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.

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.

Country property has a vocabulary all its own. One often confusing term is “perc” or “perc test”.  Perc is real estate jargon for “percolation”, a perfectly good word for the ability of soil to absorb moisture. Still, the word percolation manages to baffle people more accustomed to coffee percolation than  septic systems.  Since percolation is only a confusing word because of context, real estate people create more linguistic chaos by shortening it to “perc”,  a word no urban person has a clue about.

Urban dwellers know sewers. They pay bills directly to cover the cost of taking their waste water from toilets, showers, sinks, and laundry to a sewage treatment plant. It’s a more or less invisible process, except for paying the bill. The mystery of what happens to all the waste happily stays a mystery for most people. Like how to do a tune-up on your car or change the oil.

Rural residents, on the other hand, have to act as their own sewer district. There are no sewage treatment plants or complex infrastructure to carry their waste to a distant plant. Instead, country property typically relies on a technology called a “septic system”.

The two key components of this are a septic tank which holds the recent waste and a “leach field” where the liquid components of the waste are allowed to “percolate” into the soil.  If the property happens to have rocky or heavy clay soils, the “percolation rate” might be too low to allow for a septic system to be built. In that case, you would literally have an unbuildable lot. It happens. Don’t buy one.

More likely, the soil will have an acceptable percolation rate, a situation that is often referred to as “passing the perc test” or “having a good perc”. There’s a lot of variation in the rate of percolation and in the amount of area available to build a leach field. Those two factors combine to give a property a rating for the number of bedrooms a home can have. It’s very usual to see a property advertised proudly with a four or five bedroom perc. It clearly adds value to the land to be able to support a bigger house or a main house with a guest house. Marginal property (from a perc standpoint) with a two bedroom perc will struggle to attract the same price as nearby property with more septic capability.

So, the next time an agent starts tossing perc test and leach field and expansion field and mound system and standard septic terms around, at least you’ll know that they are talking shit waste.

The Real Deal

• Sonoma County Definition of a Bedroom
• Sonoma County Site Evaluations and Percolation Test Methods  (Comprehensive)
• Sonoma County Well and Septic FAQ

Architects and their clients have to be picky about where they choose to build. The right decision will save significant time and money.  A poorly selected site can cost much more to prepare for building than anyone anticipates.

A construction project starting on a raw parcel has a long list of tasks that have to be successfully performed before the real work of house building begins. For both architects and owners, the hidden costs can be far higher than budgeted for. The utilities required to service a home include obvious ones like road and driveway access, site grading and preparation,  and electric and telephone service. Water and septic development can cost substantial amounts as well as limiting what’s possible to do on a site.  At the very least,  delivering these services to a building site will take planning, permits, excavation, grading, and much coordination with engineers, contractors, inspectors, PG&E, AT&T, and others. It’s a full plate of work and much of  it has to happen before the project moves at full speed  into the house building phase.

Emerald Ridge

It’s the major reason that finished lots are popular with architects and owners. Building a house is enough of a challenge without having to get bogged down with the time and major expenses required for preparing the site. It is not unusual in Sonoma County for owners to spend half a million to a million dollars or more on roads and other needed utilities on estate sites. That cost doesn’t include finance costs related to the year long process required to manage wet weather perc testing, dry weather well testing, and the need to do excavation and grading when the soils are workable.  If you are planning to build from scratch, you will probably need to plan on at least a year before you are going to be able to break ground for your house.

For many architects, the year long delay is the price they have to pay to find the site they want. Most of the coveted sites that are close to town have already been built on. Some clients can afford to buy a nice home to tear down and start over, but it’s an expensive way to get a vacant, developed lot.  Other sites may have perfect exposure to the sun and views that make them worthy candidates to spend time and money on. Occasionally, the perfect view and solar site may also have decent locations and privacy.  Other times the pursuit of seclusion ends up chasing clients farther from the towns, restaurants, and wineries they are building their wine country estate to enjoy.

The Emerald Ridge lots just outside Healdsburg are special because they resolve the development and location issues perfectly. Architects looking for a site with great sun, views, privacy, and interesting terrain will be delighted with the potential on the three newly available 20 acre properties. Once they understand the costs and delays common to raw land, owners will be thrilled that the unknowns costs and delays of rural development have already been eliminated and they can work with their architect on drawing up house plans immediately. The chance to build something special that is also readily accessible to Healdsburg provides a unique opportunity.

