Napa County Real Estate Mid-Summer Report - Compass

Napa County Real Estate

Sales & Values by City, Price Segment & Lot Size; Luxury Home Sales; Market Seasonality; Market Indicators by City; Foreign Homebuyers

August 2019 Report

----------

A Breakdown of Sales by Price Segment

Sales, Prices & Home Sizes by Lot Size

In San Francisco, houses selling for $8 million and houses selling for $800,000 can both be found on lots under 1/8 of an acre. In Napa and Sonoma Counties, lot size is a major factor in home size and price.

Higher-Price Home Sales

Seasonality, Inventory & Buyer Demand

New listings coming on market, the total number of active listings, and the number of listings going into contract - these all ebb and flow very dramatically by season. Activity typically peaks in late spring or summer, then begins the decline that hits its annual low point in mid-winter.

Though year-over-year inventory levels have been higher than in the past two years, they are not particularly high by historical measures.

As measured by listings going into contract, it was a strong spring. (These numbers will adjust downward a bit if transactions subsequently fall out of contract before closing sale.)

Selected Market Indicators by City

Though there are many factors at play, it's not unusual for more expensive markets to have softer dynamics as measured by the 2 standard statistics below. The more expensive the home, the smaller the pool of potential buyers. It is also true that more expensive markets are often more prone to overpricing. These are generalities: Some high-end listings grab buyers' attention and sell quickly.

Market Dynamics by Price Segment

Around the Bay Area in recent years, the supply and demand dynamic has often been closely associated with price range. Generally speaking, buyer demand as compared to the supply of listings available to purchase has been weaker as homes get more expensive.

In the $2 million to $4 million segment, for every 10 homes that sold in Q2 2019, 8 were pulled off the market without selling.

Home Purchases by Foreign Nationals Tumble

According to a new report by the National Association of Realtors - based on a survey of its member agents - the purchase of U.S. homes by foreign nationals plunged in the 12 months through March 2019. California, and the Bay Area in particular, have been top destinations for international homebuyers.

Stock Markets Hit a New High

The last 12 months have been an extremely dramatic time for financial markets as illustrated below. The alternating confidence and fear generated by its swings have been considerable factors in real estate markets. A parallel dynamic has occurred with the large swings in interest rates.

Napa County Real Estate

Quantifying the Spring 2019 Market

July 2019 Q2 Report

Napa County Median Home Sales Prices

The county Q2 2019 median house sales price was a tad above that of Q2 2018, but remains below the peak reached last summer.

Home Sales by Property Type & Bedroom Count

Sales Volumes: General Market

& Higher Price Segments

For the overall county market, spring sales volume in 2019 was a little above spring of last year, but both were down from levels seen in previous years. In 2018, Napa home sales volume peaked for the year in Q3, the summer market.

As illustrated in the next two charts, sales of higher priced homes peaked in the second half of last year. Year-over-year, Q2 2019 sales were well down from Q2 2018.

In the $2 million+ market, there were twice as many active listings in Q2 as sold in the last 12-month period. This price segment is deep in "buyer's market" territory, with supply currently out-pacing demand.

Selected Market Indicators

The market strengthened considerably in spring - as is typical - but, generally speaking, standard measurements of demand show an appreciably softer market year-over-year. This is a very common dynamic around the Bay Area.

Overpricing: Negative Effects for Sellers

& Opportunities for Buyers

We performed longer-term analyses of the effects of overpricing - as indicated by the need for price reductions before the property sold - on every major market in the Bay Area and the results were uniformly similar. As would be expected, there were dramatic differences in the sales price to list price percentage and time on market before sale. But there were also substantial differences in the average dollar per square value realized upon sale.

Overpricing lowers values for sellers, which also signifies opportunities for buyers who keep an eye out for price reductions and react accordingly.

Mortgage Interest Rate Trends

A sudden, steep drop in interest rates since late 2018 has reduced home ownership costs considerably for home buyers, thus helping to increase demand throughout the country.

Link to Bay Area Home Price Map

Napa County Real Estate

Sales & Prices Increase as the Spring 2019 Market Heats Up, But Inventory Up and Sales Volume Down Year-over-Year.

June 2019 Market Report

Median House Sales Price Trend

In 2018, the median house sales price peaked in August, which also saw the highest number of monthly sales during the year.

