Why aren’t more houses for sale in Sonoma County?

Why aren’t there more houses for sale in Sonoma County?

It is a question homebuyers find themselves asking these days, with new listings at their lowest levels in six years.

The answer involves a combination of forces that are shaping the local housing market. Virtually no new homes are being built in the county. A glut of foreclosure properties left from the recession has been gobbled up by an influx of hungry buyers. And frequent bidding wars are intimidating many potential sellers from looking for a new home to buy, keeping them in their current home.

With inventory so tight, today’s hesitant homeowners aren’t likely worried about selling their properties. Rather, the bidding wars seem to generate fear that the owners who sell won’t be able to obtain a suitable replacement.

“It’s a great time to be a seller. It’s not a great time to be a buyer,” said Robert Lee, who with his wife, Melissa, is trying to purchase a home in east Santa Rosa.

To improve their chances, the couple this month completed the sale of a Rincon Valley condominium that Melissa Lee bought in 2009. By selling and moving into an apartment, the Lees hope they now can make more attractive purchase offers - specifically bids that aren’t contingent on the sale of the condo. Even so, after looking at more than 40 homes and making three unsuccessful offers since November, the couple suggested that acquiring the right home remains elusive.

For many of the available properties, Melissa Lee said, “we’re just not excited.”

Other homeowners, like Debra and John Franzman of Santa Rosa, are using a different strategy. They are trying to buy a home and wait until a sales agreement is completed before putting their east Santa Rosa home on the market.

But though that approach can make their purchase offers more appealing, the house competition remains fierce. This winter, the Franzmans were among 18 bidders on a home off Summerfield Road in Santa Rosa that was priced in the mid-$600,000s.

“We bid $31,000 over the asking price and we weren’t even in the ballgame,” said John Franzman, a national sales manager in Santa Rosa who deals in specialized plumbing fittings. His wife works in Petaluma as an inventory management specialist.

The county’s housing market remains in the midst of a sea change. It has left behind the crisis days when investors were snapping up a large portion of the available inventory, much of it financially distressed properties that had gone through foreclosures or short sales.

Instead, most of today’s available homes are owned by sellers who have equity in the properties, and prices have risen enough to make the market less attractive to investors seeking rental houses and condos.

But inventory has remained tight for the past few years and in February amounted to about a two-month supply at the current pace of sales. The month ended with a bit more than 500 homes available for sale. Nearly four in 10 were priced between $300,000 and $600,000.

Both agents and buyers report strong demand for homes this year. One main reason is the county still lacks a meaningful supply of newly built homes. Local governments issued just 251 permits for new single-family homes in the county in 2014, the lowest level in at least 45 years.

In this environment, real estate agents and brokers say that many homeowners aren’t putting their homes on the market because they don’t like their prospects for finding another place.

“It’s musical chairs,” said Tammra Borrall, an agent with Pacific Union and Christie’s International Real Estate in Santa Rosa. “No one wants to be left with nowhere to sit.”

Agents noted a common dilemma: Most homeowners can’t afford to buy another home without selling their existing place. But when multiple offers are common, most sellers aren’t willing to make a deal with someone who still has to dispose of another property.

“This is not normal. This is not going to continue,” insisted John Duran, a broker associate with Coldwell Banker in Santa Rosa.

Duran, who represents both the Lees and the Franzmans, said historically the market operated with an understanding that sellers typically must buy another place and many buyers often need to sell an existing home. As a result, the home sale process could take 90 days in order to allow time to complete the multiple transactions.

“But today nobody will give anybody the time to do that,” he said. Instead, most transactions are completed in about 30 days.

The county’s housing market still lives in the shadow of a historic housing bubble, which was followed by a record plunge in prices and a tidal wave of foreclosures.

The median home price here peaked in August 2005 at $619,000. But prices began a sharp decline in 2007 and fell to a low of $305,000 in February 2009. In the past three years the median price has steadily risen and by February stood at $492,000.

Even so, many homeowners were unable to benefit from that rebound. Since 2007, more than 15,000 county homeowners have lost properties to foreclosures and short sales, the latter a transaction where the price paid is less than the amount owed on the mortgage. The distressed properties represent roughly one in every seven homes with a mortgage.

Plenty of reasons are mentioned for today’s lack of inventory. They include decisions by some buyers to retain their existing homes and to turn them into rentals in a tight housing market. As well, some potential sellers also may decide to stay put because moving could trigger a big income tax hike on capital gains profits or could prompt a hefty increase in property taxes.

However, the most easily quantifiable reasons for the lack of available homes involve the decline in both home construction and distressed property sales.

For new housing, the 251 single-family permits issued last year represent about a seventh of the historical average of houses built in the county each year during the two decades before the housing crisis.

Distressed properties similarly have shown a sharp retreat.

More than 600 foreclosures and short sales were newly listed for sale in the winter of 2012 - comprising about half of all the homes that became newly available in the three months from December through February. Looking at the same period for 2015, the distressed sales had plunged to fewer than 90.

The level of newly available equity properties has increased somewhat, but new listings are still at their lowest level since 2009.

When considering the lack of inventory, it remains difficult to gauge the number of homeowners who have chosen not to put homes up for sale. But agents and brokers for months have insisted that many owners are doing just that, and their decisions mean fewer homes coming to market.

In navigating today’s market, mother-and-son real estate team Peg and Jeremy King are recommending that clients avoid making the buying or selling of homes subject to contingencies.

“There’s just too many ifs, ands and buts” with such demands, said Peg King, an agent with Coldwell Banker in Petaluma.

For buyers, the Kings recommend those with the means first buy their next home and only then sell their existing property. Lacking that ability, buyers can sell their current property and move into a rental as they start the search for their next home.

The Kings also encourage each seller not to demand that the sale be contingent on their ability to acquire another property. They noted clients soon will bring three properties to market in west Petaluma. In no case will the sellers make the deals contingent on being able to buy their next homes.

“That’s where you get the highest and best value,” Jeremy King said.

Other agents said those approaches can work for some buyers. But many homeowners lack the means to own two homes, even for a brief period. And many others will resist moving twice, first into a rental and later into their the next house or condominium.

What’s needed is more inventory, agents said. And in time, they predict, it will come. For the present, they suggested sellers and buyers use such solutions as agreeing to rent back a house to the seller for up to 60 days, a time that may be sufficient for finding another home.

Home inventories typically rise during the spring and summer selling season. And the county reported 613 single-family homes added as new listings in March, the biggest number in five years, according to The Press Democrat’s monthly housing report.

The winter months “were abnormally slow” for new listings, said Pacific Union International Vice President Rick Laws, who compiles the monthly housing report. In contrast, March and April listings appear to be surpassing expectations for agents and brokers.

Even so, Laws acknowledged, the increase may not seem very remarkable for those seeking a new home “because there’s so many buyers.”

John and Deb Franzman suggested they are still waiting for the kind of jump in inventory that reduces some of the competition.

The couple acknowledged that more homes were placed on the market last month.

“But here’s the funny thing,” John Franzman said. “Most of them sold the day after their open house.”

You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@pressdemocrat.com. On Twitter @rdigit.