Stats – Sonoma County Blog

Average Sonoma Home Prices

Sonoma County Home Sales Prices chart since 2000 — Sonoma County Home Sales Prices 2000-2022

Rising home prices are a popular topic for homeowners. Not so much for renters and others trying to buy property in a challenging market. This century witnessed prices plummet in 2008 after the financial crisis. Since the market bottom in 2011 prices have shown a steady rise year over year. Covid helped shape a new market. Working from home ballooned into the primary way office workers did their jobs. Attractive locations with low home prices relative to San Francisco and the Peninsula took off in value. Last year saw record increases in prices.

Rising interest rates make the recent price increases challenge the real estate market. A useful tool from the California Association of Realtors called the affordability index shows that only 18% of California households could afford to buy the median priced home in the 3rd quarter of 2022. It hasn’t gotten better.

Prices and interest rates are going to be the story of real estate for the foreseeable future. The steady increase of home prices over the last decade is over for now. Sellers are going to have to accept that they will not get the record breaking prices their neighbors may have gotten in 2022. Until interest rates stabilize at more affordable levels, buyers will have to accept that their choice of homes will have a lower price ceiling.

Vanishing REO and Short Sales

If you are looking for an REO or short sale bargain in Sonoma County, you are too late to the party. The getting was good even through the beginning of 2013, but the volume of sales and new listings for distressed property just keeps shrinking. My daily newsletter of new REO properties used to contain two or three new listings every day. Now I don’t bother with the newsletter since it isn’t at all unusual to go a month without a single new REO listing.

Sonoma County Distressed Property Trends

Happily, fewer distressed sales is a good indicator that the housing market has fully regained a healthier footing. A very few REO transactions were still going on in 2013, but even then the volume was down at least 90% from the peak years for foreclosures. The chart tells the tale. Six years ago there were over 300 distressed homes on the market and over 150 sales per month were taking place. Three years ago there were less than 20 listings and sales take place each month. In the last six months we have had 16 REO sales and a dozen properties are active or contingent. It’s not an invisible part of the market, but it’s down another 90% from the right end point on the chart.

From my perspective, the bargain hunters should be focusing on fixers at all price points. The value priced portions of the market are always eager for good quality homes that have been upgraded with care. You might get lucky with one of the occasional REO properties on the market, but if you are serious about actually buying a home, you will have to consider homes that aren’t financially distressed.

Sonoma Housing Demand Pushes Prices Higher

Full price isn’t high enough.

It’s strange to write those words after six months of free-falling home values in 2008 and four years of bumping along a fitful bottom since then.

What we are seeing both nationally and locally is that owner occupants and investors have returned to the market in large numbers. We are seeing record low residential inventories for sale and the emergence of a strong sellers’ market. For buyers, the emerging problem is that the tight inventories may persist. There’s a chance that the improving market may finally convince more sellers that now is the right time to sell, but until the listings start appearing, there are too many buyers chasing too few homes.

I did some analysis of all Sonoma County home sales for the first two months of 2013. Not surprisingly, the lower inventory has produced fewer sales than we had last year at this time. The first chart is for all residential activity, both single family homes and condos. There are three pieces of information in the chart for each month; the number of homes for sale, the number that are pended (meaning a contract is in place and all contingencies have been removed), and the number of homes sold. I know graphs are painful and you probably want to skip over it, but the charts in this post explain a lot about the real estate market, so please bear with me. Look at the light green column for January 2012. It’s the second column in from the left. The number at the top of the bar is 1098. That’s how many homes were for sale a year ago in January. Now look at the corresponding chart for January 2013. It’s the second from the right and the number of homes for sale is 592, a little more than half as many. The dark green columns for January and February of 2012 show sales of 387 and 396 homes respectively. The same months for 2013 show sales of 330 and 319 homes. It’s a significant fall off in sales, but you can’t look at the chart without noticing that there just aren’t as many homes to choose from.

The other piece of data to pay attention to is the red line running across the charts. Those are “pended” sales that show up in the sales figures, typically for the next month, but sometimes longer. They are a leading indicator of where sales are going. You can see that both January and February of 2013 show pended sales that are very strong relative to the number of homes on the market. (Please click on this or any other chart on this blog to see a larger version.)

That chart, believe it or not, has the good inventory numbers. It includes all price points including the luxury estate property in Healdsburg and Sonoma that drives the wine country lifestyle dreams of so many buyers. The battle for the first rung on the ladder of home ownership is fought at entry level pricing. I’m going to arbitrarily call Sonoma County entry level housing at up to $300,000.