Well, not unique. There are three lots available, so the chance to build at Emerald Ridge is limited rather than unique.  These lots have been in development for over five years and have just become available to purchase in December of 2011. There is still an administrative hurdle to cross in January that will finalize the completion of these lots in mid-February of 2012. If you are planning on building a wine country estate, Emerald Ridge should be at the top of your site viewing list. Call or email me to arrange your personal tour.

707-869-1884 or dave@sonoma.net

Thanksgiving is the right time for me to acknowledge all the great people that I get to work with. Every Sonoma County real estate transaction has an abundance of helping hands.  Some deal with the clients on both sides of the sale. Many more are working as back office professionals assisting with financing, title,  insurance, inspections, and other fields.  Here’s a sampling of the people in a typical Sonoma County country property sale.

The process starts with a property owner with a home or raw land they want to sell. The seller hires a listing broker to sell their property and list it with a multiple listing service. That listing in the MLS is an invitation to other agents and brokers to present offers.

A selling agent represents the buyer who wants to make an offer. Either the agent, or more likely with today’s internet searching, the buyer, locates and identifies the property as being of interest. The selling agent and buyer produce an offer that is submitted to the listing agent for presentation to the seller. When the cycle of offer and counter-offers arrives at a mutually agreed set of terms, the contract becomes ratified and the clock begins. At this point, there are a seller and a buyer, the two most important actors by far, and a listing agent and selling agent, each of whom may have at least one or more co-agents, and who is typically working on behalf of a real estate broker.

Each agent working at a typical brokerage will have a support staff for transactions that can include transaction coordinators  to manage paperwork flow and completion and general office assistance to keep the lights on, copies made, faxes monitored, phones answered, etc. You should visualize at least one administrative person on each side of the transaction.

Once the contract is agreed to, the document and earnest money deposit is provided to the escrow/title company to hold the funds and open an escrow. The escrow process will produce a preliminary and final title report, handle all the funds for the transaction, manage the paperwork and record the deed in the buyer’s name at the completion of the transaction (COE or Close of Escrow). For simplicity, we’ll just call out an escrow officer to handle the paperwork and a title officer to assemble all the documents needed to provide clear title to the buyer.

While the title officer gets busy with researching deeds, easements, and other recorded documents,  the buyer’s lender is getting started with loan paperwork. Staying with the simplest model, there is the loan originator, that’s the person the buyers deal with on a personal basis, either over the phone, via email, or in a meat meeting. They will typically have a processor that helps to get the masses of documentation in place. Farther up the decision chain is the underwriter who assembles all the facts of income and credit to make a decision based also on the work product of yet another person, the appraiser, who evaluates what the property is worth.

Running on a parallel track with title and lending is the process of due diligence. That’s a period for careful investigation of property conditions by the buyer. Each property may require a different set of inspectors, but for country property it’s not unreasonable for a buyer to use a general building inspector, a septic inspector, a well inspector, a pest inspector, a surveyor, a geotechnical engineer, and more.

Before COE, the current owner’s bank representative has to get involved by issuing a demand for the monies they are owed.  So does any other lien holder who has a lien against the property being sold. That often includes property taxes, so the assessor’s office has to submit a demand letter as well. At the end of the process is the signing. In Sonoma County that typically involves separate meetings with the escrow officer for buyers and sellers.

Sonoma County Notary

A notary to document that signatures are genuine is required for loan and other documents. Often that is the escrow officer doing notary duty, but for many transactions a traveling notary is simpler for everyone. All documents in place, money in hand, loans and commissions ready to be paid off, the buyer’s deed travels to the County Recorder where the documents are officially entered into the record and the buyer becomes owner. By my count, that’s about 30 people. Every transaction.

You may see a single agent’s face plastered on a billboard, but every property transaction is a team effort. So, thanks to Nancy, Jen, Don, Byron, Eric, Heather, Dan, and all the rest I don’t have space to name. You make my job possible…and fun.

