Sonoma County home sales accelerated in May to the highest level in nearly four years, but increased demand didn't translate into higher prices.
Buyers purchased 495 single-family homes last month, according to The Press Democrat's monthly housing report compiled by Pacific Union International Vice President Rick Laws. Sales were up 36 percent from May 2011 and reached the highest level for any month since October 2008.
Even so, the county's median price fell in May to $330,000, down 4 percent from April and a decline of 7 percent from a year ago. For the past year the median has remained between $314,000 and $350,000.
Despite the lack of price gains, agents suggested the market has turned a corner this year.
The county has recorded 2,089 sales to date this year, the most for the same period in seven years. And sales activity no longer is limited to the starter home segment of properties priced below $300,000. Sales for homes priced above $500,000 are up 25 percent this year.
"We're still getting multiple offers on properties, even in the higher price points," said Charlotte Leiss, an agent with Pacific Union International in Santa Rosa.
However, last month's growth in sales was concentrated in the lower end of the market, and it helps explain the drop in median prices, agents said.
Buyers purchased 323 homes priced under $400,000 in May, an increase of 18 percent from April. In contrast, there were 172 sales above $400,000, up just 2 percent from April.
The sales of those less-expensive homes pulled down the median price — the point at which half the homes sold for more, and half for less. Many of the starter homes were distressed properties known as short sales, where the home is sold for less than the amount owed on the mortgage.
"The short sales are just going through the roof," said Mike Kelly, an agent with Keller Williams in Santa Rosa.
Buyers purchased 106 short sales last month, compared to 68 a year earlier. The median price for such properties was $283,100, or nearly $47,000 below the median for all single-family sales.
One reason there aren't more sales above $400,000 is that so many homeowners have no equity available to move up to more-expensive homes, Kelly said. More than a quarter of all county homeowners with mortgages are underwater.
As well, more than 13,000 county owners have lost homes through foreclosures and short sales since 2007. In May, four out of every 10 home sales involved such distressed properties.
Prices may increase later this year, Kelly and Laws said. Even so, Laws said, sellers may not benefit if interest rates also rise from historic lows, which would reduce buyers' purchasing power.
"This is truly a window of opportunity for sellers," he said.
Buyers and sellers appear to think the market has hit bottom, Laws said. Recent news of poor U.S. job growth and Europe's debt woes have "put people a little on edge, but it hasn't put a dent in our trend lines" for sales.
The county's median price hit a record high of $619,000 in August 2005 before tumbling to $305,000 in February 2009.
In contrast to the trend in Sonoma County, the Bay Area reported increases last month in both sales and the median price.