Housing also in severe drought

This article is reprinted from Wine Country Real Estate, a special advertising section of The Press Democrat.

Food, water, shelter and clothing are the basic minimum needs of the human race. Some may argue love, as The Beetles did, or community is as necessary as well. As our state has been experiencing a shortage in the supply of water we are also finding a shortage in housing from all perspectives. Whether you are trying to find your next home to purchase or to rent, both commodities are in historically constrained availability. Commonly accepted principles would dictate that if the marketplace is short of supply and demands from buyers are ever so high, then we should experience extreme pressure on prices to rise thereby restoring balance. While digging further into the details may reveal that the other constraint holding back heavily accelerating prices may really be the local regions wage earners ability or willingness to afford yet significantly higher home prices.

Get the market right. To better grasp prudent real estate investing in Sonoma County you must first understand local inventory trends. In doing so, you will fill the void left by macro analysis of the nation, state, and region – after all, the devil is in the details. According to BAREIS MLS, there were exactly 444 single-family homes for sale as January came to an end – that's a whopping 20 percent less than a year ago when markets were dubbed as supply constrained. The county welcomed 258 new listings to the market in January while 308 units garnered accepted offers during the month as 222 homes formally traded hands, leaving the county with a months' supply of inventory (MSI) of 2.0 – good macro information.

MSI is the metric that indicates the number of months it would take to sell the current inventory at the current rate of sales. An MSI ranging from 4.0 to 6.0 is generally indicative of a balanced market, with lower numbers increasingly favoring sellers and vice versa.

The Santa Rosa marketplace is the largest not only in size but in volume of transactions every year in the North Bay. It is comprised of five distinct regions, each with numerous communities within their boundaries.

The submarket of northeast Santa Rosa consists of picturesque landscapes and a bustling economy. As January closed there were only 69 single-family homes available for sale, 41 of which were new to the market during that same month – 21 percent less than inventory arriving at this same time last year. Buyers and Sellers in this market came to agreement on 49 new contracts while this submarket tallied 35 completed transactions during the month pushing the MSI up to 2.0 – still indicating that we may see greater pressure on buyers as 2015 unfolds.

In southeast Santa Rosa, where the Montgomery Vikings and their steward in the paint, Erik Poulsen, are hotly in pursuit of their sixth basketball championship, there were 30 homes available as January concluded – 23 of those being new to the market during the month. Buyers garnered accepted offers on 32 homes while just 13 properties cleared title in formal transfers to new owners thereby allowing the MSI to rise to 2.3 – comfortably indicating a supply constrained market still exists.

Oakmont is an active adult community located on Santa Rosa's extreme eastern boundary and nestled in the Valley of the Moon with well over 4,000 residents living the good life. This submarket has been no stranger to supply constrained forces either as it experienced a significant surge in buyer activity. When January wrapped up there were only 16 homes listed for sale, including the 15 new homes that were brought to market during that same month. Sellers accepted 13 new contracts from buyers while six homes passed to new owners – allowing the MSI to spike upwards to 2.7 due to the light amount of closed sales during the month.

Turning our attention across the highway to northwest Santa Rosa, there were 22 homes available for sale at month's end, including 25 newly listed properties during the period – both, the lowest respective amounts seen through the preceding year. Buyers got sellers to agree to 35 new purchase contracts as 26 sales closed during the month reflecting a steady MSI of 0.8 – certainly a call to the markets to bring out more new homes.

As January's final numbers were tallied, southwest Santa Rosa residents could select from just 16 remaining homes for purchase consideration. This included 14 that were newly introduced to the marketplace in that same month as 12 buyers were successful at garnering ratified offers by months end from active sellers. January boasted only eight completed transactions which allowed the MSI to climb up to 2.0 – still clearly in the folds of a seller's market.

Starting off the year with inventories of available homes off 20 percent may be foreshadowing of greater than expected appreciation, at least in the first half of 2015. You may even say, just like the water situation plaguing the state, our supply of housing for would be buyers is in the severe drought zone.