Sales Volume Trend

March-May Year-over-Year Comparisons

Comparing March-May of 2019 with the same period of 2018, median sales prices were up a little and average dollar per square foot values down a little. Both are mostly explained by the 3% increase in the median size of homes sold: Larger homes will typically sell for higher prices (of course), but lower dollar per square foot values.

The Napa market held up fairly well year over year, but saw some softening in most of the indicators of supply and demand.

Higher-Price Home Markets

Looking at the Napa markets for homes from $1,000,000 to $1,999,999, and for homes $2,000,000 and above: In May, both hit new highs in the number of active listings on the market. Though the number of listings priced $2m+ outnumbered active listings in the lower price segment (first chart below), the number of sales in the more expensive segment were far lower (second chart).

Median Home Price Changes -

Selected Napa & Sonoma County Cities

Comparing annual median home prices to partial year prices is not really an apples-to-apples comparison because of the effect of market seasonality on sales prices, and in Napa, the issue is further complicated by how few sales some of our communities had over the last 5 months.

Note that full-year 2019 median home prices may be significantly different than the year-to-date figures.

Median House Sales Prices by Bedroom Count -

Houses on Lots of 2 Acres or Less

Average Dollar per Square Foot Values -

Houses on Lots of 2 Acres or Less

Click on the button-link below to go to our updated map of Bay Area median house prices.

Bay Area Home Price Map

Selected Market Indicators

Besides providing context to market dynamics over recent years, these next 2 charts also are excellent illustrations of the extreme seasonality of the Napa County real estate market: Supply and demand usually climbing from February through mid-late summer, then quickly dropping to their mid-winter nadirs.

Selected Economic & Demographic Snapshots

This chart below illustrates historical trends in unemployment rates, using larger counties to the south as examples, but the trend lines are similar across the Bay Area.

In April 2019, the Napa County unemployment rate was 2.7% - very, very low by historical standards, as were the rates for all other Bay Area counties.

The 3 North Bay counties have the highest median ages in the Bay Area, and the lowest percentages of their populations made up of millennials - Marin County most of all. The counties most affected by the high-tech-hiring boom have seen a significant influx of younger workers - especially in San Francisco.

Napa County Real Estate

May 2019 Report

In Napa, the market typically begins to warm up in early spring, with both listing and sales volume steadily building through early-mid summer. With April’s end, we now have 2 months of spring season data unaffected by market activity at the end of 2018, when financial markets plunged. As of early May 2019, stock markets have recovered to hit new highs (though some subsequent volatility has developed) and interest rates are far lower than last year’s peak.

Monthly Median House Sales Price - 2 Years

Because the county doesn't have that many sales in any given month, its monthly median sales prices can sometimes jump around without great meaningfulness. Right now, we are not seeing any significant increase compared to the beginning of last spring, but the next few months will provide more data. In 2018, the Napa County median house price ended up peaking, on a monthly basis, in August, and on a quarterly basis in the 3rd quarter (July through September).

Around the Bay Area, the general trend has been year-over-year stability in median sales prices or small percentage declines. The large y-o-y jumps in appreciation that have been common in recent years have so far not occurred in 2019.

This table compares the March-April market statistics of 2018 and 2019. Generally speaking, the Napa County market has cooled somewhat year over year, with the number of active listings, of average days on market, and of price reductions increasing, and the number of sales declining. But the median house sales price - based on a relatively low number of sales during the 2-month period - ticked up a little.

Home Sales by Price Segment & Bedroom Count

The most common home sale in Napa County over the past 12 months was a 3-bedroom, 2-bath house selling between $500,000 and $750,000.

Sales Volumes, Median Prices & Median Sizes -

Napa & Sonoma Counties

The next chart breaks out the number of house sales over the past 12 months by city, with median house sales prices and median square footage. (Median means half the sales were for more, or larger size, and half for less, or smaller size.) This analysis focuses on the sale of homes with lots of 2 acres or less - to help keep the median sales price comparisons relatively apples to apples.

St. Helena had the highest median home price in the 2 counties - as it commonly does - and the largest median home size.

Higher-Price Home Sales

in Napa & Sonoma Counties

Q1 2019 Luxury & Ultra-Luxury Homes Markets

in Napa County

The more expensive the home, the smaller the pool of potential buyers, and generally, these properties take much longer to sell. Napa County has a substantial market of very expensive homes - including estates with significant acreage - but in the highest price segment, $5 million+, the supply of listings in Q1 far exceeded demand. Considering the competition for qualified buyers, correct pricing is critical to effecting a sale.