Emerald Ridge estate lots outside Healdsburg are finally ready to view in person.  The lot creation process takes time, and the creation of these twenty acre lots has been at least a five year process of planning,  government approvals, and site work.  The asphalt roads and driveways have been completed and each lot now has underground water installed. The electrical and telephone cables will be pulled through already installed underground conduits when buyers are ready for it.   The only thing that hasn’t been updated on the site is the geography. These lots started out very close to Healdsburg. They still are.

Emerald Ridge

For architects looking for an ideal location to design a wine country estate, Emerald Ridge offers views, sun, great building envelopes, and a forested environment. The views from each of the lots are different, but they all include Fitch Mountain, Mt. St. Helena, and portions of the Dry Creek Valley.  It will be up to the proud, new owners of the lots working with their architect and landscape architect to determine just how much of the view to open up by selective thinning or limbing.

In the same way that the property developers have done a sensitive job of opening up the views just enough to reveal them, they have created building envelopes that are big enough to be flexible, but contained enough to help maintain the privacy among all the lots. Each parcel has several acres of the twenty acres that are set aside for buildings.  It will be fascinating to see the compounds and main homes designed by the architects fortunate enough to have one of these lots to work with.

There are still a few administrative hurdles to clear before we get permission from the county to hand over the lots, but we can sign purchase agreements “subject to county approval”  starting December 11, 2011 with delivery expected in mid February 2012.  If you are interested, I can show them to you now. You can also see extensive photos and map information at the Emerald Ridge web site.

Updated Selling Information on 12/11/11

Luxury real estate in Healdsburg got a boost recently with three beautiful newly listed homes  ranging from $1.25 million to $3.95 million, a wonderful 56 acre Chalk Hill view parcel with money making vineyards,  and an unlisted and off market showing of a $10,000,000 ultra-premium estate property that is sure to find favor with discreet buyers looking for a wine country getaway to add to their real estate portfolio.

Matheson St. Bungalow - rear and side

556 Matheson is the downtown classic home many Healdsburg real estate buyers are looking for. It’s an easy walk to the Healdsburg Plaza and is loaded with charm.  Built in 1918 it has only had three owners, and the most recent owners have created superb garden spaces on the property. This is a turnkey “walk to the plaza” property that so many people ask for.

Entrance to Provencal Style Estate Residence

14849 Chalk Hill Road is a Provencal style estate inspired by French country living. Remodeled in 200o, the home features timeless elements combined with modern conveniences.  The fifteen acre cabernet sauvignon vineyard adds an element of realism to the dream of a wine country lifestyle. In addition to the main house, there are multiple outbuildings including office space, guest bedrooms, a pool house, etc. There are very few amenitites that aren’t already part of this property.

Vineyard Parcel and Estate Site in Chalk Hill

Nearby at 13421 Flora Ranch Road, also in Chalk Hill appellation, is a new luxury land listing that’s tailor made for a buyer with dreams of building their own estate.  This vineyard property has hilltop views in every direction, magnificent old oaks, a pond, and great neighbors. The grapes are under contract until 2016 and have been a reliable source of income to help defray some of the costs of ownership. The tree house gracing the top of this blog post is adjacent to one of the premium building sites with 360 degree views. There is also a tent cabin nearby for hanging out at the property while you plan what you are going to build.

Books and magazines line hallway

The third luxury Healdsburg residential listing is a lovely country farmhouse on 10 acres in the Russian River Valley. 3294 Westside Road is set back from the road on the river side and is surrounded by vineyards. The recent remodel includes a warm, rustic oak floor, a wonderful floor plan, and charming details everywhere. I particularly liked the book and magazine lined hallway, but lovely touches were everywhere. I hate to play favorites, but I think this was the most appealing home of our tour.

I can’t say much about the unlisted  $10,000,000 estate due to non disclosure requirements. The owners want their privacy respected and photographs were not allowed during our tour. I can say the setting is wonderful and private, the buildings are architecturally stunning and the the overall feel is a casual, country comfort that would be a wine country getaway of choice for foodies and wine lovers with an entourage.

 Healdsburg Luxury Homes  (Over $1,000,000)

Sonoma Home Affordability Index

Sonoma County home prices are at historically affordable levels. Nearly half of the households in the county can afford the median priced home. That compares to only 9 percent of buyers from just a few years ago in 2006 and 2007. Combining the California Affordability Index with historically low interest rates creates an environment that is hard to resist for buyers who pay attention to all the factors that combine to create opportunity. In Sonoma County’s real estate market today, savvy buyers are making offers on homes to avoid both higher prices and higher rates.

