Sonoma County's housing market has started this year the way it ended 2012, with lower sales, higher prices and a sharp decline in the number of financially distressed properties.
County buyers purchased 289 single-family homes in February, down 18.6 percent from a year ago, according to The Press Democrat's monthly housing report compiled by Pacific Union International Vice President Rick Laws.
The median sales price rose 21.7 percent from a year earlier to $380,000.
Agents and brokers said prices rose largely because more buyers are chasing the smallest number of available homes for a February in eight years.
"Now that everybody wants to buy, there's nothing to sell," said John Duran, a broker with Frank Howard Allen in Santa Rosa.
In recent transactions, buyers who agreed to pay the full asking price at times have been outbid or lost out to others who agreed to take the property regardless of its appraised value. In cases where the appraisal comes in lower than the agreed price, such buyers must put forth the extra cash not provided by a lender.
One example of the current competition involves a two-bedroom bungalow in Santa Rosa's Burbank Gardens neighborhood. CPS agent Pam Atchison listed the 1,026-square-foot home on Brown Street last week for $249,000. Based on early responses, she quickly raised the price to $289,000.
"For anybody that wrote (an offer) under that, it would have just been a waste of time," Atchison said.
By Wednesday, she had received more than 10 offers, some above the new asking price, some with personal appeal letters and color photos from potential buyers. Her owners were expected to select a buyer this week.
The spring homebuying season has yet to begin, but agents said they already know what it won't be featuring: an abundance of available bank-owned foreclosures and short sales.
A year ago, such distressed properties amounted to half of all sales. But foreclosures and short sales last month accounted for only one in three transactions. Short sales are properties sold for less than the amount owed on the mortgage.
Buyers last year purchased nearly 5,400 county homes, the most since 2005. The annual median price rose nearly 8 percent to $350,000. A year earlier, the median price of $325,000 was the lowest in a decade that featured a historic crash of the housing market.
County home prices have risen on a year-over-year basis for 12 straight months.
Home sales had increased for 18 straight months, but that trend ended in December. January and February sales this year have declined 17.2 percent from the same period of 2012.
The drop in sales isn't due to fewer transactions involving homes with equity. Equity sales have risen on a year-over-year basis for 17 straight months. But the number of distressed properties coming to market and being sold is the lowest in at least four years.
The reduction in distressed properties likely accounts for some of the increase in median prices in the past year.
February ended with 616 homes available for sale. That is a two-month supply of inventory at the current pace of sales. Experts say a balanced market has roughly a six-month supply of inventory.
Agents said the rising prices are helping those owners who have been underwater, meaning they owed more on their mortgages than their homes were worth. But even buyers with strong credit and large down payments have found it difficult to make purchases.