Condo prices still sliding

Sonoma County's condominium market is still bleeding, and no cities have been hit worse this year than Rohnert Park and Cotati.

Nearly nine in 10 condos sold this year in the two cities were foreclosures or short sales. That was the highest rate of distressed sales for all the county's cities.

Rohnert Park and Cotati, two adjacent towns on the Highway 101 corridor, comprise 10 percent of the county's population. But together they accounted for 31 percent of condo sales during the first five months of 2011. Buyers there purchased 104 condos this year, compared to 157 in Santa Rosa, a city with three times the population.

Condo sales in Rohnert Park and Cotati are "totally dominated by people who have to get rid of them," said Dave Roberts, an agent with Sotheby's International Realty in Healdsburg who analyzed this year's sales.

"This really highlights how far they've fallen from favor," Roberts said.

Condominium sales this year have jumped to their highest level in the county in six years, according to The Press Democrat monthly housing report compiled by Coldwell Banker manager Rick Laws.

In the first five months, buyers have purchased 334 such homes, compared to 308 for the same period last year.

But prices have tumbled to the lowest level in 12 years. The median price for sales to date this year fell to $140,000, down 13 percent from the same period in 2010. Prices have dropped 62 percent since the peak year of 2006, when the median reached $365,000 during the first five months - a steeper drop than for single-family homes.

The last time the year began with lower prices was 1999, when a median-priced condo cost $126,500 during the first five months. Accounting for inflation, that condo would cost nearly $172,000 in today's dollars.

Some have made the most of the lower prices. Josh and Lea Schneider last month paid $175,000 for a three-bedroom, two-bath condo in Rohnert Park that was neither a foreclosure nor a short sale.

They previously had rented a two-bedroom condo in the same Racquet Club complex off Country Club Drive, for $1,200 a month. They will now own a larger unit by paying about $340 more a month, including homeowner association dues, utilities and insurance.

The couple this year made about eight offers to buy single-family homes, but they were turned down every time, Josh Schneider said. He understands the housing market has undergone a historic setback, but believes his wife and he made the right move.

"We found a place that we could easily live in for the next 20 years," Schneider said.

Rohnert Park and Cotati produce so many condo sales in part because of their large numbers of such homes.

Condominiums and apartments together make up "a much higher percentage in Rohnert Park than any other place in Sonoma County," said Jake Mackenzie, Rohnert Park's vice mayor and a 15-year veteran on the city council.

Slightly less than half of all the homes in the two cities are single-family houses, according to U.S. Census data.

That is the lowest rate of all the county's cities. Six out of 10 homes in Santa Rosa are single-family. In Petaluma, the rate is seven in 10 and nearly eight in 10 in Windsor.

The nearby proximity of Sonoma State University may be a big reason for the higher rate of apartments and condos in Rohnert Park and Cotati, Mackenzie and several agents suggested. Some parents purchase condos for their college-age children rather than pay dorm fees at the Rohnert Park campus.

Along with Rohnert Park and Cotati, Santa Rosa also had a high rate of distressed condo sales this year. About three in four condo sales were either foreclosures or short sales. For the rest of the county, the rate was about five in 10.

Some agents and other experts have speculated the condo market has so many distressed sales because, as with entry-level houses, it was a key segment for first-time buyers before the housing bubble burst. Many of those buyers since have lost their homes to foreclosures. Others are seeking bank permission to do a short sale, where the home is sold for less than the amount of the mortgage.

Whatever the reason, the amount of distressed property is holding prices down.

"If you don't have to sell right now, you don't," said Michelle Meisner, an agent with Century 21 Classic Properties who specializes in condominiums.

However, the market does have buyers, especially those seeking rental properties.

"I have one investor who's picked up four in the last six months," said Ken Schrier, an agent with RE/MAX who helped the Schneiders find their home.

The increase in condo sales is prompting a change in the housing stock.

During the housing bubble, some of Rohnert Park's apartments were converted to condos and sold to buyers, said Spence Hiatt, a co-owner and broker for RE/MAX Pros. Now, he said, many of those same units are being bought by investors and are "slowly being converted back to rental housing."

The jump in condo sales is burning through the available inventory, agents said.

May ended with just 179 condos on the market, the lowest amount for any month since December 2009. When comparing inventory for the month of May, it's the lowest amount since May 2005.

Schrier said his investor would like to acquire three more condos, "but there's just nothing left to buy."