Coronavirus pandemic causing Sonoma County housing market to sputter
Julian Castro and his partner, Zaira Sevilla, found the perfect first home - a two-bedroom, single-bath house just east of Santa Rosa’s Montgomery Village shopping center. It has a big backyard where their dogs, Lila and Diego, could run and play.
But that was before Sonoma County residents were ordered to mainly stay home to slow the spread of the new coronavirus. In fact, the couple made a $499,000 offer for the house on March 14, the same day county public health officials announced the first local resident had contracted the virus from community transmission of the infectious disease.
Since then, the economy locally and nationwide has experienced a free fall, and the bottom remains unclear. Businesses, especially in the service sector, are shedding jobs by the thousands, with some economists saying the U.S. jobless rate could soon reach 20%, a level not seen since the Great Depression in 1929. A local economist said 18% unemployment is possible in Sonoma County because of the area’s vast number of restaurant, hotel and other service jobs.
Amid the financial upheaval caused by the coronavirus pandemic, the county’s housing market showed signs in March of a sharp slowdown, even as single-family home sales appeared strong. Nearly 218 homes were taken off the market last month by real estate agents, a sobering threefold jump from 59 ?expired listings in March 2019, and 45 in March 2018. Furthermore, the number of homes newly listed for sale fell from 149 in the first week of March to 59 during the final week of the month.
“Both of those indicate a dramatic slowing of our market,” said Rick Laws of Compass real estate brokerage in Santa Rosa.
Last month, the median price of a single-family home in Sonoma County was $678,455, a 6.8% increase over March 2019, according to The Press Democrat’s monthly housing report compiled by Laws. Home sales in March were 294, a 4.6% bump from the same month last year.
Laws acknowledged the March sales advance represented deals “already in the pipeline” before the county’s health officer issued the unprecedented directive effective March 18 for all but businesses deemed essential to halt operations and for most residents to stay home other than routine errands to buy groceries or go to the bank.
Castro, a 26-year-old software engineer at Keysight Technologies, and Sevilla, a middle school teacher and also 26, say the price for the Montgomery Village house is not a problem. They’re just reluctant to buy their first house at the “top of the market,” Castro said.
The couple started looking to buy a house about eight months ago and recently found the home on Magowan Drive near Montgomery Village. They visited the property, currently rented, in the beginning of March before making the purchase offer.
“We’re kinda going back and forth every day,” Castro said. “If there is a recession, how much will it affect home prices? Buying now means we can’t buy later.”
Under a revised local public health emergency order, in-person real estate showings are permitted only in cases when virtual ones are not possible and only if the property is vacant. Showings are by appointment only and no more than two visitors from the same household can be in the house at the same time, along with the person showing the house.
David and Erika Rendino, co-owners, Re/Max Marketplace in Cotati, said local real estate agents are doing the best they can showing houses “virtually” with video recordings and holding meetings via Zoom with clients.
The Rendinos, who worked with Castro and Sevilla on their offer, said since vacant homes for sale can be shown, they expect many of the residential property listings withdrawn in March eventually will come back on the market.
“It is our expectation that the lion’s share of the inventory, including occupied properties will come on the market only after the shelter-in-place order is removed,” David Rendino said.
The big question is whether there will be many buyers, given the deluge of people losing their jobs, at least temporarily.
Erika Rendino said first-time homebuyers were “driving the market” before the coronavirus reached Sonoma County.’
“But that’s the population that is mostly likely to be affected by the economic impact of the pandemic,” she said.
Her husband and business partner said homebuyers are weighing the benefit of low interest rates against the possibility of an upcoming decline in local home prices. If the economic fallout of the COVID-19 pandemic is as severe as most economists expect, many potential buyers no longer will qualify for a home loan.
Laws of Compass said the county housing market is rapidly changing and it’s difficult to assess what effect the lack of home inventory will have on prices going forward while the shelter-in-place order is still in place.
Normally, he said, less inventory would lead to an increase in home prices. But this is not a normal market, he said.
“I fully expect pent-up demand to play out in the marketplace. People still want to sell,” he said, noting many are “honoring” the home-isolation order and waiting to put houses on the market when it’s lifted May 3 at the earliest. “But I can’t imagine what the future economic impact will be on the market.”
You can reach Staff Writer Martin Espinoza at 707-521-5213 or email@example.com.