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It’s been a real Humboldt Winter – one with multiple storms, rolling in successively, lots of precipitation, and even early snow and cold snaps. I know I’m not alone when I say that this weather reminds me of Humboldt’s past, while for others, it’s shockingly different.
Then there’s the earthquakes…
I’m not trying to wax poetic about the weather – but it brings me to the first point I’d like to make about the local market right now – it’s SLOW. In some ways, I’d rather describe it as distracted, since I’ve heard the words “bomb cyclone” and “the big one” enough for 2023 already, but also, folks being rightly distracted by sheets of rain and aftershocks has reasonably led to less listings and sales.
We left off in Fall of 2022 mostly focused on interest rates. You can read the full write up on that here: FALL 2022 REAL ESTATE MARKET REPORT
Interest Rates – 2023
At the writing of that FALL report, the 30 year mortgage fixed rate was at it’s peak. We didn’t know it for sure at the time, and of course, we don’t know for sure if it will last or change abruptly again, but as of today, the rate reached it’s highest point at 10/27/23 at 7.08% according to FRED Economic Data. Since then, rates have come down, and are currently sitting at 6.33%. The last time rates were over 7% was 2002.
It will be some time before I’m comfortable saying that rates have “stabilized” because the fact is, looking closely at the stats show that it seems like as soon as January 2022 rolled around, there was a new policy ending the years-long gentle adjustments to the rates in favor of a more aggressive approach. It’s difficult to know when things are more stable until after the fact, so timing is an important factor.
Because interest rates most directly affect the buyer, I do have a couple of tips regarding lending:
First, be sure you have a knowledgeable lender who is active in understanding the fluctuations. Some lenders change their rates daily, while others will go weeks before changing. Sometimes they know when the rate change is coming and sometimes they don’t. Asking these questions about how your lender adjusts rates, when/how often, etc. will give you a good understanding of who you are working with and what they may be able to offer you in a market like this.
Many lenders are selling loan products with Adjustable rates and buy-down packages. Just be sure to really do the math, and prepare for worst-case scenarios (should rates continue to rise, etc.) It’s common to hear: “…you can refinance when rates come down…” but be advised that refinancing usually has a price tag as well, and some people might not have the equity or cash to make that happen so easily.
Interest Rates and our Local Market
Even with rates coming down slightly, the bottom line is that when rates go up, the buyer’s purchase power goes down. Money that would have previously been applied to a purchase price is now allotted to interest. Not only does this change the price point for buyers, but it’s downright discouraging if it happens to you in the middle of your purchase process.
However, as time marches on, the current state of affairs is no longer as big of a surprise to buyers. Also, as new buyers enter the market, they are aware of the volatility, and aren’t expecting what our Summer buyers were. So, as we move into our Spring Market, I anticipate that interest rates will be less of an “issue”, assuming they don’t start fluctuating too wildly and/or they continue to go down overall.
What this could mean for our market is more stability and activity than what Winter has offered.
Lastly, it’s important to note that interest rates for investment properties are higher than they are for owner-occupied properties, and since Humboldt has been a reliable market for investment properties, 2nd homes, etc, there may be continued slowing in those purchases, which could be good for people looking to buy a home for themselves.
Sale-to-List Price Ratio
I did a pretty good job explaining the Sale-to-List Price Ratio in the Fall report – the market at that time really deserved close attention and understanding of the stats, so I went for a LONG report. Feel free to read it as a primer for understanding these stats better.
The short of it is that a ratio around 100% indicates that by-and-large properties are selling for what they are listed for. For some time, we have had a ratio at 100% and higher. In July, we saw a precipitous drop as prices scrambled to adjust for the rate increases, and we have stayed below 100% since then.
Interestingly, I think everyone anticipated that the rate would only continue to go down, but it did rally in October and reached 99.6% – very near 100%… We do usually see an overall drop during early and mid winter, so, when the number came back down to 97.6% by the end of December, it wasn’t a surprise. It is important to note, though that year-over-year, the overall number was down significantly from when it was still 100% at the end of January 2022.
