The real estate market can be fickle and constantly evolving, making it challenging to stay on top of what’s actively happening and predict what conditions will be like when you’re ready to buy or sell. However, understanding the market is crucial to achieving a good deal, regardless of your goals. An experienced real estate agent, such as Carolyn Roberts, can assist you in using the current housing trends to achieve your goals. Still, it’s best to start with a basic overview of the Napa Valley
Houses in Napa Valley have increased in price steadily, with the current average at $831,323, up 12.5% from one year ago. It’s expected for those numbers to continue rising steadily, making real estate one of the best investments for those looking to expand their portfolio. In April, over 74% of homes for sale sold for over the asking price, proving that the real estate market is still strongly favoring sellers in Napa Valley.
It’s unlikely that the market will see any significant decline in price growth in the foreseeable future, as a booming economy and the continued lack of inventory will keep prices high. In addition, Napa Valley, in particular, continues to be a popular place to live due to its established role in California Wine Country, its proximity to San Francisco, and its array of gorgeous, luxurious houses.
One of the biggest reasons for the hot housing market is the law of supply and demand. Low-interest rates have invited many first-time homebuyers into the market, creating high demand, but many people aren’t selling. Supply chain delays due to the pandemic have slowed new construction significantly, leaving buyers to battle over the few houses listed. In April, Napa Valley saw a 12% increase in homes for sale, indicating the inventory shortage might be improving.
However, it’s important to note that April starts the home buying/selling season. In Napa, June and July
are generally solid months for the real estate market.
While different areas might see more robust sales in varying times, the summer months generally see an increased impact on inventory, as people prefer to move when the weather is nice. While Napa Valley is seeing inventory increases right now, it’s too soon to tell whether it’s just the natural seasonal evolution of the housing market or if the city is finally seeing a balance in supply and demand.
House sales continue to move quickly, with the vast majority of homes selling within thirty days of being listed. According to Redfin
, while houses sold in 36 days in March of 2021, they are now moving off the market in just 28 days. Buyers can expect to be in multiple-offer situations, meaning if you are serious about buying a house, you need to move quickly and put together a compelling bid.
Rising interest rates
In the past few years, both nationwide and locally, buyers have seen historically low-interest rates available on mortgages. This factor has dramatically stimulated the real estate market and resulted in very high demand. However, in 2022, interest rates have increased faster than was initially expected and are currently reaching 5.8% — nearly double last year’s number.
How interest rates are affecting your power to buy
Rising interest rates have begun to price some buyers out of the market. While they could afford the mortgage at an interest rate of 3.5%, the current numbers would increase monthly payments by $120 per $100,000 of the loan amount. This is a significant increase, especially with how complicated the purchasing process can be.
What neighborhoods are most popular?
Napa has over 26 neighborhoods, and while all are seeing strong sales, some are doing better than others in the current housing market. Downtown Napa sees a significant influx of millennials flocking to the area as they are seeking an urban environment less expensive than San Francisco. The location allows them to still partake in the wine culture of the area but also provides easy access to lifestyle conveniences.
Browns Valley continues to be popular with families due to its robust school system and variety of activities for people of all ages to enjoy. Quieter than the downtown area, Browns Valley is still close to plenty of amenities, which means no sitting in the car for an extended period with kids asking, “are we there yet?”
For those who want the best view as they enjoy a glass of wine on their back deck, Alta Heights looms over the town and provides vistas that are quite breathtaking. While an unappealing house would sell for the view alone, houses in Alta Heights are prime examples of luxurious havens where residents can escape the stress of the workweek and enjoy an unparalleled level of comfort.
Why is the housing market so strong?
Considering the economic impact of the pandemic, the current inflation rates, and the supply chain demands, it may seem surprising that the housing market remains as strong as it is. However, there are a few reasons to consider — all of which indicate that this may be somewhat of a new normal.
One factor is, of course, the low-interest rates the country has seen. Low-interest rates entice people to buy, especially people looking to upgrade to more space or first-time homebuyers who have been sitting on the fence. However, this was exacerbated by the entrance of millennials into the housing market. Previously, millennials, as a generation, were not seeing appropriate career growth and perceived themselves as unable to buy a home. Job changes during the pandemic paired with low-interest rates finally made homeownership achievable, and the market flooded with hopeful buyers. Considering millennials are currently the largest generation, it’s unsurprising that this has overwhelmed the housing inventory.
Another factor is the pandemic itself, which has affected the market in two different ways. First, the pandemic showed that people need their house to be a haven, with enough space to live comfortably, should another lockdown happen. Now, realtors see many buyers who want extra living space
— home gyms, offices, or spacious outdoor rooms. Families with children consider the importance of each child having their own space for virtual classes, and parents are sick of having to work at the dining room table.
The pandemic also led to increased work-from-home positions, with many companies offering flex work or simply going remote permanently. As a result, people no longer have to live close to their offices. Many employees, particularly those who work in large cities, have been taking advantage of the opportunity to leave highly high housing costs found in urban environments like San Francisco or New York City to move to quieter, slightly more affordable areas.
Additionally, the Great Resignation
may play a role in the market. Employers have seen employees quit en masse. The pandemic caused many people, primarily the older generations, to leave the workforce and open up jobs with higher salaries and better benefits. As a result, people are moving to new jobs, and if they remain in the same area, they can afford to purchase their first house or buy a long-awaited upgrade.
While nothing is set in stone, you can expect Napa Valley will remain a strong seller’s market for 2022 and the beginning of 2023. Housing prices will continue to increase, albeit slightly slower, and while interest rates will rise and force some buyers out of the market, it’s unlikely it will be enough to balance supply and demand. If you’re considering selling a Napa Valley property or purchasing one of the Napa Valley mansions, contact Carolyn Roberts
to learn more about Napa Valley real estate.