effects of extreme interest rate hikes mid-month. Possibly, all of the above.
Until last month, a reasonably priced property could expect to get multiple over-asking offers. That has shifted somewhat and buyers are being given a breather for the first time in a long while.
ABSORPTION RATE
Absorption rateThe absorption rate tells us the average of how long properties are staying on the market in a given area. For Coastal Humboldt County, the rate was more or less steady from July2021-February 2022 at just under 2 months. Most properties were getting into contract right away and were being sold in 30-60 day escrows.
Then in March of 2022 it hit 2 months and has gone up since. June 2022 was at 2.7 months, and I anticipate we’ll see it continue to rise. This basically means that homes are on the market longer before getting into a contract and being sold. It’s taking longer to sell properties in Humboldt.
This can have a pretty quick effect of lowering prices as buyers have more options and might be less aggressive with their offers.
WHAT DOES THIS MEAN IF YOU’RE A SELLER?
Did you miss your chance? Is the peak over?
Well, be glad that you didn’t put your property on the market right in the middle of the biggest interest hike in recent history! I definitely feel for the folks who put their properties on the market at a volatile time. It’s still to early to say if prices will drop precipitously or if this is a temporary trend until we recalibrate to the new rates. It’s likely that we are indeed past the time when a seller could reasonably expect to pull maximum profit out of the market. However, it’s really important to realize that while selling just before or at the peak of the market is ideal, that doesn’t mean that we aren’t still VERY NEAR the peak, which would be the second best time to sell, right?
The truth is, it’s still a great time to sell in Humboldt County. You can read through my other market reports for more information about how Humboldt County is somewhat insulated from huge swings in the housing market because we are small, isolated and have our own local market factors to account for – the biggest of which is very little new housing being built. I do not predict a huge crash for our local market anytime soon.
IF YOU’RE A BUYER, SHOULD YOU WAIT?
The psychology of Real Estate is an art, not a science. There aren’t stats to analyze for how a buyer will feel or think about a purchase afterwards, but we do know for a fact that every buyer would like to pay as little as possible for their dream property. So, when it comes to timing a purchase and looking at what the market is doing, it’s one part rational and one part emotional.
As always, if you’re looking to buy housing for yourself or your family, it’s definitely better to buy than to rent. It’s a wealth-building activity to buy your own home, even if rates and prices are higher.
If you’re actively trying to time the market, and know that you want to wait to see if prices drop, that is also an option. I do anticipate that they will drop slightly, as they already have in June 2022. However, consider that our prices may not drop much. We really don’t know yet. There may be a rebound from sellers who change their mind about listing now – that may mean more competition again. A big fire season inland could send a whole bunch of buyers our way, as happened over the last several years… it’s hard to know for sure.
I do think now is actually a good time, as a buyer, to be more choosy about what properties you write offers on. You can also be a little less aggressive with your offers, and in some cases can get your offer accepted below asking price. Consider that some homes listed right now have sellers that put their property on the market at a time when they could be reasonably assured that it would sell right away for top dollar. Now a month later, they’re still waiting for a buyer. We are seeing more price reductions happening. So sellers are still actively wanting to sell their properties, and as a buyer, now might be a good time to take advantage of that situation.
SOUTHERN HUMBOLDT MARKET STATS/COMPARISON
Currently, MOST residential and land LISTINGS are in the South County Area. Southern Humboldt also accounts for the most Vacant Land sales.
However, residential properties sit for longer in SoHum. Over the last 6 months, the average days on the market for properties in Coastal Humboldt was 37, but for South County it was 110. Also, the market there is slightly less competitive. Properties on the coast got 100.2% of list price, where south it was 91%. Also, less properties listed in the SoHum area actually sell – meaning that there are more properties on the market/more to choose from, etc.
In closing, the Humboldt County housing market is still alive and well. We’re still seeing a lot of people move to the area, and it’s anticipated to continue. Barring any major national or global economic situations, you can be assured that our market is stable.
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