Home prices are climbing, real estate investors are in a "frenzy" and sellers are being deluged with offers well above their asking prices, according to recent headlines.
"Prices are going up rather dramatically," Pacific Union agent Rick Laws told staff writer Robert Digitale for a May 15 story. In fact, the median price of a home in Sonoma County jumped $100,000 in the past year, to $435,500 in April.
This is good news for sellers, and for the quick-turnaround artists known as flippers who buy homes, perform quick upgrades and remodels, and then put them back on the market for what is often a much higher price.
But for buyers? Not so much.
"I think it's going to be a challenging market for buyers for the remainder of the year," Brian Connell, broker/manager for Frank Howard Allen in Santa Rosa, told Digitale.
How challenging is it? Consider the story of Alicia and George Deguchi, who sold their Fountaingrove house in December with a plan to downsize and simplify their lives as the youngest of their three children prepares to head off to college.
"We've been really frustrated," said George Deguchi. "It's not just that there are so few houses on the market. It's that prices are being hugely inflated by a few companies out there that are in the flipping business. They are competing against each other and driving up prices in the area."
Not every house for sale is being pursued as a flip, of course. But, as Digitale reported in a story last week, many are. Last year, 527 Sonoma County homes were flipped (about 10 percent of all sales), a jump of 47 percent over the previous year. A study lists Sonoma County as one of the nation's top-25 most profitable markets for flipping.
I watched in fascination this winter as a house around the corner from me went through the process. First listed for $279,000, it was a mess that needed a lot of work. But it was quickly snapped up for $351,000, and immediately became a beehive of activity. Crews worked for several weeks removing a dilapidated back-yard pool, replacing the roof, installing new windows and performing other upgrades. About six weeks after it sold for $351,000, it was listed for sale again for $539,000. In early May, it sold for $560,000.
Flippers defend the practice, pointing out that it employs construction workers, improves neighborhoods and increases values of surrounding properties. In Digitale's story last week, flip specialists said they risk their capital in an uncertain market. Chris Peterson of Praxis Capital in Santa Rosa said if people think flippers are making a killing in this market, "&#8230;go to the courthouse. You can buy one, too, if you think it's a great idea."
The Deguchis, who have seen house after house slip away from them over the past six months, did just that. They had offered $475,000 last November for a home on Bayberry Drive in Santa Rosa, but it fell into foreclosure before any deal could go through. They researched the auction rules and showed up at the courthouse in March confident they could buy it at auction, figuring that most of the flipping activity was happening with properties in the $200,000-400,000 range.
But the auction turned into a competition between two flipping companies, Alicia Deguchi said. Blue Mountain Realty of Vacaville, one of Sonoma County's most active flippers, bought the house for $640,000 on March 28. And today, it is listed for sale for $790,000.