Entry level sonoma county residential sales — Sonoma County Residential Sales under $300K

I prepared the same chart as above, but just for entry level housing. This is seriously scary for anyone who wants the American dream of home ownership available to all. Compare January and February of 2012 to the same months in 2013 for the For Sale and Sold columns. The light green of For Sale is almost invisible in 2013, buried behind strong sales represented in dark green. In fact, since April of 2012, the number of homes sold has outpaced the number available For Sale. The trend analysis (red line) shows the market continuing to take off in February of 2012 with more pended sales than available homes. That’s not a tight market. It’s crazy.

When buyers sense a market that isn’t slowing down to let them jump on, they only have a couple of alternatives. One is to stay on the sidelines and continue as a renter or a stuck-in-place home owner. The other is to jump in and grab what they can…paying what they have to. That’s the origin of the lead sentence where I say “Full price isn’t enough”. The final chart is an analysis of the selling price for all the homes compared to the listing price. Other terms for listing price would be full price or asking price. It’s what you see when you look at the price of a home online. What my new chart and the data behind it is telling us is that a lot of homes are selling for more than their full price. If you are planning on jumping into this market, be warned that even if you make a full price offer, there is a good chance that someone else may end up buying the home.

sonoma county residential price chart showing underbids and overbids — Sonoma County Overbids and Underbids

Reading this chart is a little different than the first two. The key element here is a horizontal line running across the chart at 0.0%. That represents the asking price for a home. Any vertical bar above that line means the average of homes sold that day was for more than the listing price. If the bar is under the zero line, people paid less than asking price. The chart starts on January 1, 2013 on the left and finishes at February 28, 2013 on the right. Again, the vertical lines represent the average of the overbids and underbids for three types of properties:

REO or bank owned properties (orange)
Short Sales where the bank must accept less than is owed on the home (green)
None which represents a traditional owner selling their home for more than the outstanding mortgage. (blue)

Take a deep breath and stay with me. This chart is going to help you think about your strategy for buying a home. Let’s start with some clear facts:

The traditional open market home sales (in blue) are typically selling for less than asking price
REO homes are typically selling for up to 5% or more over the asking price
Short sales are likely to be selling for more than asking, but not by as much as REO listings.
The pricing trend line for REO homes is climbing. Pricing designed to get multiple offers is working.

Please keep in mind that these are averages. Different neighborhoods, quality of improvements, lot size, and other factors still play important roles. Learning as much as you can about the inventory and recent trends is key to making a smart offer. Knowing whether you are looking at an REO property, a short sale, or an open market sale will help determine whether or not you will offer over the listing price or not. Knowing what has sold in that neighborhood recently will also be an important factor. Even with perfect knowledge, a great lender, a fantastic agent, and a winning smile, you can still lose out with a thoughtful offer. You may have run into a more desparate buyer who wants it more. You may be competing with an all-cash investor who is willing to pay above market prices to get another rental unit. What is guaranteed is that if you understand what the market is doing, you will be making smart offers in line with current trends. Reading this blog post has hopefully made you a smarter buyer. Putting that brain power to use on your next offer will hopefully make you a more successful one.

The Great Equilibrium

Sonoma County 2011 real estate stats show another boring year of price stability. For anxious buyers and sellers of Sonoma County real estate, the news of a flat marketplace is probably the most reassuring thing they could hear. They’re not going to get rich on price appreciation like everyone thought they would in the hot bubble years in the mid 2000’s, but neither are they going to lose their shirt like the unfortunate souls (like me) who bought in 2008 midway through the decline.

Sonoma County 2006 to 2011 single family home quartile analysis — 2006 through 2011 Single Family Home Quartiles

I was rash enough to call a bottom of the market in April of 2009. I’ve almost had to eat crow a few times since then, but we have had a remarkably steady median price performance for nearly three years. It’s up a little and down a little, but three years is plenty of time to see if there was still a lot of excess built into housing prices. The strong interest of investors buying single family homes for rental properties provides a clue that the market has solid fundamentals today; at least solid enough to create investor confidence.

I analyzed the numbers for the last six years by quartile. That gives numbers for not just the median at 50%, but the 25th and 75th percentiles as well. I was curious if the whole market had moved in unison or if different price tiers behaved differently. I found some evidence for each theory. You can see in the chart (please click to see it in larger size) the simultaneous beginning of the end of the bubble (for each price segment) around August of 2007. The precipitous decline ended for all tiers in March of 2009, marking a year and a half long shedding of nearly 40% or more in value for each tier.

