It’s still a seller’s market

This article is reprinted from Wine Country Real Estate, a special advertising section of The Press Democrat.

It's already May and spring is in full bloom. Dreams of late spring showers are giving way to browning hills and the hope of a mild summer. Along with the warming weather, the real estate market is in the midst of its annual spring warm up, too. Spring and summer are the most active seasons for buying and selling homes and this year will be no exception.

If you measure the heat of a market by how much home prices rise, then buyers and sellers will both tell you that we've been in a heat wave for the past 3 years. In March, the median home price of residential property in Sonoma County reached $479,000, a dizzying 59% increase from March 2012 when the median home in our area sold for $300,000. As the spring buying season unfolds, it is likely this pricing trend will continue. April sales data is currently on pace to tip median price above $500,000—a price point last seen in July 2007.

If you're a homeowner, you love the fact that prices have been on a steady climb, restoring or creating equity in your home. If you're a homebuyer, you may not feel so optimistic. Part of what creates market pricing is available inventory, the number of homes for sale in the region. With enough houses to choose from, buyers can take their time to select a property and negotiate the best terms possible with the seller. Conversely, with enough buyers to choose from, sellers can decide which deal to take while also asking for things like free rent backs.

A strong economy, low unemployment, booming tech business, and an influx of foreign investors have all combined to inspire confidence in home ownership throughout California and the Bay Area. We see the demand in the North Bay, with Marin's median price rising 57% and Napa's median up 40% since 2012. These increase in median price are driven by buyers willing to compete to purchase the few homes that come to market.

Last year, agents in Sonoma County reported receiving multiple offers on 26% of all homes sold. So far this year, that figure has risen to 29% of reported sales…40% if you only look at homes that sold within 30 days of coming to market. All related to not enough homes for sale.

Change is in the wind.

The biggest factor in our rising market has been inventory—the number of homes for sale at any given moment. While home prices have pushed upward, sales volume (the number of homes exchanging hands) has declined. During the last 3 years as median price climbed 59%, the number of homes sold decreased 28%. The biggest question on everyone's mind has been, 'When will we see more inventory?' The answer is: Now.

At the beginning of March there were approximately 650 properties available for buyers to choose from, today there are 1,356—more than double the choices from a few short weeks ago. For buyers, this is great news; you now have more options. More options = less competition. Less competition = fewer bidding wars. Fewer bidding wars = stabilized prices. Or, at least, that will be the eventual outcome. Depending on how steadily new listings come to market, we could see a shift in buyer competition within the next few months. With more choices the market will begin to cool, especially for properties that are marginal in condition or location.

Another great stabilizing factor is mortgage interest rates. Astoundingly, rates have hovered around 4% for the last two years, giving buyers extraordinary buying power. As soon as rates begin to move up buying power diminishes, restricting how much a buyer can offer on that house they really want. The borrower who was approved for a $400,000 loan may suddenly only have $390,000 available to them, leaving $10,000 less to offer on a house. Many mortgage experts, including kiplinger.com, project interest rates will rise about 1 percentage point by the end of the year. With less money to spend, offer prices will temper.

While the weather's good…

If you've been thinking of putting your house on the market, now is a good time to talk to your Realtor® and ask for a Comparative Market Analysis, which will show what is happening in your immediate area, what other homes have sold for, and what comparable homes are on the market.

And, if you're in the market to purchase, be patient as the spring inventory reveals itself—you'll soon have more homes to choose from which should bring you some cooling relief. Of course, don't wait too long… While there should be fewer bidding wars (or at least less intense ones) as more homes come to market, there will still be competition, especially for homes that have a great location or features.

Whatever your plans this spring, today's weather may prove to be perfect for your next move.