This statistic basically represents that you can very accurately say the market is “down.” It’s a funny number though, because it does depend a lot on list prices. However, I am of the opinion that currently, Realtors are doing a great job helping sellers find reasonable prices in a changing market, and less sellers are expecting the gold rush days of 2021-early 2022.
Also, it’s important to note that this number reflects ALL residential properties in Humboldt County, and the stats for the coast are slightly different. For example, the ratio for Arcata was not dramatically affected buy the Summer interest rate drama and has stayed over 100%, only going as low as 99% in September, and without any precipitous drops. It then rallied at the end of December at 103.9%. To be fair though, the ratio peaked in April 2022 at 113.6%, so the Arcata market is still down like everything else. Also important to note is that when you zoom down to individual cities and try to analyze them as a market share, because our area is rural and “small,” even one sale can affect the numbers pretty dramatically.
It’s difficult to know without geeking out too much on the closed sales by month, but in Eureka, we saw the ratio also start to drop in April 2022 from it’s peak of 104.4% to a low of 98.2% by the end of September. (By the way, we usually see the numbers stay high through Summer, but the interest rates affected the local market pretty dramatically.) That November rally really hit Eureka causing the rate to jump from 98.6% at the end of October to 103.3% a month later. As expected, the market came back down for winter and at the end of last month was back down to 98.3%
It’s fascinating (to just me maybe!?), because Arcata did NOT have a peak in November, but Eureka did, indicating that it’s entirely possible that there was one or two massive (over-asking price) sales that caused the ratio to jump. I’d love to wormhole on that more, but unfortunately there is a lot still to cover, and writing these reports can take days, so I must move on… …but I wanted to illustrate that in a small market like ours, statistics can be confusing or even downright deceiving if you aren’t thoughtful about what you’re looking at.
Also, I would just like to point out that the coastal Humboldt sale-to-list price ratios peaked last year in April, showing that it was more favorable to list your property in Spring, than Summer. It’s a common misconception that properties sell best in Summer. Of course, the market was pretty dramatic last Summer, and has continued to change since then. Also, Spring weather is always a factor, so no one knows for sure what 2023 will bring, but it’s still interesting to note. Historically, we have seen peaks in May (2021)(2019).
The Absorption Rate is typically looked at to see how long a seller can expect to be dealing with selling their property. It reflects the number of days between when the property hits the market and when it closes escrow. It can also be a great general indicator of how robust the market is.
In January of 2022, we saw a relatively low rate of 1.64 months. The rate had been continuing to climb through Spring, and into Summer, presumably because properties were being listed at top dollar, (A time I am now referring to affectionally as the “gold rush” – Mid 2020-Early 2022) and the interest rates did start to go up slowly starting in January as well. Since July, the Absorption Rate has hovered around 3+ months, from 3.32 months in August to where it was at the end of December, 3.54 months. This likely indicates more days on the market before a property sells as well as longer escrows. Prior to the interest rate shift, buyers were bending over backwards to give sellers anything they wanted – including lots of shortened escrow periods.
Again, it’s so interesting to assess sub-areas in our market to compare. For example, the rate in Arcata has not gone above 2.15 months and is currently sitting at a rather quick sale of 1.65 months. Interestingly, Eureka’s rate peaked at the end of October at 1.77 months, and is currently at only 1.5 months. I’ve said it in Market Reports in the past that we always have to consider the county-wide stats carefully, because coastal sales are quite different than inland/rural sales. For comparison, Garberville’s absorption rate is currently 15.69 months, down from a whopping 26.4 months at the end of September. So, when you’re combining these numbers, you can get a figure that isn’t really accurate for any one area…
(A side note – I know I’m focusing on Arcata/Eureka for comparison’s sake – but sincerely, if you need/want specific stats for your town/area, just send me an email and we’ll get you those numbers.)