I found that although the dollar difference between each tier was diminished, the percentage value between tiers has increased. As the figures stand at the end of 2011, the gap between the 25th and 75th percentile is 50% and about $200,000. At the height of the bubble, it was 30% and $250,000. My reading is that the demand for entry level housing during the crazy-time drove the price of even the lowliest shanty to record highs not supported by the wage structure of Sonoma County. On the other hand, the 75th percentile was still somewhat restrained in absolute terms by the ability to pay of high income two earner households. Remember, the 75th percentile are regular middle class folks who were trying to pay for a $750,000 home (in 2007) that’s priced today in the mid-$400k range. In hindsight, we were all crazy.

Be glad we live in more boring times.

Advice for Fence-Sitting Buyers in Sonoma County

If your cousin, brother, or best friend’s dog was warning about the housing bubble in 2006, I would pay a lot of attention to them today. Unfortunately, almost everyone else missed the bubble in spite of all sorts of warning signs that we were in an unsustainable market. It’s human nature to go with the crowd, but as we saw with the housing bubble, it can be dangerous not to pay attention to fundamentals such as affordability and historic trends.

That comfort in being part of a pack was a significant contributor to the bubble. Today, herd thinking is contributing to to a large number of ready and willing buyers sitting on the sidelines waiting for better prices, better interest rates, or better selection. It’s smart to want to avoid a mistake when you buy a house. It’s a big investment and we all know people who have lost their savings and their credit because of the housing bubble. At the same time, it’s important to realize that every bubble comes to earth eventually and markets do stabilize and recover. Smart buyers who want to make sure they don’t get caught flat-footed when the housing market in Sonoma County recovers need to pay attention to current trends to make sure they don’t wait too long.

Rohnert Park, Windsor, and Cloverdale Residential Sale Chart

This Rohnert Park/Cotati, Windsor, and Cloverdale sales chart for the last year has valuable information to help buyers decide if now is a good time to buy. Three key indicators I look at include number of units available, sales volume, and whether the pending trend shows increasing or decreasing sales (pending is a real estate term for a contract with all the contingencies satisfied and ready to mark “sold” when the close of escrow date arrives). What we see in this chart are strong indicators of a recovering housing market in these three Sonoma County cities.

The “homes for sale” inventory has declined from 390 to 267 over the last year.
The sales trend is definitely up. September is down from the highest months in the spring, but is substantially up from a year ago.
The pending trend (the red ine with triangles) should be ringing alarm bells for you if you are a buyer sitting on the fence. Pending sales will go into the “sold” column in the near future, so it’s easy to see a significant increase in future sales is already embedded in this trend. Look at it again. This line is sales that are essentially already done, but the paperwork hasn’t become official yet.

Sonoma residential housing trends clearly show more homes going into contract. This sales activity has reduced the available inventory by a third from a year ago. What it means in stark terms for home buyers is that you have fewer homes to choose from. Whether current buyers are investors or owner-occupants, there are clearly more people every month who are getting off the fence and making offers to purchase Sonoma residential property.

One technical term for how quickly homes sell is the absorption rate. What we are seeing today is a three to four month absorption rate compared to an absorption rate of six months from a year ago.

The danger isn’t that there will be no houses available. There are always houses for sale. The danger is in jumping into a market that already has many other buyers looking for the same bargain properties. Almost any agent can tell you horror stories of multiple offer situations when the listing price is just a number that’s the starting point for a winning bidder. Your question to sellers today of “how low an offer will you accept?” becomes, “how much do I have to bid over the listing price?”. Trust me, you don’t want to be asking over-bid questions. It’s complicated enough to buy a house without worrying whether you will even get the chance to make the purchase. If you are a qualified buyer, you want to house shop during a buyer’s market where your options are greater and your flexibility is at a maximum.

Prices are still likely to move, either up or down. Buying today isn’t a guarantee that the property you purchase won’t decline in value. However, given the historically low interest rates available to creditworthy borrowers, a few thousand dollars higher or lower in purchase price will be insignificant over a five, seven, or thirty year stay in the house. The risk of inaction is in facing more competition, fewer choices, and a more frenetic buying experience. I didn’t predict the bubble, so I don’t get a gold star as a prognosticator. However, I pay a lot of attention to Sonoma County market trends and think this is an excellent time to get off the sidelines and start writing offers on property that fits your needs.

Average Sonoma Home Prices

Vanishing REO and Short Sales

Sonoma Housing Demand Pushes Prices Higher

The Great Equilibrium

Advice for Fence-Sitting Buyers in Sonoma County

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Transaction Guide

Home Buyer’s Guide

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