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Higher rates may be a factor as home sales fall in Napa County

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Napa County, Calif., home prices continue to rise while the number of homes sold declined year-over-year, according to the most recent statistics from Bay Area Real Estate Information Services Inc.

The number of local homes sold dropped 13.7% — from 131 sold in September 2017 to 113 sold this September.

At the same time, the median sale price rose 14.4%, from $590,000 this past September to $675,000 this September.

That means half of all the homes that changed owners sold for above $675,000 and half sold for below that figure.

“We’re starting to see a little bit of a slowdown in sales,” said Desi Capaz, the chair of the Napa chapter of the North Bay Association of Realtors and a Realtor with Berkshire Hathaway HomeServices Drysdale Properties.

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The decline in sales can be somewhat attributed to the start of the fall holiday season, Capaz said. “But the real reason is that the market is somewhat slowing down.”

“We had been on such a tear for so long with big increases,” he said. However, as prices and interest rates continue to rise, more buyers are being priced out.

“It’s not like we’re headed for dire straits,” said Capaz, “but I’m thinking we’re seeing our plateau.”

NorBAR Napa Vice Chair Tim McCall of Keller Williams Realty said today’s Napa County real estate market is more balanced than in the past.

“We’ve transitioned from a seller’s market over the past year,” he said. “Sellers have definitely come to grips with the fact that they are not going to get as many multiple offers” as they previously might have.

As for sales in September, “There was a big slowdown once school started; more so than I’ve ever seen,” said McCall. However, as of October, the market has settled and he’s hearing more people saying “now we can list or look at buying again.”

“The rebalancing between buyers and sellers is driven by affordability constraints and buyer fatigue,” said Selma Hepp, a chief economist with Pacific Union International.

While affordability has long been a serious concern in the Bay Area, recent median home price hikes coupled with rising mortgage rates have put a dent in some buyers’ purchasing power, Hepp wrote.

On the other hand, buyer competition led some buyers to step back and put home purchases on hold, said Hepp.

“Both sides may believe that housing price growth has reached its peak and are acting accordingly, with buyers pulling back and sellers rushing to list their homes before the slow winter season kicks in,” said Hepp.

“Also, a sentiment that the housing market has reached the top has impacted sales activity, with buyers not wanting to purchase at the top of the market,” Hepp wrote.

Median home prices, however, maintained healthy momentum, with most Bay Area regions continuing to grow at rates as seen by Napa County in September.

To some extent, ups and downs in the stock market and the election season “may be exaggerating consumer fears,” said Hepp.

“However, the underlying macroeconomic environment and California’s continued growth confirms that housing markets may be returning to a more normal balance between buyers and sellers rather than preparing to topple,” she said.

Andrew LePage, an analyst with CoreLogic data service, wrote about the greater Bay Area September real estate market.

“Job growth and demographic trends have created plenty of housing demand, but the combination of higher home prices and increasing mortgage rates have priced out some buyers and prompted others to take a wait-and-see stance,” said LePage.

“Price growth could continue to weaken if sales continue to slow amid a rise in listings,” said LePage.

“This is welcome news for potential homebuyers, but many will still face a daunting hurdle — monthly mortgage payments pushed up sharply by higher mortgage rates.”

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