Housing market shifts in Sonoma County
Published: Sunday, January 27, 2013 at 4:15 a.m.
Last Modified: Sunday, January 27, 2013 at 8:27 a.m.
In 2012, Susan Rapp saw firsthand how patience has its rewards.
Rapp, a Petaluma resident, said she endured eight “grueling” months waiting for a bank's permission to purchase a four-bedroom, custom-built home across town. She locked in the price for the short sale in January and then wondered what would happen with home prices.
By the time escrow closed in September, values had risen. As a result, Rapp and her husband last fall sold their five-bedroom, east Petaluma tract home for nearly $800,000 — more than they had expected and more than they had paid for the 3,250-square-foot home on the city's desired west side.
“I was one of the fortunate ones who was able to buy low and sell higher,” said Rapp, an attorney in San Francisco. She said the new house, reminiscent of her childhood home in San Jose, likely would have cost more than she could have afforded during the housing bubble.
Last year marked an upturn in Sonoma County's housing market.
Five years ago prices took a historic plunge, followed by a deluge of distressed properties and a lack of buyers for mid-level and million-dollar homes. In the dark days of 2009, three out of four sales were foreclosures or short sales, where the home is purchased for less than the amount owed on the mortgage.
But last year, the market experienced a sharp uptick in home sales above $500,000, a decline in distressed sales, a shortage of inventory, low mortgage rates and a rise in prices.
“The market's come off the bottom,” said Cynthia Wood, a broker associate with Sotheby's International Realty in Sonoma.
Home prices hit the floor in Sonoma County in 2011, when the annual median price fell to $325,000, down 45 percent from the 2005 peak of $595,000.
Last year, the median price rose 8 percent to $350,000, according to The Press Democrat's monthly housing report compiled by Pacific Union International Vice President Rick Laws.
Agents attributed the increase partly to the jump in the sale of more-expensive homes. But they maintained that home values also have risen.
Support for that view comes from property information service CoreLogic. Based on same-home sales, it estimates that prices for non-distressed homes in the county increased nearly 9 percent in November from a year earlier. In comparison, the company estimated that national home prices rose nearly 7 percent for the same period.
Agents contended that confidence rose last year among both buyers and sellers, something that was in short supply as prices plunged.
“People were afraid of pulling the trigger back in 2008,” said Peg King, who with her son Jeremy are agents with Coldwell Banker in Petaluma.
The two agents, who helped Susan Rapp buy and sell her properties, teamed up to represent buyers or sellers in 61 home sales in 2008. But last year, that number increased to 97, a record for Peg King during her 34 years in business.
County home sales increased 16 percent last year to nearly 5,400 single-family homes, the most since 2005.
Those sales shifted toward more affluent neighborhoods and places that draw second-home buyers. Among those communities was Petaluma, where sales rose 23 percent last year.
Russian River sales volume jumped 43 percent last year; Healdsburg, 31 percent; Sonoma, 23 percent; east Santa Rosa, 21 percent; and Sebastopol, 20 percent.
In contrast, volume stayed flat in communities with a larger proportion of starter homes. Home sales grew only 2 percent in west Santa Rosa and 1 percent in Rohnert Park/Cotati. Sales declined 4 percent in Windsor.
Susan Packer, an agent with Frank Howard Allen in Guerneville, attributed the higher sales along the river largely to second-home buyers, many of them longtime visitors to the area.
“We jokingly call them the old river rats,” Packer said. Many plan to retire there, but in the meantime they intend to visit on weekends and often will rent out their properties to other vacationers.
Since 2008, most of the county's smaller towns and second-home communities have seen annual sales steadily rise. Among them are Sonoma, Healdsburg, Sebastopol, Russian River and Bodega Bay.
In contrast, Santa Rosa sales volume in that period shifted across Highway 101. In 2008, most home sales occurred west of the freeway. Now most are taking place on the east side.
For most of 2012, the number of homes on the market hovered at or below a two-month supply — significantly lower than the six-month level that many experts say represents a balanced market. Agents are scouring their contacts for possible sellers.
“We've got a lot of buyers looking. We don't have a lot to look at,” said Herman Hernandez, broker with Frank Howard Allen in Guerneville.
As a result, buyers often are competing for the same property. Many have started writing letters with their purchase offers to tell the sellers their stories and why their families so appreciate the homes. Even so, the buyers who prevail often have a large reserve of cash to deal with contingencies, including appraisals that fall below the sales price.
“You have to be creative in order to get any property for your buyers,” said Tonie Dao Murphy, an agent with Frank Howard Allen in Santa Rosa.
Murphy recently helped client Eric Boehmer buy a home by contacting the seller before the property was even listed for sale.
The home off Occidental Road in west Santa Rosa had been bought at a foreclosure auction, and the new owners planned to fix it up and flip it. Boehmer, a lab technician and 1993 Analy High grad, and his wife wanted the home because it was near family. But they were worried they might not be able to buy it once it was upgraded and put back on the market.
They made their pitch to the owners and this month were able to complete the purchase for the three-bedroom, 2.5-bath home for $365,000.
“I think it worked out great for both of us,” Boehmer said of the couple and the sellers.
Despite the low inventory and the likelihood of multiple offers, agents maintained that buyers still are exercising restraint regarding how much they're willing to pay.
“Buyers are still value conscious,” said Mary Anne Veldkamp, an agent with Coldwell Banker in Santa Rosa. They have done their research and they're telling her, “We're not going to the max of what we can afford.”
Jill Silvas, branch executive in Sonoma for Pacific Union International, said the current market can make sellers “get stars in their eyes” in regard to asking prices. But she warns them that buyers aren't going to overpay for properties.
Her advice: “Don't go crazy because you won't get an offer.”