Sonoma County housing market breaks records in 2020 despite pandemic

After the coronavirus pandemic sent Sonoma County homebuying into a tailspin last spring, the local housing market rebounded to have a banner year in 2020, posting a record annual median home price and the most houses sold in seven years.

Local real estate agents attributed the remarkable turnaround to a rush of Bay Area residents fleeing dense neighborhoods for suburban Sonoma County. Untethered from the office, these house hunters sought bigger living spaces and a more relaxed lifestyle as they began spending most of their time at home.

North Bay home prices that remained significantly cheaper than in other parts of the region also were a draw. At the same time, historic low interest rates spurred potential home buyers to take advantage of attractive mortgage loans.

The growing demand sent the midpoint sale price for single-family homes up 8% from 2019 to $700,000 last year, an all-time high for the county, according to data gathered by Rick Laws, a regional vice president at Compass in Santa Rosa. In total, 4,861 area homes were sold in 2020, an increase of 10% from the year prior and the largest amount since 2013.

“The demand that was created by COVID, that rush from density — I don’t think anybody that I knew expected it,” Laws said. “No one saw that coming. Nobody.”

Last year, Sonoma County condominium sales mirrored those of single-family homes, jumping 8% to 590. The median condo price for the year was $390,000, a 7% increase.

In April and May, the first full months after the pandemic took hold in Sonoma County, home sales plummeted by almost half compared to the same time in 2019, down to 249 and 208, respectively.

Once restrictions on in-person residential real estate showings were lifted in June, sales quickly returned to normal seasonal rates, reaching 473 for the month. In July, sales spiked even higher to a record 621 homes, and remained well above 2019-levels through the rest of the year.

In December, 438 homes were sold in the county, a 34% increase from 324 during the same month in 2019. The median home price in December jumped to $720,000, matching a record monthly figure set in July.

Local real estate agents linked the soaring prices locally to a surge of high-paid workers from urban hubs buying single-family homes and vacation houses for as much as six figures above the asking price. At the top end of the market, sales of homes worth over $2 million increased 95% year-over-year in 2020.

“People that are coming into the area also have interest rates as a tailwind, so they’re willing to pay more and are buying more expensive homes,” Laws said. “The pressure is intense.”

Despite widespread unemployment and a pandemic-battered economy, home sales statewide ticked up 3.5% in 2020, according to the California Association of Realtors. For the entire nation, meanwhile, sales hit a 14-year year high, with the median price rising 9% to $296,500, according to the National Association of Realtors.

In the Bay Area, sales in suburban counties including Sonoma, Napa and Marin counties far outpaced their urban counterparts this summer, a result of the exodus from larger cities. In recent months, however, home sales have climbed across the region, up 40% in December compared to the same month the prior year, according to the California Association of Realtors. Last month, the median price in the Bay Area was roughly $1.06 million, a 16% bump from December 2019.

In Sonoma County, new buyers from San Francisco, Silicon Valley and the East Bay often are replacing long-time residents that are abandoning the region and state altogether, real estate agents said. Many of those leaving are weary of the seasonal wildfires, tight pandemic restrictions, local political environment and high cost of living.

“We have never seen more clients packing up and leaving the state than we have right now,” said David Rendino, a broker with RE/MAX Marketplace in Cotati. “But as many people that are moving out of the county, we have just as many migrating north.”

That ongoing demographic shift may have lasting effects on the county. One positive for employers is that an influx of high-skilled workers could fuel the North Bay’s burgeoning technology industry, said Ethan Brown director of business development of the Sonoma County Economic Development Board.

But Brown was quick to point out that growing pressures on the housing stock could exacerbate what public officials regularly describe as a local housing crisis.

“On the whole, a lack of affordable housing is not a good thing for younger workers who were born and raised here and are not in those high-paying manufacturing and tech industries,” Brown said.

Even as home prices climbed in 2020, rents in the county actually started to decline at the end of the year. That’s good news for those who can’t afford to buy. But it could reflect a departure of lower-wage service and hospitality workers who suffered among the worst job losses last year due to state and county virus-induced lockdowns.

In Santa Rosa, the average cost of an apartment dropped to $1,859 in December, a 5% decrease compared to the previous year, according to apartment listing site RentCafe. In Rohnert Park, rents dipped 2% to $1,964.

Chris Palmer, a 34-year-old commercial landscaping manager in Santa Rosa, is finishing his lease on a lower-priced duplex with his girlfriend. He had saved for a downpayment on a property of his own, and decided he needed to act now if he wanted to become a homeowner in Sonoma County.

This month, he started the process of buying a two-bedroom condo in Santa Rosa for $300,000.

“If the market keeps going up and up, I’m going to be priced out,” Palmer said. “It’s probably going to go up faster than the money I can save. I’d rather build equity and stop paying someone else’s mortgage.”

With the start of the traditional homebuying season approaching this spring, those in the local real estate industry are bullish the market will remain hot, especially as sellers become more comfortable putting homes on the market as the latest pandemic surge hopefully subsides.

“That long-term revaluation of where people want to live will continue yet for a time,” said Carol Lexa, former president of the North Bay Association of Realtors. “I think the intensity is easing. It’s no longer an emergency response that we saw pretty much throughout 2020.”

But if home sales and prices are set to continue rising nationwide, are we on the verge of a housing bubble collapse like the one that preceded the Great Recession?

Laws with Compass in Santa Rosa, thinks not.

“Back in 2006, that was a collapse of loan standards, and we don’t really have that,” he said. “People aren’t taking out loans that they can’t repay.”

You can reach Staff Writer Ethan Varian at ethan.varian@pressdemocrat.com or 707-521-5412. On Twitter @ethanvarian