As a proportion of total active home listings, Napa has far more $5m+ listings than any county in the Bay Area: approximately 8.3% of listings in Napa vs. 2.4% in Sonoma, 5.7% in Marin, and 4.5% in San Francisco.

Home Size & Era of Construction

Many factors influence home construction size during any particular period: Affluence, economic conditions, household size, land costs, population growth, highway construction, natural disasters, etc. Generally speaking, the median sizes of houses built in the Victorian and Edwardian eras - before 1920 - were larger, and then declined into the mid-century period. Home sizes began to climb again with the large population and housing-construction increases in Napa and Sonoma Counties that occurred in the decades following. Recently built houses are larger than ever.

It is common that older homes destroyed by natural disasters - such as during the recent fires in Sonoma and Napa, or in the 1991 Oakland hills fire - are replaced by larger homes.

Throughout the Bay Area, buyers looking for smaller homes often purchase condos or co-ops, but these only constitute about 10% of the market in Napa County.

Selected Demographic & Economic Factors

Population Change

After years of large population increases around the Bay Area, in the last 2 years through July 1, 2018, growth slowed considerably in most counties, declined slightly in Marin, and dropped more significantly in Sonoma and Napa Counties. In the last year measured by the census, the destruction of thousands of homes by fire in the wine country certainly played a role in this decline, and is presumably a short-term effect as rebuilding proceeds.

The enormous jumps in population occurred further south in counties most affected by the high-tech boom and its accompanying social, economic, quality of life and housing-market effects.

Commuting

Napa County has the lowest average 1-way commute time in the Bay Area, one advantage of living further away from the traffic-clogged hubbub further south. (However, not much use of public transport in Napa.)

Venture Capital Investment

In recent years, the Bay Area has been the biggest destination of venture capital investment dollars in the country. These tens of billions of dollars have constituted a massive factor in supercharging the creation of new companies, hiring, and, eventually, IPOs. Though the biggest effects are concentrated in SF and Silicon Valley, the creation of new wealth certainly affects Napa County as well, especially its second-home market.

It is impossible to know how median and average value statistics apply to any particular home without a specific comparative market analysis.

These analyses were made in good faith with data from sources deemed reliable, but may contain errors and are subject to revision. It is not our intent to convince you of a particular position, but to attempt to provide straightforward data and analysis, so you can make your own informed decisions. Median and average statistics are enormous generalities: There are hundreds of different markets in San Francisco and the Bay Area, each with its own unique dynamics. Median prices and average dollar per square foot values can be and often are affected by other factors besides changes in fair market value. Longer term trends are much more meaningful than short-term.

Compass is a real estate broker licensed by the State of California, DRE 01527235. Equal Housing Opportunity. This report has been prepared solely for information purposes. The information herein is based on or derived from information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. Compass disclaims any and all liability relating to this report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, the report. Nothing contained herein is intended to be or should be read as any regulatory, legal, tax, accounting or other advice and Compass does not provide such advice. All opinions are subject to change without notice. Compass makes no representation regarding the accuracy of any statements regarding any references to the laws, statutes or regulations of any state are those of the author(s). Past performance is no guarantee of future results.

Napa County Real Estate

Home Prices, Sales & Statistics; Stock Markets; Interest Rates and Seasonality

April 2019, Q1 Report

A substantial portion of Q1 statistics reflect new listings and accepted offers occurring during the mid-winter market doldrums (Thanksgiving to mid-January). In November and December 2018, the stock market plunged drastically from its all-time high in September, and interest rates hit their highest point in years: These factors negatively affected buyer demand. Then both turned in dramatically positive directions in early 2019. So, Q1 statistics reflect economic conditions in both Q4 2018 (very negative) and Q1 2019 (very positive). It is also the quarter with by far the lowest sales volume.

The spring and summer selling seasons, Q2 and Q3, are the most active of the year in Napa, and what occurs in coming months will give us much better data as to the direction of the market. As always, there are many economic factors at play impacting Bay Area markets, some of which are discussed below.

Year-over-Year & Longer Term Trends

As compared to the first 3 quarters of 2018, the market in Napa County has clearly softened: This is a common dynamic around the Bay Area. Changes in the balance between supply and demand in Napa have actually been of lesser magnitude than in a number of other local counties, though still significant. Buyers are still purchasing homes they deem are priced fairly, and we have just recently entered the prime, spring selling season.

