Your friendly local source for Sonoma County information

It’s easy to forget how blessed we are in Sonoma County. I was previewing a Healdsburg listing for some snow-bound clients who wanted to know what was blooming right now. The property owners obviously loved camellias and had planted some wonderful specimens to go with the quince and daffodils that bracket the floral show below. These photos are all from the middle of February.
Renowned horiculturist Luther Burbank considered Sonoma County “the chosen spot of all earth as far as nature is concerned.”

Mix heavy rain and narrow river channels and you’re bound to get floods. I’ve had one home and one business flood, so high ground looks good to me, even in dry times. When floods are rumored, it helps to have good information about projected river levels. Even the best estimates are often wrong, but it’s smart to keep your eye on accurate information.
This web page from the California Department of Water Resources combines both rainfall and flood stage information for Guerneville, the most likely flood area in Sonoma County. Here’s an example.

The left side of the chart is five days of historical information, with rainfall on top and flood stage on the bottom. The right side of the chart contains five days of predictions for both rainfall and flood stage. The nearer in time the more accurate the predictions. Those are shown in green. The state also attempts to look deeper into the future, but they call it guidance rather than predictions, since they don’t have enough information to make a strong prediction. That information is in magenta and is worth watching, particularly when rains are heavy and flood rumors start to spread. The image is a link to the actual state information that is updated frequently.

The best advice I can give potential flood victims is to keep your pictures and important documents where you can grab them fast and keep them safe. Furnitures, clothes, applicances, etc. can be replaced, but your wedding pictures, birth certificates, etc. can be impossible to recover. Next best advice…get a motel room in Santa Rosa and wait the flood out with electricity, working toilets, showers, and hot food.

Not too far from the energy of the Airport Business Park and Shiloh’s Wal Mart and Home Depot is Faught Road. It’s only a couple of miles long, but it’s miles away in space and time from the urbanizing 101 corridor. This classic farm house on six acres is architecturally pleasing on many levels. The three dormer roof lines echo the larger gable and break up the roof plane. The wrap around porch makes a symmetrical division of the house height and creates blocks of space that comes close to fitting into the “golden ratio” that has always been a pleasing shape. The house itself from the peak of the gable to the width of the entire structure is also close to the golden ratio.

The photograph to the right uses color masks to show the way the house’s design is a series of golden ratios. The use of these proportions is probably an unconscious element on the architect’s part; just good design that pleases the eye.

REO is the acronym for Real Estate Owned. Owned by banks, insurance companies, mortgage companies, and anyone else who ends up holding the deed when foreclosures are finished and there were no bidders (holders of ten or more of these properties are listed in the box on the left). These are the reluctant owners who thought they were buying guaranteed cash flow, but instead ended up with real property that most likely is worth less than the original loan amount. How we as a community of buyers, sellers, and brokers end up valuing and moving these homes into the hands of resident buyers and rent-minded investors is likely to be one of the most interesting stories in real estate this year.

First, the number of REO properties is small in absolute terms, but as of the end of the year, nearly 400 homes in Sonoma County fell into that category. Less than half of that number were actively on the market, so there is a growing reserve of over hundreds of REO homes that aren’t listed on the MLS yet. The sellers are motivated to get these properties off the books, but they don’t want to flood the market and depress prices any further. Still, the need to dispose of the homes will be a strong incentive for the REO holders to accept qualified offers and to avoid piling up even more inventory as the foreclosure boom continues.

Some properties are on the market now that I would classify as excellent values. Some are inexpensive enough to create a positive cash flow for investors; others are estate type properties at prices that will look like great deals in a few years. I can produce a list of the MLS-listed, REO single family homes available for download if you would like to see what’s on the market. I would also be happy to produce a list about REO properties in specific areas.

In the last six months 60 REO single family homeshave been sold. Selling prices ranged from $195,000 to over $1,000,000. Depending on location, the prices they are selling for are anywhere from 15% to 30% below the market peak prices of 2005. Almost nowhere in the county is immune from foreclosures, so these sales happened in south west Santa Rosa and the Russian River, but also in Healdsburg, Sonoma, Sebastopol, and Fountaingrove.

The other factor to consider along with REO’s in Sonoma County is short sales. These are sales for less than is owed on the property and the banks and other mortgage holders end up negotiating how much money they are willing to lose. Their alternative, of course, is to foreclose on the property and take their chances that either wiping out a second mortgage or a HELOC (Home Equity Line of Credit) might leave them in a position to recover their investment. There are more than 500 short sale listings right now, and it’s fair to say that all of them are highly motivated sellers. Add to this the even more motivated sellers of the 41 homes listed on the MLS that are in foreclosure or have a notice of default filed, and it makes this is an interesting time to be a buyer.

