Sonoma County homebuyers still spooked by high prices, yet low interest rates add buying power

When Paul Saharoff tried last year to sell his Santa Rosa home on Alta Vista Avenue for almost $1 million, Sonoma County’s red-hot housing market already had started to cool.

From late March to June 2018, Saharoff, 77, couldn’t get any buyers for the home he’d owned for 33 years. “I could feel the market braking,” Saharoff said. “It was also breaking my heart.”

Finally, he’s set to close a deal to sell the 3,228-square-foot, four-bedroom house. Saharoff cut the asking price by about $75,000 to put the house within a buyer’s reach and was helped by lower mortgage interest rates.

At the halfway mark of 2019, the county housing market remains somewhat sluggish. The median single-family home price in June was $658,500, a sharp drop from the all-time record $700,000 median in June 2018, according to The Press Democrat’s latest monthly housing report compiled by Rick Laws of Compass real estate brokerage in Santa Rosa. Meanwhile, there were 422 houses sold last month compared with some?429 home sales last June.

Through the first half of the year, there have has been 2,000 single-family homes sold countywide, a 6.45% decline from the comparable period last year when 2,138 homes were sold.

Last year, the local housing market was fueled by post-wildfire demand, which caused a price spike and a surge of sales. After shifting downward during the second half of 2018, the market has leveled off this year and buyers are slowly coming off the sidelines looking to use their leverage to get a good deal, real estate experts say.

“Right after the fires, we had a spike in prices even though the interest rates were going up. That is not a normal market,” said Erika Rendino, the real estate broker who helped Sarahoff sell his house.

Rendino, co-owner of Re/Max Marketplace in Cotati with her husband, real estate agent David Rendino, said at the start of 2019 interest rates began to decline and have continued that trend. But Rendino and other local real estate experts say buyers still are spooked from last year’s record-high pricing and many still haven’t realized that they can get more house for the same downpayment.

David Rendino said it’s going to take buyers at least three more months to realize they now have more “buying power.” It’s not technically quite a buyer’s market, but it’s leaning toward buyers, he said.

“The lowering of interest rates has given some buyers the opportunity to purchase homes previously out of reach,” he said, adding that every ¼ of 1% decrease in interest rates roughly translates into a $10,000 increase in purchasing power.

Ross Liscum, a Santa Rosa real estate broker affiliated with Century 21 NorthBay Alliance, expects low interest rates to continue boosting housing market activity in the coming months.

“It feels like we’re experiencing what we had in the past,” he said, referring to pre-fire housing activity. “For properties that come on the market that show nicely and are priced competitively, we’re seeing offers within the first week or two,” Liscum said. “You have better buying power. You can buy more home with a lesser payment than you could have last year.”

Otto Kobler, a mortgage broker and branch manager of Summit Funding in Santa Rosa, said Monday current interest rates for conventional fixed-rate 30-year mortgages were roughly 3.99%. Meanwhile, 15-year fixed mortgage rates were about 3.30%.

Kobler said high interest rates last year were part of the reason the area housing market slowed after last summer’s peak in prices. He said buyers that calculated their purchasing power based on last year’s interest rates have not readjusted to today’s lower rates.

“They’re just not really hearing it,” he said. “We bottomed out with rates last week. I wouldn’t be surprised if rates move up a little bit more maybe by next week. They do move around quite a bit.”

Low mortgage interest rates, notwithstanding, there are a number of factors in the local economy keeping potential homebuyers from entering the housing market.

Jordan Levine, deputy chief economist California Association of Realtors, said although lower interest rates make mortgage payments more affordable, overall home prices remain too high for many Californians.

“Affordability is already at the point where two-thirds of Californians can’t afford the median price home,” Levine said.

There’s also a great deal of uncertainty about the current ?10-year economic expansion, he said. Though not as robust as previous expansions, it is the longest in American history.

“That brings with it fears about whether that can be sustained,” Levine said.

And the available supply of homes for sale is “still very low from a historical standpoint,” he said. Statewide, there’s an inventory equal to 3.4 months of sales, whereas for several decades before the 2008 recession the available home listings in California were equal to six months of sales, he said.

Dave Corbin, broker with HomeSmart Advantage Realty in Santa Rosa, said although the number of home sales in Sonoma County has declined by 15 during the first six months of the year the total value of those sales is ?$5 million higher than the six-month stretch a year ago.

In the first half of 2018, Corbin’s agency represented 72 buyers and 47 sellers. This year, he said, the agency thus far has represented 63 buyers and 41 sellers.

“I’d rather see a lot more units sold,” he said. “It’s just a little harder to come by in terms of listings this year but we’re still doing all right.”

The general consensus locally among homebuyers and sellers is that the housing market is “cooling,” David Rendino said. However, he said that perspective comes from comparing the current market to a six-month period in 2018 that was historically abnormal.

“The reality is that with this interest rate (on mortgages), it’s actually changing into a more balanced market,” he said.

You can reach Staff Writer Martin Espinoza at 707-521-5213 or martin.espinoza@pressdemocrat.com. On Twitter @pressreno.