Before I begin, I have something to say: we are still in a seller’s market. We can look at the numbers in about 800 different ways and the fact remains that there are more buyers looking to purchase in American Canyon than there are sellers looking to sell.
The housing crunch is starting to ease a bit but that is relative. There are 13 homes on the market (with two more coming soon) which is fantastic because since last April there have been 10 or fewer homes for sale almost exclusively. Late winter/early spring there less than five! All of which is to say that 13 homes for sale feels pretty good right now. Still, largely because of the lack of inventory for so long, home prices have increased dramatically. Nowhere is this more evident than in the luxury home category where most of the newer developments now fit.
Led by 54 Goldfinch Drive, which sold at $1.163M in the middle of May, there has been an all out assault on $800,000 27 homes have closed above $800,000 since March 15, 2020, the beginning of the shelter-at-place order in Napa County. The preceding 15 months, there was only one home sold above $800,000.
Many people are concerned about an impending crash. There are a few reasons that I don’t think a crash is imminent, but I do believe that the market is going to start evening out, with home prices appreciating at a more normal rate than we’ve seen over the past year and a half.
I’ve previously shared an article by Keeping Current Matters outlining why the dramatic increase in home prices doesn’t signal a looming crash. At the end of the day, stripping away everything else, there are two primary reasons why things are different: Not enough supply to meet demand and the lending fundamentals are stronger than they were a decade ago.
I shared the graph above earlier this summer which shows just how far behind we are in new construction to meet demand. Without significant moves towards new construction, we will continue to see major increases in housing prices over the coming years. According to the National Association of Realtors:
…the state of America’s housing inventory is dire, with a chronic shortage of affordable and available homes needed to support the nation’s population.Counselors of Real Estate, Top Ten Issues Effecting Real Estate
Watson Ranch, the new development in American Canyon that is paired with a town center and entertainment area, is supposed to bring in about 1000 single family homes over the next 7-10 years. How much will these new homes dilute inventory so that it starts to bring the median sales price down? With lumber prices still at least double what they were pre-pandemic, it’s likely that these homes will be at a price point that drives the median price up in town, rather than lowering it. The first homes are scheduled to be built starting next April so it is something that I will continue to keep an eye on.
For now, looking at the rest of 2021, it appears that housing prices will continue to rise although at a slower rate than they did in the first half of the year.