The last few days have been cool enough to make jackets and sweaters seem like a good idea. The rain has been warm enough to still feel like a California winter, but the higher hills have been dusted with a beautiful snow cover. I spend some time hiking around a new listing in the Alexander valley, and was surprised by the amount of snow I could see. Eric Drew is a great photographer and I assumed he would have some pictures of the snow. Instead, in a classic example of the way the world works, when he saw the perfect picture to take, he was without his best camera, and the memory card for his backup camera was in the office. He left me with a poetic vision that will serve until pixels arrive:

Sun on snow
Mt. St Helena
black and white wispy clouds

Arnie, baby, tell me it ain’t true! Newspaper reports indicate the proposed state budget plans to close Austin Creek Reserve and Armstrong Woods along with 46 other California parks. In Sonoma County the Petaluma Adobe park would also be closed. It’s clear that we have budget woes in the state, but there have to be better solutions than closing pubic facilities beloved by the public.

The silly thing about “saving money” by closing parks is that the towns and surrounding businesses will be taking in less sales tax for the state as visitors who would have stopped and enjoyed the parks  decide to spend their vacations doing something else. They may spend their money here, or they might go somewhere else. The hotels and motels will also be bringing in less Transient Occupancy Tax which hits the county hard.

This blog isn’t the right forum for helping balance the state budget, but let me put one often discussed alternative out there for people to think about. Many states charge sales tax on professional and craft services the same as they do for products.  If we collected sales tax on your accountant, lawyer, and plumber we could balance the budget while lowering the overall sales tax rate for everything else.  You could even charge tax on the work of lowly bloggers and web site designers to bring in a couple of bucks. I just hate to see Arnold take his sword to the state budget without the citizenry giving him our two cents…or 8.5 cents worth.

I have worked my fingers to the bone assembling Sonoma County residential sales and activity records for the last four years to answer the question in the title. Are we at the bottom? In order to get the broadest view possible I chose all residential sales in the county which mixes condos, single family homes, and farms and includes high price areas like Fountain Grove, Sonoma, and Healdsburg as well as south west Santa Rosa and the Russian River.

I’d like to point out two interesting patterns that hint at an answer. The first is sales volume which is indicated by the yellow line. Within that line which goes from January of 2004 to December of 2007 you can see seasonal variations. The two highest peaks on the graph are for the selling seasons in 2004 and 2005 when the market was hyper-active. If you were buying at the time you remember that every listing had multiple offers and no house was selling for less than asking price. Even if you weren’t in the market, the conversations around the water coolers and the golf course (or job site) were all about how much your house’s value had gone up that month. Looking back on it, we should have known it was crazy.

Continue tracking the yellow line to this summer on the right side of the chart and you’ll see the plateau that has occurred since the mortgage meltdown in August. We are far off our usual monthly levels, but I can actually take some grim satisfaction in seeing a plateau as opposed to continued declines. From the point of view of unit sales volume, we may have hit bottom. We’re going to be selling at least 250 homes a month if the trend continues. If you’re waiting for the magic month when nothing sells and the buyers have to panic sell, you’re not going to be rewarded. It will take a long time to clear our inventory at this rate, but homes that are priced right will sell.

The other interesting trend is the return of the median price to approximately mid 2004 levels. I have drawn a blue line for you to see that the median price (the shorter of the vertical bars) in May 2004 and December 2007 are about at the same level. Keep in mind that the mix of condos and luxury estates isn’t the same and that the market today has a much higher inventory, so the two months aren’t comparable directly. Still, as a rough finger in the wind estimate of the state of the market I think it would be fair to say that we have seen a big squeezing of the bubble and returned to a pricing level that averages about 20% less than the peak.

I’ll have more to say about pricing in my next post where I talk about REO (Real Estate Owned by banks) holdings and actual REO sales in the last six months. Just as a teaser for you, it’s clear that many homes in the market today are priced right. Let me know if you are interested in seeing information for cities you are interested in buying in.

I’ve been blessed with a wife, children, brothers and sisters, parents, coworkers, and a great boss. I have invested a great deal of quality time during the last month hanging out, cooking, eating, dawdling, dog-walking, and generally having a relaxing holiday season. Regretfully, but with a cheerful spirit, I resolve to update at least three times a week and pick up the thread where I left off last month.

California’s growth rhythm is always a mystery to newcomers from four season climates. In Sonoma County we already see the first stirring of new life even as the leaves linger on the trees and Halloween, Thanksgiving, and Christmas bear down on us. These early rains have triggered the grasses and beneath our still golden hills the new season is being born.

I was at spectacular Applewood Inn a few days ago, talking with innkeeper Jimmy Caron as the gentle rain was falling in the courtyard. A passing guest heard us admiring the summer-ending rain and reminded us that tourists aren’t quite as happy with early season rainfall as the locals. His party had pored over weather predictions for months, hoping for a beautiful and dry tour of the wine country at the end of the harvest. I was disappointed for him since I love showing off the beauty of the county to our valued visitors. On the other hand, he’s going to get the clean skies, fresh earthy smells, and sparkling crispness that isn’t possible without a cleansing rain.

I passed a Japanese maple after the rain. Many still-green leaves, already loosening for their personal fall, had taken a beating from a brief burst of pelting rain. They joined their yellowing comrades on the ground around a brass watering frog. For me, these first rains and emerging grass shoots mark the start of the new year even before the old year is ushered out the door.