Year over year statistical data for Solano County ending November 20, 2020

Each month we look at our most recent past months’ activity and compare it to a year ago and devise an overview of how the housing market is moving. During what all of us will remember as the COVID-19 Pandemic year has actually produced some extraordinary housing statistics. You probably know a REALTOR or two who are crazy busy. This is true for most agents who have been in business for 7+ years. The flip side is there are many REALTORS not having such a great year. The reason behind the 7+ year assessment is those agents who have been in business for longer than 7 years have a tremendous amount of past clients to pull from. We live in a world of distrust. It seems everyone is skeptical about everything. Our elections are questioned, the pandemic we are in is questioned and it seems as though trust has become a very big issue. Newer agents rely heavily on open houses, lead generation, and gaining trust from new prospects. Today that is challenging because consumers have such distrust they are tuning to referrals and recommendations more than ever. As one of the largest and most successful real estate teams in the county, we see our fair share of the market. RE/MAX Gold in Solano County has a near 15% market share which is about twice as much as our closest competitor.  

While properties continue to sell at a rapid pace (DOM is a low 32) we continue to see a very low inventory level. In fact, our inventory levels are nearly the lowest levels the market has ever seen.  Dating back to the beginning of the pandemic we have experienced a 50 to 60 percent drop in homes coming on as new listings. Looking at the chart below we can see that in December of 2019 485 new listings came on the market. In the same month this year, we see only 197 which is -59.4% less The sold properties look on the surface to be very strong with 294 homes sold in December 2019 and 371 homes sold in December 2020. That’s an increase of 26.2% year over year and more importantly nearly twice the number of homes that came available for sale. Each month since march of 2020 we continue to eat into the inventory creating a buyer demand which puts us in a very strong seller’s market.  

Month over month we experienced our usual season lull with a dip in homes coming to market -21.8%, Sold properties at -11%, and Pending properties at -10%. While most agents and industry professionals I have spoken with agree this year should remain a strong seller’s market and we all are hopeful more properties come to market and begin to ease the competition. January, February, and March will be really good indicators as to what to expect this year as these are the three months of the year where listings start to come on the market. I can verify we took 53 listing the first week of January and 71 new listings the second week. This puts us on target for listing growth. Time will tell. Stay tuned!

In the last 12 months, our price per square foot of $295 has increased by 11.7% since December of 2019 and our month over month increase was 0.7%%.

As mentioned above here you can see our average days on market (DOM) is at 12 months low of 32. This is at a time when we usually see a lull in the market and our days on market grow as the seasonal period for real estate sets in. A low DOM number usually produces a higher offering price on homes as the fewer the homes, the stronger the demand, and the more offers coming in above asking. Here you can see we have grown to over 101% average offering price from the listed for sale price and the sold price. A seller could read this and expect a price over asking if their home is priced right for the market. Don’t let this mislead you as many REALTORS are employing a start low and end high strategy. This is when we intentionally list a home below market value to increase visibility and awareness that ultimately drives more buyers’ interest, competitive offers, and a stronger price. This is a good strategy in a strong seller’s market with low inventory. Buyers should read this with the expectation that they are not going to get a great deal or be able to bid under the listed price if they want a chance at buying one of the few homes on the market. 

We have looked a lot at the pricing, days on market, and the listing pricing strategy. Here you can see a year over year listed price to selling price. In a strong seller market like we are in now we always see a higher list price to sold ratio. Here we can see that in November our average list price was $642,000 and the average list price in December 2020 was $647,000 the average sold price in November 2019 of a home was $523,000. Compared to the average sold price in December of $525,000  This is a 0.8% increase in listed prices but only a 0.4% price in the properties that sold. These monthly numbers don’t tell us much except that we are seeing a slight slow down in the selling price vs. the listed price. Could be an indicator that pricing may stall. If we have multiple months in January, February, and March with very small sold price increase percentages we will then be able to predict the market is slowing.   The good news is if you purchased your home back in December 2019 you have seen an 8% county-wide increase in your value. A cautionary note here is looking back at our November 2020 Housing Report we saw a county-wide increase of 10.8%

You may not be running out to list your home on these numbers but if you purchased your home three years ao you are looking at a 23.4% increase. This is what is fueling the market. What we are seeing is a lot of move-up buyers looking for their dream home.

Case Study:  Robin and Sam purchased their first home back in 2017, The paid $450,000 for a nice 3 bedroom 2 bath started home. They financed the home with 3% down with an interest rate of around 4.5% (historical rates from 2017 fluctuated from 4.25% to as much as 4.75%) they have a current house payment of $2,573. Flash forward to November 2020, and Robin and Sam’s home is now worth $555,300 which gives them $125,300 (This includes their original downpayment and payments for the three years they have lived in the home) for a down payment and closing costs on a new home.  If Robin and Sam put $110,000 down on a $650,000 4 bedroom, 3 bath home (Their Dream Home) They can finance this home at 2.65% giving them a payment of $2,670. Can you see why everyone wants to buy a new home? 

We lost another week’s worth of inventory in December. The chart below shows us at 1/2 months inventory. From November 2020 through December 2020 our inventory level is down 18% and down 63.5%. year over year.  If things stay the way they are and we continue to list 50% to 60% fewer homes than we sell each month we will run out of available homes sometime next year.

While most of us are very optimistic that sellers are going to start selling homes and inventory will open up a bit we still have to stare down the pandemic we are in and hold our breath the economy pulls through it. Interest rates are going to go up this will slow the buyer activity a bit. The future could be even worse.

Just released today is the next New COVID-19 Relief Package Unveiled: What the ‘American Rescue Plan’ Proposes

If we look into the future the biggest concern I have today is what the market will look like in 3 to 5 years when interest rates could be back up to the mid 4% or 5% range. It will be extremely difficult for a homeowner to sell and buy when they will be facing a payment twice the amount because interest rates have doubled. There is no crystal ball to look at and I am only guessing here but I don’t see how we can continue down this path with continued success. Something is going to give. If the government keeps rates low indefinitely then we will get through this but they start to climb significantly then I would worry. It’s simple math. Interest rates go up home values go down, interest rates go down and home values go up. Let’s hope the rates stay low… 

Another option I see coming back is “Assumable Loans” remember those? I purchased my first home with an assumable loan. 12.8%. One way to overcome higher interest rates when lenders offering the loan to be assumable so a buyer can actually qualify and purchase the home at a lower interest rate. 

The opinions expressed in this report are those of Don McDonald, Founding partner, and REALTOR with RE/MAX Elite Partners brokered through RE/MAX Gold. They are not in any way intended to express what RE/MAX, RE/MAX Gold or any other agent or brokerage may think. It is my honest analysis backed but some market data. Check back each month around the 25th or so for an update as we continue down this path. 

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