Payments at 4% - $300K home with 20% down

Interest rates at or under 4% are historically unprecedented. Throughout most of the 1990′s and the first decade of this century, 5.5% interest was pretty much rock bottom with rates of 6 and 7% quite common. It doesn’t sound like much of a difference to people who haven’t explored the numbers in detail, but on the purchase of a$300,000 home with 20% down, the difference between 4% and 6% is on the order of $300 per month and $100,000 over the 30 year duration of the loan.

Payments at 4% $375,000 with 20% down

Alternatively, someone who can qualify for that $300,000 purchase at 6% interest might qualify for $375,000 at 4%. I don’t know if you have been tracking listings recently, but that extra $75,000 to spend on a home can get you an extra bedroom or a swimming pool or a big lot or all of these and more.  Whether you are going to save money and buy a smaller home or go big and use up all the loan you qualify for is a personal choice. What isn’t a choice is whether it is smart to buy a house when interest rates are at record low rates.

If you want to buy eventually and are just waiting for prices to creep down a few thousand or even a few tens of thousands of dollars, run the calculations and see if the lower interest rates you can get today are worth more than saving a little on the price. I think you’ll be surprised how much of a discount on a house you would need to balance paying a higher rate.




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.

1. The “homes for sale” inventory has declined from 390 to 267 over the last year.
2. The sales trend is definitely up. September is down from the highest months in the spring, but is substantially up from a year ago.
3. 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.

Sonoma County Harvest Fair Logo

It’s time (Sept 30-Oct 2) for the 2011 Sonoma County Harvest Fair. Right on schedule the vineyards around the county are laden with ripening fruit that give testament to the bounty that Luther Burbank loved about Sonoma County. You can’t see the densely grouped clusters without appreciating the gift that nature bestows on us.

The Harvest Fair is a great opportunity to get in touch with local growers and wine makers and to share a weekend of food, music, fun, and games with your  fellow food and wine enthusiasts.

Congratulations are due to these Harvest Fair award winners:

Kenwood Vineyards – 2010 Pinot Gris – Russian River Valley:
Sweepstakes Winning White Wine and the James Guymon Memorial Award

Wilson Winery – 2009 Zinfandel – Dry Creek Valley – Sawyer
Sweepstakes Winning Red Wine and the George Cooke Memorial Award

Gloria Ferrer Caves & Vineyards – 2007 Brut Rose – Carneros
Sweepstakes Winning Specialty Wine and the Mike Lee Memorial Award

It’s sometimes easy to forget how beautiful Sonoma County property can be.

Our Healdsburg Sotheby’s International Realty office toured a wonderful new 201 acre land listing just south of Healdsburg recently. Most of the staff hadn’t seen this ranch before and weren’t familiar with the dramatic views possible just a few hundred feet above the Russian River Valley floor.

Looking across meadows at Russian River Valley

The big views to the west where you can see Healdsburg’s Westside Road’s flanking vineyards are dramatic. The clear view all the way down to Mount Tamalpais in Marin was also impressive, although impossible to capture well with a camera. Most of the views on this site are so panoramic that a standard image can’t do it justice. There’s no substitute for arranging a visit to this Healdsburg country property with either Dave Roberts or Charlene Schnall, the co-listing agents.

For viticulturally focused agents the relatively flat fields studded with majestic  oaks were the prime view. There aren’t many unplanted, open spaces this large in the Russian River Appellation and Chalk Hill Appellation where this property is located. To vineyard professionals looking for Russian River Valley land, the sight of hundreds of acres of grapes to the east and south are clear indicators that this pasture land could easily be home to superb Pinot Noir and other varietals.

Panoramic meadow view on Los Amigos ranch

From the high points on the main bench it’s easy to visualize a family compound with as many as the five homes that are currently allowed with Sonoma County zoning rules. Whether the new buyers will want a family compound, a single family home, or a large-acre residential development is up to them. What the land has today is potential. Potential for the right buyer with vision to create their own masterpiece on one of the last big, open sites this close to Healdsburg.

Healdsburg Locator Map for 11450 Los Amigos

11450 Los Amigos Road in Healdsburg