Sonoma County’s hot housing market prompts buying frenzy, record prices
The coronavirus pandemic flattened a great deal of the Sonoma County economy. But it’s proven no match for the surging housing market.
Sales and prices of single-family homes notched consistent gains since last summer against strong economic headwinds. In the past three months, however, prices skyrocketed to astonishing levels never seen before in an area accustomed to outsized price tags on houses.
The median price of the 546 existing homes sold countywide in May reached an all-time high of $780,000, up 16.5% from the same month a year ago.
That smashed the record $775,000 median price on 580 home sales in April, a 17.6% yearly jump. The March median was $767,000, a 13% annual boost.
Despite soaring prices, buyers, many flush with cash, are snapping up homes in lightning-quick fashion. The frenetic pace of monthly sales volume, which more than doubled from a year ago in both April and May and remains induced by low interest rates, left a sharply limited inventory of single-family houses to sell before additional properties were listed for sale in June.
Rick Laws, a regional vice president at Compass real estate brokerage in Santa Rosa, said the housing market is so hyperactive “it’s almost a rule” that buyers make offers “shockingly over the asking price with no contingencies” to competitively vie for houses. “And that’s a risky, market-driven strategy.”
What that means is most would-be homebuyers are waiving common protections for themselves by making offers without stipulations that: houses pass an independent inspection; they can definitively obtain financing; a lender appraise a house to ensure the asking price is in line with its value; and a title search of a property doesn’t turn up any unsettled liens or unpaid taxes.
While a robust housing sector bodes well for the overall health of the local economy, county residential property has gotten so hot, many middle-class working residents remain stuck in rental homes. In fact, only 27% of all county residents — roughly 1 in 4 — can afford the hefty down payment, monthly mortgage payment and property insurance to purchase a home at the median price, according to the California Association of Realtors’ housing affordability index.
Laws, who compiles monthly market updates for The Press Democrat, attributed the area’s supercharged housing juggernaut to a “COVID bounce.” Fueling that bounce and driving home prices through the roof, he said, are high net worth buyers mainly from San Francisco and Los Angeles converging here to snap up houses because the pandemic continues enabling white-collar professionals, who had reported to offices, to work from home.
“People are fleeing urban density for more open space,” he said. “Compared to San Francisco and Marin County, Sonoma County is on sale.”
Jenni Klose, executive director of Generation Housing, an independent housing advocacy organization, called the county’s median single-family home prices “staggering” and the latest affirmation of a 20-year-old predicament: a housing shortage that’s heavily contributed to worsening home affordability for buyers and renters.
In the past four years, wildfires have exacerbated the housing shortfall. In 2017 alone, devastating fires — predominantly the historic Tubbs blaze — destroyed 5,300 homes in the county essentially in a day. Subsequent blazes in 2019 and 2020 burned down about 660 more houses. Comparatively, over the last decade, around 5,000 new houses and apartments were built countywide.
“The bottom line is we don’t have enough housing and we need to be building it,’’ Klose said. Her nonprofit recently released a report stating that 58,000 houses and apartments need to be built by 2030 for purchase and lease to alleviate the longstanding housing shortfall plus handle additional demand for homes here through the decade.
As the pandemic fades, the potential for widespread economic recovery heightens with the much-anticipated full business and public reopening set for Tuesday. At the same time, the runaway local housing market exerts extra wage pressure on businesses still grappling with depleted staffs and increases the likelihood more residents will leave.
Actually, housing affordability presents a monumental challenge statewide, with a midpoint single-family house sale price now at $813,980. There are few cities and towns to live in California where the majority of residents can afford to become homeowners.
“Not only do skyrocketing home prices threaten already-low homeownership levels and make it harder for those who don’t already have a home to purchase one, it also brings to question the sustainability of this market cycle,” said Jordan Levine, chief economist with the state Realtors’ association.