Long-Term Median Sales Price Trends by Month

Shorter-Term Median Price Trends by Quarter

Each year since the market recovery began in 2012 has seen a new high in median house sales price. The question now is, will that happen yet again in 2019, or has the "up-cycle" run its course for the time being?

Year-over-Year Quarterly Appreciation

After a big jump in Q3 2018, year-over-year appreciation rates declined in Q4 and then turned slightly negative in Q1 2019. One quarter's data - especially the lowest sales volume quarter of the year - should not be considered too important until substantiated over the longer term.

Selected Market Indicators

These charts give more historical context to many of the year-over-year changes noted in the table at the beginning of this report. They also illustrate the dramatic role seasonality plays in supply and demand.

The number of active listings has spiked as compared to the abnormally low levels of the past 2 years, but is not particularly high by historical norms.

This days-on-market chart illustrates the considerable cooling in demand since the very strong market of Q2 and Q3 2018, however Q1 's figures are always higher since many of its sales reflect the winter-holiday slowdown period.

Sales volumes have been declining over recent years and Q1 2019 had the fewest sales of any quarter in at least 4 years. This is certainly a trend that bears watching as we move into spring.

The number of price reductions has increased since summer 2018 - a sign of a shifting balance of power between buyers and sellers. In hotter markets, buyers compete for new listings, often by bidding against each other. In cooling markets, sellers start competing for buyers - by reducing prices. All Bay Area counties have seen increases in price reductions and many have seen much larger spikes than Napa.

Homes Selling for $1,000,000+

Higher price home sales dropped on a year-over-year basis to the lowest number in at least 4 years, but Q2 and Q3 are the big quarters for such sales, and will be much better indicators of market direction.

Selected Economic Factors

A big factor underlying Bay Area housing markets has been the staggering increase in employed residents since 2010. Outward-bound migration trends of residents and businesses - often citing housing costs as one major motivator - have been an increasing concern in recent years, but for the time being, employment numbers have continued to grow.

A wild ride in stock prices, particularly in high-tech: Prices soared to new peaks in summer-early autumn 2018, plunged drastically in Q4 2018, and then saw the biggest Q1 jump in 20 years. Huge amounts of wealth appearing, disappearing and reappearing - a critical influence on consumer confidence and home-buyer demand.

A new surge of large, high-tech unicorn IPOs - mostly of firms headquartered in SF - has just started to roll out. IPOs have historically created vast quantities of new wealth in the Bay Area, though the effect of this new wave on Wine Country housing markets is unknown.

There has been a stunning decline in mortgage interest rates from mid-November 2018 through the end of March, from 4.94% to 4.06% - to the enormous advantage to buyers. Big drops such as this have helped to recharge buyer demand in the past.

Housing Affordability & Household Income

This chart calculates the income required to buy a median-price house in Q4 2018. Napa's relative affordability - especially for those buying second homes or relocating from SF or Silicon Valley - is certainly a factor in its housing market.

County median household incomes are broken out below for homeowners and tenants. Comparing the chart below to the one above illustrates the disparity between prevailing incomes and the incomes required to purchase in the Bay Area.

Health & Economic Indicators

According to CountyHealthRankings.org, Bay Area counties are at the top of the list within CA for Overall Health Outcomes: Marin, San Mateo and Santa Clara rank 1, 2 & 3, while Napa ranks 5th. Within the Bay Area, Napa County ranks 2nd for the lowest ratio of income inequality (just a tad behind Sonoma).

Napa Real Estate

Entering the Spring Selling Season

March 2019 Report

Around the Bay Area, spring 2018 was one of the hottest markets in the last 2 decades. The market began to cool considerably in summer and autumn - demand, sales and appreciation rates dropping, while supply and price reductions rapidly increased - and then the mid-winter doldrums took hold. The Napa market has not, so far, been as significantly impacted by these changes as some other local counties (for example, Sonoma, which has seen more dramatic shifts).

Spring into summer is typically the busiest period of the year - summer is more active in the wine country than in other Bay Area regions, because of its second home market. And this is often the time during which appreciation gains have been the largest. The spring 2019 market is just getting started amid a diverse set of economic indicators. Financial markets have, so far, recovered in 2019, interest rates have dropped, and big IPOs loom in San Francisco. We will know much more soon.