Days on the Market
I don’t always address this number, since it is a lot like the Absorption Rate – however, the real variable in an escrow period tends to be the amount of time the property sits before it “sells,” aka “Days on the Market” (DOM). The loan process usually takes 21-45 days, but what a seller really wants to know is how long they have to wait before they get a good offer, and buyers are interested in knowing how quickly they have to act to get in on a property before it sells out from under them. That’s what this stat tells you.
First, a look back. Since April 2021, DOM has been between 20-30 days until Feb 2022 when it went up to 40.3 days. This could be a bit of an outlier of a month, but between March and July of 2022, the rate hovered between 25-30 DOM. Since then, the rate has jumped, and has reliably stayed between 30-40 days before getting an accepted offer.
It’s not uncommon lately to hear Realtors saying they’re seeing properties linger on the market these days, citing the recent interest hikes as cause for slowing the market, but the DOM stat for coastal Humboldt County paints a different picture. Deep-diving in the individual statistics for Arcata-Eureka-Fortuna, we see that Arcata has the highest DOM, while Fortuna has the lowest. All are within the 20-40 day range, with Arcata being closer to 40 and Fortuna clocking in around 25 days.
It’s important to note that comparing the DOM stats between 2021 and 2022, you do see a definite rise in how long properties are sitting on the market before selling, but we’re not getting stats showing that homes will sit for months and months before selling, as the norm, that is. Again, comparing coastal Humboldt to Inland, you find differences that are telling. In Garberville, the DOM for December was 130, and interestingly, for November it was only 38! That’s a huge range, considering that in October it was 134!
This further illustrates how county-wide stats aren’t always awesome at assessing individual property values in sub-markets AND that small market shares can be dramatically affected by individual sales and the make-up of what sold during a given month. We simply do not have enough inventory and turnover to have a very reliable sample size. Nevertheless, looking at county-wide stats is a good basic indicator, and looking deeper at the sub-areas is interesting, for sure.
…and now we come to what I think is the biggest factor in our current local market situation… the list volume. When there’s “nothing” on the market, some people stop looking actively. We always anticipate a dearth of listings around the holidays, but when you add multiple earthquakes and a protracted period of stormy weather, one after another – you get a SLOW market.
These stats can also be a bit misleading if you don’t read them right. The overall Humboldt County statistic shows that ACTIVE List Volume steadily rose throughout Spring of 2022 and early Summer. In July, when we saw the volatility cause ripples in the market, there was a peak of 398 listings, and we’ve stayed steady right around that number until it dropped slightly to 371 at the end of December.
It’s important to compare this number to the NEW List Volume, because while ACTIVE List Volume is an overall picture, we actually want to know if we’re seeing NEW listings coming on the market – and what we’re seeing is less and less properties getting listed since June 2022. The new properties listed in June peaked at 206 new listings and for December that number was less than half as many, at 86.
For Eureka, properties actually tend to sell relatively quickly, and so while we saw the ACTIVE List Volume peak in October at 65 properties. The trend for NEW listings in Eureka is definitely downward, and possibly close to an all-time low, at just 25 and 26 new listings in November and December respectively. This number isn’t dramatically lower than it was in December 2021, however the ACTIVE and SOLD List Volume through the year were robust that year, so that compensated overall.
What this translates to is a Fall and Winter market without very many New listings, and when combined with the weather and quakes – well, like I said, we’re distracted.
Overall, there is just less inventory. If you look only at the county-wide stats, the many rural-residential parcels throughout the inland regions of Humboldt might make it look like we have a lot of properties available, but that’s not the case if you’re only looking in Coastal Humboldt.
A Quick Search of residential properties currently on the market between Rio Dell and Mckinleyville yields 137 listings. If you remove fixers from that list, you have 123. If you’re only looking for properties in Very Good or Excellent condition, there are 37. Of those, only 23 are under $500k.
If we compare this to last year at this time, there definitely are less properties on the market now. Last year at this time, we were looking at 195 Active listings, with 78 in Coastal Humboldt and 69 that were not fixers.
