Condo market trends: People and money on the move

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

As the stock markets have given up most any gains from the outset of the year approaching what many financial advisors term a 'correction," the housing markets in the North Bay region have exemplified the trailing effect as smart money is taking profits in the stock market while searching for the better returns being evidenced in hard assets - real estate. This effect is not uncommon and is certainly worthy to note.

We have seen single family homes make significant gains back to within 10 percent of their pre-meltdown prices. The market has also had a substantial appetite for multi-unit investment properties and land, both residential & agricultural, though nothing has truly rivaled the velocity of sales and robust absorption rates experienced in the world of condominiums. This niche of the market usually trails the single family home market at both ends of its cycle and typically represents the entry point into any submarket for many buyers.

Sonoma County, the largest in the North Bay by population, saw July close with a significant 40 percent increase in the number ratified offers from just the prior month and 65 percent from the prior year. According to BAREIS MLS, Sonoma County finished July while ringing the proverbial bell. As inventory has come forward each month it has been met with insatiable demand from buyers. The median price of a condo or townhome in Sonoma County climbed just more than five percent from the same time last year to settle at $290,000 – reflecting a value of $269 per square foot.

The overall marketplace has seen heightened demand since the beginning of this year. As July is now in the books we find that 65 units were purchased in total, while another 84 units received accepted offers. The markets insatiable desire to own real estate was reaffirmed during the month as the absorption rate climbed to 103 percent – currently the highest in the North Bay – as only 63 new offerings appeared in the market, further suggesting that the rate of sales and appetite to acquire is still extremely high as buyers encounter multiple offers on nearly every unit in this category.

The absorption rate is calculated by dividing the total number of homes sold in a month by the total number of homes available for sale at the end of the same month. A high absorption rate – 20 percent and above – indicates that the supply of available homes will shrink rapidly, thereby increasing the odds that an owner will sell a property in a shorter period of time. Conversely, an absorption rate below 15 percent is indicative of a buyer's market, meaning homes are selling more slowly.

As the markets to the north were searing, Marin County's condo market trailed very closely. Having a well located condo in one of America's most affluent markets has paid many a good dividend over time. As July concluded, the vigorous nature of buyers truly shined through as 61 units changed hands – although 27 percent less than the same time last year - leaving the absorption rate off its peak from 115 percent but still comfortably elevated at 84 percent. Marin's markets are controlled by those who own property not those seeking it. The median price of a townhome or condo in this county has fluctuated mightily over the year but as July concluded it stood at $634,000 – 22 percent greater than July 2014 and indicating a value of $528 per square foot.

The more general rural nature of Napa County has traditionally exhibited less availability of townhome style properties as it did not experience the development of this particular housing unit as widely as its' neighbors to the South and West. In July, Napa County buyers managed to acquire 13 units while placing another 15 units under contract. The Napa market closed the month with an absorption rate of 54 percent, indicating a pace of sales even more robust than the prior year. The county's median price for this type of housing currently rests at $330,000 – indicating a value of $359 per square foot. With the general supply of condos or townhomes in this market being relatively small, prices can swing abruptly month to month.

How smart is your money? Everyone has an opinion on this subject. Some prefer the multi-faceted highly liquid pace and play of the financial markets, while others appreciate the less volatile nature of real estate investing. While living in California, which essentially functions as the seventh largest economy in the world on its own, you may say that this is one of the few areas in your life that you may be able to actually live in the asset you purchased. After all, anyone who was stuck holding Enron or Lehman Brothers stock the day they imploded can tell you they were left with nothing to show for the years of effort put into those investments. Think of your home as a long term hold.