Sonoma County’s 2018 housing market derailed by sluggish home sales, price decline

Sonoma County’s housing market hit the skids in 2018, beginning a slowdown over the summer as buyers rebuffed fire-inflated home prices and ending the year with a thud.

The big question looming now is whether there wlll be a prolonged decline or the market will bounce back later this year.

The total value of the 4,400 single-family homes sold countywide last year was $3.65 billion, almost $60 million less than the $3.71 billion on 4,740 sales in 2017. That marked the first annual decline in the value of home sales here since 2011 when the county reported sales of ?$1.91 billion, according to The Press Democrat year-end housing report based on data compiled by Rick Laws of Compass real estate brokerage, formerly Pacific Union.

Randy Waller, a real estate broker and owner of W Real Estate in Santa Rosa, said months of “desperation” that drove up home sales and prices after the October 2017 wildfires came to an end by midyear 2018.

The county’s median home price peaked at an all-time record of $700,000 in June, then started to decline before ending the year at a median price of $639,000 in December. That price was an uptick from the year’s lowest monthly median of $615,000 in November, but a drop of 5.1 percent from $673,500 in December 2017.

“We lost a beast of a percentage of housing stock,” Waller said, referring to the 5,330 homes destroyed in Sonoma County by the fires. “And we lost a higher percentage of higher-end housing stock.”

The local housing market already was experiencing “price exhaustion” before the 2017 blazes that forced sellers to ponder reducing the price tags on houses. Then the fires jolted the market, catapulting prices steadily upward on sharp demand for several months after the fires.

The sluggish county housing sector mirrors the trend in other communities across the Bay Area, Laws said, although home sales in those cities and towns have been hurt by economic headwinds rather than fires.

Laws said the shift in the local housing market that began at the end of last June was caused by buyers pushing back against sellers’ asking prices. He said it remains to be seen how much the Sonoma County market will be affected by the negative domestic and international economic factors already felt in other parts of the Bay Area and the state.

“We’re going to have to watch that trend into next year to see how much of a trend it is,” he said of the potential for outside economic forces such as interest rates, trade wars and stock market volatility to push the local housing market into a tailspin. “It’s time for the market to shift. We’ve been seeing large appreciation in this economic recovery for a good number of years. We’re not anticipating that we’re going to see that kind of appreciation.”

He predicted there would still be some appreciation in home prices in 2019, possibly 3 to 5 percent. “Our best estimate is that things are going to go flat in 2020,” Laws said.

The housing outlook depends a great deal on whether the county can withstand global economic shocks.

“There’s Brexit, the trade wars, interest rates, which are steadily rising - all this stuff puts the brakes on the (housing) market,” Laws said. “There’s a lot of things on the horizon that are causing people to close their checkbooks, if you will.”

Meanwhile, Glen Hurley, manager for Platinum Realty in Santa Rosa, said housing market activity is often cyclical.

“At some point in time, every real estate market that’s climbing needs to stop and take a breath every once and a while,” Hurley said.

That breath took place in September in the county housing market, he said. Indeed, the number of homes sold in Sonoma County from September through November plunged to low levels not seen in at least eight years. Then sales slid by almost 15 percent more in December, according to The Press Democrat’s latest housing report.

After a dim final month of 2018, Hurley said a slight decline in interest rates and a bigger inventory of local houses to buy has helped the local housing market stabilize somewhat in January.

“I had nothing to do in December and now I have four or five clients actively looking” for homes, he said, noting he expects the housing sector to pick up in February, March and April.

You can reach Staff Writer Martin Espinoza at 707-521-5213 or martin.espinoza@pressdemocrat.com.