Clearly, there are less properties to choose from, and significantly so – which makes shopping for a home or investment even more frustrating for buyers. Interestingly, because of the instability of the market right now, this situation isn’t great for sellers either – since you would think less properties would drive your prices up – but higher rates have tempered that phenomena for now. It will be interesting to see what happens in Spring 2023.
Tips for Sellers
Now is a good time to consider “holding” a property, if you have that option. Since most residential property owners bought when interest rates were lower or have since refinanced, chances are VERY good that you can find a renter to cover your costs, and then some, if you own the average home.
As always, choosing a good time to sell may not have anything to do with the market fluctuations, and thank goodness, or things would probably come to a complete standstill in times like these! Many life situations and personal circumstances dictate the need to sell. Births, Deaths, Divorces and more can all make selling a need, and as such, there will be people continuing to list properties in Humboldt County. If you are one of them, here are a few tips:
- Price your property appropriately. Don’t put your property on the market thinking it’s 2021 and you can get whatever you want – even if it’s the nicest house on the block. Finding a good Realtor that can show you an appropriate price is really important right now – and especially as we move into Spring, when there WILL be more competition. Here is my article on Pricing, and one on the dangers of pricing too high.
- Manage your expectations. I always like to say, “Any house/property will sell at a ‘certain’ price.” Point being, you have to ask yourself what the lowest amount is that you will take, and while you’re at it, consider how long you’re willing to leave it on the market, doing showings, keeping it clean, paying the mortgage… Educating yourself about worst-case-scenarios during your sale will help you manage the stress in the process should things tend that way, and hopefully they won’t!
- Pick a good Realtor. I’m going to be straight up, since everything about this market report might temporarily put me out of business! 🙂 There are A LOT of GREAT Realtors in Humboldt County. We are lucky that way. But that being said, don’t trust the first one you meet. Do your research. Each Realtor will offer you different Marketing, Attention and Skill/Knowledge Level. You need to choose someone you feel comfortable with, but now is NOT the time to pick your sister-in-law’s third cousin just because. Find someone who will WORK for you and who knows what they are doing. Marketing is a huge part of that, and here is what we offer our clients.
- Put in some effort. I have a bunch of tips and tricks on this website for how you can get your home ready to sell, make it more attractive to potential buyers, simplify the timeline and process as well as prepare for the eventual stresses of selling/potentially moving. Educate yourself and use some of the ideas to make your listing stand out to your buyer pool. Before you set your pice and list your property, consider having your Realtor take you on some showings to see your competition first-hand. Find more tips and ideas here.
Tips for Buyers
It’s a changing market, and if you’ve been trying to buy for a bit, you may be exhausted, discouraged and ready to quit. Maybe you’ve already given up trying to find something, or have decided to wait. Either way, it never hurts to keep an eye on the market in the meantime, if you can stomach that.
Now is a great time to stay actively looking because there are so few properties on the market, that it’s pretty easy to search your area/price point and look at ALL the options – there aren’t that many.
With the variables facing us right now, I do have some tips for buyers to help you weather this storm with a little more ease and comfort.
- Find the right lender. You should consider interviewing multiple Lenders, as was discussed in the section above on Interest Rates. Make sure you feel super comfortable, and supported by your lender, and that they’re willing to talk to you, advocate for you and educate you about what’s happening with rates as well as how your stack up. Having this relationship established and ready to go is ideal for when the perfect house does come on the market – you’ll be ready.
- Know your purchase price. Before you even look at homes (even online) you should know what your monthly mortgage would be at a certain price point, and wether or not you can afford that house. Looking at homes out of your price range is always a buyer no-no, but particularly if you’re wanting to reduce the stress of the process, you should be well aware of how much you want to spend. This will help you make educated decisions about properties more quickly, because you’ll be better equipped to assess the purchase from a financial standpoint.
- Be reasonable. Lately buyers have been looking for price reductions, but so many buyers are looking for HUGE drops and discounts, that I just don’t anticipate becoming the norm. I’m not saying that you can’t get a deal right now – quite the contrary – see my next bullet points – but I am saying that hoping that the average 3 bed, 2 bath home will see price reductions upwards of 100K is HIGHLY unlikely. Look for price reductions, and Negotiate – but don’t expect anything.
