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Home prices rose to new highs in Sonoma County in May, when the median hit a record $692,250, but there are indications the unrelenting price increases may be starting to test buyers’ limits.

Over the past six years, the median price has more than doubled, climbing from $329,000 in May 2012. Last month, the median jumped nearly 11 percent, compared to a year ago.

“I think it is significant because it is a long run,” said Rick Laws, a vice president at Pacific Union International who prepares The Press Democrat’s monthly housing report.

The destruction of 5,200 county homes in last fall’s wildfires likely contributed to higher prices this year, he said. So have large numbers of Bay Area residents who consider the county a relatively affordable place to buy property.

In the past dozen years, Sonoma County real estate has featured a housing bubble and crash, a recovery marked by a tight supply of available homes and a market that was rattled by the most destructive wildfires in state history.

Before the crash, the median price hit a high of $619,000 in August 2005, then plunged to a low of $305,000 in February 2009. The 2005 high wasn’t surpassed until March 2017, when the median hit $635,000. New record prices since have been set six more times — before May, the most recent occasion was in February at $689,000.

Even as prices came back, buyers found relatively few homes available to purchase. For much of the past six years, the inventory of homes listed for sale has hovered at about a two-month supply — generally considered a sign of a seller’s market.

In October, wildfires killed 40 people in the North Bay and burned over 6,000 homes. The fires set off a scramble for many fire survivors to find replacement properties. In November and December, buyers purchased a record $737 million worth of houses and condominiums in the county.

In May, buyers purchased 416 single-family homes. That was the lowest number of sales for the month since May 2011, when 364 homes changed hands. However, sales for the first five months of the year still increased 3 percent, compared to the same period a year earlier.

Brokers and agents this week pointed to disparate markers of change in the market.

Laws noted a jump in contracts signed for homes selling at $4 million or more. Buyers signed deals on eight such homes in May, more agreements than were made in total during the first five months of 2017. Not all those signed contracts will result in completed sales because some arrangements fall through.

Meanwhile, Bill Facendini, president and broker of Terra Firma Global Partners in Santa Rosa, said in the past three months a significant number of sellers have reduced prices of properties after failing to initially land buyers.

Sellers typically try to keep raising prices above what their neighbors obtained in recent sales, he said. But buyers these days seem less inclined to pay the higher amounts.

“They don’t feel that need right now,” Facendini said. He called it a sign that the market is in transition and price appreciation could slow, if not level off.

Lisa Thomas, an agent with Pacific Union in Santa Rosa, said buyers seem more cautious about overpaying. Also, those that have been looking since winter now have more choices, as additional homes have come to market this spring.

Read all of the PD's fire coverage here

Nonetheless, she thinks the market will remain “really strong” for the next year to two.

“The buyer demand is not going away,” she said.

Agents and brokers noted the Federal Reserve this week raised its benchmark rate a quarter of a percentage point, with more hikes expected later this year. As a result, individual borrowers eventually may qualify for smaller home loans, they said, but to date the increased rates don’t seem to be significantly dampening demand.

The fire has spawned a new market for burned lots, including 62 listed for sale in May. Laws reported that a total of 480 such lots have been offered for sale since November.

Buyers purchased 34 fire lots in May, the lowest number for the year. The median price was $265,000, an increase of 6 percent from April.

At the end of May, 178 lots were still listed for sale, more than double the number available at the end of January.

Gerrett Snedaker, senior vice president for the North Bay division of Wine Country Group by Better Homes and Gardens, estimated the lots are selling for about 60 percent of what they would garner if they weren’t located in the burn areas.

He said a relatively large number of such lots are available for sale compared to a limited number of buyers.

“That’s why that discount’s there,” Snedaker said.

Brokers and agents noted that many sellers are leaving the county for less-costly housing markets in California and the West. Meanwhile, a significant number of buyers are homeowners coming from the Bay Area and finding their money goes further here.

“We’re witnessing a demographic change” in the county’s population, Laws said. The shift will help answer the question: “Who can afford to live here and who can’t?”

You can reach Staff Writer Robert Digitale at 707-521-5285 or robert.digitale@pressdemocrat.com.

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