Slowdown in Sonoma County housing market continued in November
The slowdown in Sonoma County’s residential real estate market sharpened in November, when sales and prices declined while the number of homes available for buyers jumped significantly.
The slowdown represents a continued adjustment from the initial real estate jolt immediately after the fires, according to local and Bay Area real estate experts.
In November, the county’s median housing price fell to $615,000, a decline of nearly ?9 percent from the record peak of $700,000 in June, according to The Press Democrat housing report, compiled by Rick Laws of Compass real estate brokerage, formerly Pacific Union.
Even more striking, the number of homes sold in the last three months has fallen to its lowest level in eight years. And the number of homes for sale at the end of November increased to 909, a 77 percent increase from a year earlier.
Lori Sacco, managing broker at Vanguard Properties, said the November year-over-year spike in inventory - from 515 to 909 homes for sale - says a lot about the impact of the fire on the local housing market.
“When the fires first happened, people with means bought houses and they bought them right away,” she said. “They paid whatever it was going to take to get that house. That pushed the values up.”
But she said that many of those people are now out of the market. A “correction is happening now, relative to the bump we had due to the fires,” she said.
Though the market appears to be trending toward greater balance between buyers and sellers, Sacco said the North Bay wildfires are likely to affect the local market and economy for years to come. The November correction is on top of the normal seasonal decline that takes place leading into the winter months and during the holidays, Sacco said.
“It’s the holiday season. People take their houses off the market, they go on vacation. Homes don’t look so attractive during the rainy season,” she said.
The current slowdown in home sales is evident throughout the Bay Area, but is happening to a greater degree in the North Bay and especially in Sonoma County, according to a recent analysis of the local housing market one year after the October 2017 wildfires, which destroyed ?5,334 homes in Sonoma County.
In the first month after the fires, home sales declined 11 percent in the North Bay, compared to the previous year. But home sales jumped 15 percent in November 2017, when many buyers responded to a sort of post-fire panic or “knee jerk” reaction, said the report’s author, Selma Hepp, vice president of business intelligence and chief economist at Compass.
Even as year-over-year home sales in the Bay Area saw declines in November, December and January last winter, sales in the North Bay remained elevated during that period. That sales boost, however, ended in March, when North Bay sales activity began to ebb, mirroring the slowing sales trends elsewhere in the Bay Area, according to Hepp’s report.
By September of this year, Sonoma County posted the largest year-over-year decline of all Bay Area counties, at 26 percent, according to Hepp’s analysis. The increase in inventory in Sonoma County is largely driven by the availability of homes under $1 million, a trend that is also evident in other parts of the Bay Area.
Hepp noted a marked increase in the number of county sellers cutting the price for their houses. In September and October, ?45 percent of sales involved a price reduction, compared to 26 percent during that period in 2017.
Sacco said there’s likely to be another bump in the housing market when fire survivors’ insurance payouts for rent run out. Some fire survivors have only a two-year limit for such funds.
“You’re probably going to see a return of the people who lost their homes looking to buy a house,” she said, adding that some of them will not have rebuilt their homes.
“Next summer or next spring and summer, their rental payments are probably going to expire from their insurance companies and they’re going to need to get a house.”
Sacco said another thing that’s noteworthy about the current housing market is that homes in the ?$2 to $3 million range or above are sitting on the market a little longer than they have in the past.
“The higher-end luxury home, it’s a purchase that’s made because it’s discretionary,” she said.
These people are watching interest rates rise, they’re tracking the economy and the shift in government and they’re thinking twice about making such purchases.
In Hepp’s post-fire analysis, she said the most encouraging thing she found is that demand for homes and lots remains strong in the two ZIP codes most affected by the 2017 fires: 95403, which includes Coffey Park and the Larkfield/Wikiup neighborhoods, and 95404, which includes Fountaingrove.
“The demand remains. People that are going to stay are going to stay and there’s a solid number of them,” Hepp said. “That’s the most encouraging sign.”
Laws said the retreat from the initial post-fire demand in housing is driven by a “general price resistance in the overall market.”
“We are still in a seller’s market, but less so,” he said in an email. “If the trend continues we will get back to more of a balanced market.”
“Things getting back to balance,” she said. “When there’s an imbalance, one party has more negotiating power. When there’s more of a balance between buyers and sellers, each side is more likely to get what they want.”
You can reach Staff Writer Martin Espinoza at 707-521-5213 or firstname.lastname@example.org. On Twitter @renofish.