- Negotiate. Buyers (and some agents) are pretty wary of asking for anything these days, and rightly so. It’s been a crazy seller’s market for some time, and buyers were not given much leeway or opportunity. It was a seller-take-all situation. This is, thankfully, changing. This does take time to shift overall, but now is the time to start trying to get better terms on your offers. You don’t know if a seller will agree, unless you ask. Be prepared to be shut down, but now IS the time to try. Here’s my general article on Winning At Negotiations.
- Leverage your Purchase Power. If you’re lucky enough to be able offer perks to your seller, your offer will stand out more. If the purchase price is reasonable, and you have the means, consider offering to pay for an appraisal gap. For some properties, shortening your inspection period can be a minimal risk, while being very attractive to the seller. Get your financing in order and consider asking your lender if they can do a 21 day escrow to expedite the process for all involved. There are lots of ways to make your offer attractive to a seller besides just offer amount.
- As always, choose a good Realtor to be your advocate. Realtors have a fiduciary duty to act in your best interest. Be sure you feel good about who you are working with, and don’t be afraid to ask your Realtor hard questions to understand their level of knowledge and engagement with you. Don’t assume a new Realtor isn’t worth your time, or that a seasoned agent is the best choice. We’re each different, and we each offer a different buying experience. Here is more info on choosing the right Realtor for you.
Other Market Considerations
Probably the biggest issue in Humboldt is a lack of affordable housing for our residents combined with a lack of new development. Projects are in the works, but very few of those projects are for single-family OR owner-occupied properties, which could cause continued price increases for the average home. With all of the economic and population growth that Humboldt is anticipated to experience in the coming decade, it’s hard to imagine how this will resolve without a crisis.
Recently, it seems that PG&E is not allowing more development on the grid that serves Fortuna and Southern Humboldt, as they are now running their lines at a lower capacity. There isn’t an anticipated date when more power will be available to those ares, but some numbers have quoted a decade or more!?!
As Cal Poly Humboldt continues to add students and faculty for the next several years, the surrounding areas will see an effect, and we can only imagine what that might do to the market. The university IS working on creating housing, serving online students and accepting more local students (who theoretically have housing in the area already) to ease this burden, but it will only be a buffer, not a solution to the issues that may come from such a quick increase in the population of that small city.
Speaking of Arcata, in the news just this week, the Fire District has reported that they cannot service the potentially 8 stories tall buildings that are part of the Gateway plan, which would theoretically assist in the housing issues Arcata is and will be facing. While the Gateway plan was in motion well before HSU became Cal Poly, it will take years and years before these projects are making a significant impact on the housing issue, and this recent new indicates that there will be other infrastructure issues forthcoming as growth happens.
Meanwhile, if you follow local trends online, there are lots of Facebook posts to show you just how disgruntled our community is with the housing situation. It’s not difficult to find multiple recent posts where citizens are expressing frustration at rising rents, home prices as well as difficulty in finding places to live at any price point.
Where this is all headed is difficult to say, but in the meantime, Real Estate is an ongoing constant, always there to factor in. Housing is a human need, and an economic opportunity. Our Spring market will tell us a lot about how Humboldt rebounds from national happenings like crazy-fast interest rate hikes, and my prediction is that we’ll see a more subdued market for some time, but that it will also be relatively normal compared to last year (barring more surprises!)
Will prices rise or fall dramatically? No one knows for sure, but I believe our bottleneck will keep getting smaller and we may see prices continue to go up slowly, but surely, over time. Lots of factors could affect that, but I’d love to hear why you think prices will go down, honestly – email me your thoughts!
Thanks for reading this Seasonal Market Report about HumCo Real Estate. This is a reflection of my opinions as one Realtor serving Humboldt County. I am heavily invested in the ups and downs of the Local Real Estate Market, because it’s my job to be!