Long-Term, Annual Median Price Trends

Median Home Price Changes

by Month

since 2012

Since the earliest months of the year are also the lowest sales-volume months, their median price movements are less meaningful. What is much more important is what occurs during the next 3 to 4 months.

Median Home Price Appreciation

by City, 2012 - 2018

Markets appreciate due to a wide variety of local and macro-economic reasons: economic cycles, inflation, consumer confidence, interest rates, hiring, gentrification, new construction, comparative affordability, foreclosure rates after the subprime crash, ecological factors, commuting, population migration, buyers’ median age, tax law, the role of second home buyers, and so forth. The particular combination of factors affecting any particular region is often specific to that market.

These appreciation percentages, measured since the Bay Area recovery began in 2012, should be considered very approximate.

For more context on the appreciation percentages above, below is a chart from last month's report delineating 2018 median home prices by market area.

Market Seasonality

New Listings by Month

New inventory usually starts pouring onto the market February and March, to fuel the beginning of the biggest selling season of the year.

Sales Volume by Month

On a monthly basis, year-over-year sales volumes have generally been dropping, though the ups and downs in monthly sales are sometimes erratic. We are now entering the time of rapidly accelerating sales activity after the mid-winter doldrums. Sales in one month generally reflect new listings and accepted-offer activity in previous months.

Listings For Sale

Active Listings in January-February

Year-over-Year Comparisons

The inventory of listings on the market in the first two months of 2019 was much higher than in January-February of the past 2 years, when supply was abnormally low.

The number of active listings fluctuates daily, and the numbers below are rapidly increasing as more new listings come on market. These next 2 charts are snapshots of the number of active listings on the market as of February 28th or March 1st.

Active Napa Listings by Price Segment

as of March 1, 2019

Active Listings in Napa & Sonoma

with Median LIST Prices, by City, 2/28/19

The supply of listings available to purchase varies widely between cities, which can be a simple reflection of market size and/or an indicator of supply and demand dynamics. If median LIST prices (below) are well above median SALES prices (charted earlier in this report), it is typically a sign that the balance in listings for sale is disproportionately weighted towards higher priced properties, where demand is softer and homes can take much longer to sell - and/or a sign of systemic overpricing beyond what buyers consider fair market value.

Market Statistics in Selected Cities

Napa & Sonoma Counties

Varying factors are behind current market dynamics in any given city in the wine country. Proximity to San Francisco is one. Also comparative affordability: Demand in more expensive areas has typically been softer than in less expensive, a common dynamic around the Bay Area in recent years. Whether an area is primarily a destination for second-home buyers is yet another factor: The sense of urgency for a second-home buyer is distinctly less than for someone buying what is to be their one home.

Average Days on Market

Percentage of Listings Going into Contract

Quarterly Average

Months Supply of Inventory

County to County Migration

People Moving to or Leaving Napa

People move to the Bay Area from all over, and people leave Bay Area counties to move to a vast number of locations, for differing reasons. This analysis looks at those counties with the greatest number of people coming and going, to and from Napa County. In many cases, there is a large exchange between 2 counties, with residents going in both directions. Often, but not always, the outward flow is greater to counties with more affordable home prices, but there are many dynamics at play.

Comparing Bay Area Markets

Median Home Sales Prices, Q4 2018

Number of Listings under $1 Million

by County, 3/1/19

Number of Listings Priced $2 Million+

by County, 3/1/19

Considering that Napa County is by far the smallest market in the Bay Area, it has a surprisingly high number of luxury home listings. In the $10 million-plus segment, it ranks 4th after SF and the Silicon Valley counties.

In the wine country, acreage often plays a large role in luxury real estate sales. And what one gets for $2 million in Napa is usually fantastically more luxurious than buying a home at the same price in Marin, San Francisco or Silicon Valley.

Demographic Snapshot

Educational Attainment

Education & Income

Disparities between the Sexes

An indicator of the income-generating value of education, along with an unhappy indicator of where progress remains to be made in income equality. (As an aside, real estate is certainly one of the first, major professions that saw income equality established between the sexes: Women have been holding their own and not infrequently dominating rankings of top Bay Area agents for many decades.)

The statistics in this report are very general and approximate indicators based upon listing and sales data pertaining to assortments of relatively unique homes across a broad spectrum of locations and qualities. How these statistics apply to the current value, appreciation trend, and prevailing market conditions of any particular property is unknown without a specific comparative market analysis.