Housing market: It's madness out there

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

Has the madness of March overtaken you yet? As the NCAA's premier basketball programs kick into gear for this annual rite of passage, we find ourselves about to embark on our own spring rush in the North Bay real estate markets. Coming off last year's supply-constrained market conditions, we are seeing even less inventory make its way to the table for consumption by eager buyers. Many sellers are searching to understand what the actual value may be of their current home, as well as wondering where and when they will find their next home.

One of the most common components of measure in value is price-per-square foot, a calculation based upon recent averages of perceived similar homes in a perceived similar market area. As inaccurate as this metric may be specifically to your property – just like the median price valuation – it is routinely applied to appraisals to justify valuation for what a market buyer and seller have come to terms with in fostering an agreement, thereby supporting the new lender's position in the property as secured.

A current macro overview of the North Bay region of Marin, Sonoma and Napa counties indicates an average price-per-square foot (psf) of $457 for a single family home – an 18 percent gain over February 2014. This is a good statistic, but it is not detailed enough to truly understand a home's value in a specific submarket.

Sonoma County has seen resilient growth in its price-per-square foot metric. In February 2014, as supplies continued to tighten, the value proposition for a single-family home rested at $312 psf. According to data collected by BAREIS MLS, by the close of February 2015, Sonoma County saw this number escalate to $350psf - a 12 percent increase from the prior year – indicating a substantial rise in values and further corroborating the trends experienced during the prior 24 months when the rate of annual increase registered a modestly higher 14 percent.

Within the borders of Sonoma County, Windsor's price-per-square foot soared to $405 for a single family home - a staggering leap of 96 percent over last year, partly due to a low volume of sales. The city of Sebastopol reported a 39 percent gain to close the month at $528psf. The west side of Petaluma boasted a hearty 21 percent rise as this submarkets tipped the scales at $390psf. Northeast Santa Rosa and the coastal Sonoma areas exhibited 17 percent and 14 percent increases in this metric as values closed February at $334psf and $401psf, respectively. Elsewhere in Sonoma County, buyers were paying $517psf in Healdsburg, $262psf in Southwest Santa Rosa and $328psf in Oakmont – all showcasing increases of 12 percent from the prior year. Notably so, east Petaluma and the town of Sonoma saw regressions of two and six percent to close out the month at $286psf and $432psf, respectively, as a greater number of less expensive homes sold during the month.

The Napa County market as a whole saw its price-per-square foot climb to $416 - a whopping 40 percent improvement from February 2014. The city of Napa posted a robust $421psf as it managed to improve by just by more than 28 percent. While in St. Helena, there were actually no transactions of single family homes during the month, although 12 new deals were put together. Quite a different story in American Canyon where residents there experienced a 20 percent climb in this metric to settle at $215psf as eager buyers jumped into the market ahead of the spring rush.

In Marin County, the price-per-square foot closed out February 2015 at $605 – an earthly nine percent increase from a year earlier. Corte Madera checked in with the most dramatic increase to $677psf – yielding a gain of 49 percent from last year. Novato closed the month with a 14 percent rise from last February as it recorded a valuation of $396psf. The remaining submarkets throughout Marin tallied very little gains as some even regressed from this same point a year ago – due primarily to a low volume of properties changing hands.

The markets are indicating aggressive demands from buyers with sellers trying to figure out how they can have their cake and eat it, too. Most are encountering madness in the process. This year may find the aggressive, yet patient buyer have the greatest success as they will likely be more creative in their attempts, eventually reaching their goal while helping to create momentum in the marketplace.