For some time now, Napa Valley real estate and the California housing market has been a popular topic of conversation among real estate professionals. With the area’s economy growing and an infusion of new enterprises, the neighborhood has grown more appealing to potential property investors. However, with current inflationary pressures prompting price increases in many locations, how is this affecting the area’s property market?
Inflation profoundly impacts almost every industry, but it is especially relevant in real estate. Because of the essence of real estate values, when inflation happens, prices can rise, making purchasing a home increasingly costly for prospective buyers. This has been notably true in Napa, where price rises have surpassed national averages by a considerable amount.
Napa Housing Price Rise & Sales Dip
It’s crucial to emphasize that numerous variables, such as growing demands from new businesses and exponential population growth, cause an increase in costs. As the price of living rises, so does the cost of acquiring a property. This trend has been evident in Napa for some time now and shows no indications of alleviating anytime soon.
Despite a brief sales rebound in August, steadily increasing mortgage rates slowed Napa County house sales in September and continued the month-to-month downward pattern that began in the spring, according to California Association of Realtors (CAR) data. The number of local residences sold decreased significantly yearly and monthly.
The midpoint (or center) cost of marketed Napa County properties dropped from $977,500 to $849,500 in August and September. However, when comparing September to September of the previous year, the sold price of a Napa County home increased 6.1% — from $800,000 to $849,000. The California Association of Realtors also predicted that the median home price in California would fall 8.8% in 2023, following a 5.7% increase in 2022.
As reported by the Labor Department, the consumer price index (CPI) in the United States reached 9.1% last June, the biggest annual growth since November 1981. The Federal Reserve has been raising its federal funds rate to contain increasing inflation, which has indirectly led mortgage rates to rise. Many Americans expect home price increases to slow down shortly. Following the recent New York Fed market expectations poll, the median projected change in house prices for this year will fall to 4.4% in June. This is the lowest reading in the series as of February 2021.
Inflation Could Be Beneficial
Despite inflationary pressures, the Napa Valley home market remains robust. Although prices are higher than they were previously, there are still bargains to be obtained, and property investors should keep this in mind as they search for homes to grow their portfolios. Buying a property without breaking the bank is feasible if you take the appropriate strategy and keep an eye on current market trends. Prospective buyers should take advantage of these opportunities when possible, as they can make a significant difference in the long run.
If inflation persists in driving up mortgage rates and keeping purchasers who need a mortgage out of the market, cash buyers who are not harmed by high loan prices will have less demand and more availability. And, because real estate is typically a reliable inflation hedge, investing money into a house is one method to capitalize on an appreciated asset over a period.
Inflation reached new highs in the first quarter of 2022, and with supply constraints persisting, customers may be forced to pay higher prices for what they want. This could be viewed as a chance by a wise investor. Leveraging an existing real estate portfolio to purchase new rentals enables you to grow and secure long-term interest rates on a property in scarce supply and rapidly increasing value. Trying to sell now would inevitably result in a big payout, but you’ll need to discover a way to spend that income. If it is to purchase another rental, you will almost certainly end yourself in a competitive tending battle.
Selling your property and settling off your huge mortgage would be a catastrophe. Inflation could play against you rather than for you in terms of mortgage repayment. With this in mind, renting out your real estate investment may be a better option.
How Property Management Services Can Help
At the market’s current state, you might want to consider hiring a professional property management company. Our team at Atlas Property Management can assist residential real estate owners and investors in the Napa/Sonoma and North Bay market with comprehensive, dependable, trustworthy, and cost-effective services. Here are some of the most notable benefits of working with a property management company:
- Less legal issues.
If you hire an expert and avoid litigation, the money you save will be more than enough to cover the property management company’s expenses, plus you will also save time and energy.
- Assist you in achieving your financial objectives.
Property management companies in Napa present a range of accounting records to assist you in obtaining an understanding of the performance of the property. These statements are critical for future property planning and achieving your property goals.
- Act as maintenance representatives on your behalf to lessen your burden.
This saves you time and money in the long term by keeping your property up-to-date and well-maintained. Napa property managers deal with day-to-day maintenance requests. Upkeep demands and regular maintenance services have lengthy to-do and to-know lists that might consume your time and resources.
- Personal Benefits
Hiring a property manager can lead to less stress and more freedom. You can travel, invest in other properties, and have more time to spend with your family and friends. You can also focus on asset management and growing your business.
Contact Atlas Property Management now. We would love to hear more about who you are, your investment goals, and how we may assist you in achieving greater outcomes with your Napa investment property.