Homes – Sonoma County Blog

Housing: Start Small

Complaining about housing prices is a pastime that is matched by a quiet self satisfaction among those who were fortunate enough to have bought at the right time to ride the real estate roller coaster to unplanned wealth. What today’s first time buyers often fail to appreciate is that many of today’s housing winners started out small.

It would have been very common for GI’s returnng after the Second World War to rent a small apartment or live in a tiny house while they were starting a family. The classic FHA homes designed in the 1930’s often contained less than 1,000 square feet. Land was inexpensive and widely available and prices of labor and materials were within the reach of average households. Fast forward a few generations and the housing situation has gotten much more complicated…and expensive. We humans aren’t twice as big. We don’t need twice as much “stuff” as our ancestors. But somehow, the average new house is twice as big as it used to be.

I searched the MLS for Sonoma County today and found three active listings for homes under 1,500 square feet that were built after 2010. The same search for modern homes over 1,500 square feet had 65 results. That 20 to 1 ratio isn’t a mistake or aberration. It’s just what is getting built. It’s nobody’s fault, really. Buildable lots are hard to come by and expensive when you can find them. Development fees for new construction are often more costly than already expensive building permit fees. Together, those fees can surpass $100,000 making it impossible for builders to offer low priced homes.

The housing stock that remains from the days of smaller homes is in high demand since it is the only remaining “naturally affordable” housing. The only housing getting built today that is comparable to the FHA plans I mentioned earlier are the ADUs that are being added in backyards, created in garages, and carved out of spare bedrooms in existing homes. The combination of no new lot costs, limited development fees, and modest building permit fees allows these small homes to fill the need created by decades of failure to build enough new housing for a growing population.

Embrace the idea of small homes. It’s the fastest, most economical path to solving the joint housing problems of affordability and homelessness.

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.

Privacy and Open Space in Healdsburg

Healdsburg Open Space — Your Gate to Open Space

Healdsburg real estate showcases many million dollar estates on vineyards and abundant acreage outside of town. I’m happy to present an alternative to those high-priced properties. This listing is inside the city limits with million dollar views and access to hundreds of acres of open space right outside the back door. Think of it as the affordable alternative in the wine country.

People buying property in Healdsburg include retirees, families with children, week-enders from San Francisco and Sacramento, and second home buyers from all over the United States. It’s nice to be both a destination town and a great place to live full time, but it makes it a little more confusing for marketing the home. If I had to rank the amenities this house offers in terms of the ideal buyer, I would have to put families first. That’s because of the relatively easy access to schools in the area. The high school is only a few blocks away and the junior high and elementary schools are still within a normal walking distance. This house might be a great fit for a physician who wants to work at the Healdsburg hospital which is just a few blocks away.

Broadening the vision of who would fit perfectly in this home, I would also say that fit seniors dedicated to an active lifestyle would be at home here. There are stairs from the garage and laundry room level to the main living area, but the house is primarily a single level for all the bedrooms, the great room, kitchen etc. Decks and a big patio area are all available at the same elevation. For serious walkers, the back yard opens directly on hundreds of acres of public open space for walking apart from the noise and aggravation of public streets.

Architecturally, the house is conventional on the outside, but open and modern feeling inside. The sellers have opened the floor plan to include a great room floored in oak that is warm and inviting. There is a new deck just off the kitchen that is great for a morning cup of coffee in the privacy provided by trees (including your own redwood) between the street and the house. The entire back of the house is equally private and is divided between a deck and a patio area. There’s plenty of room for a hot tub.

The side yard is where the big lot starts to come into play. Behind the new kitchen deck is a small greenhouse that’s great for starting new plants or growing your favorite sub-tropicals. Past the greenhouse are three terraces, currently fallow, that are designed for flowers or vegetables. Moving farther into the property, there’s a set of hillside stairs starting just past the terraces and in front of a storage shed. The hillside steps lead to the open, fenced back yard where dogs are able to roam. It’s a hillside back yard, so throwing a ball isn’t the kind of recreation you would likely engage in, but most dogs can entertain themselves. If you’d prefer cultivating trees to dogs, your private space on the big lot would be suitable for extensive landscaping. Drought tolerant, of course. Water is expensive.

I’m holding this house open Sunday October 3 from noon to 4 if you are interested in seeing an affordable alternative to million dollar vineyard estates. If you’d rather see the million dollar estates, I’ve got one of those I’d love to show you as well.

More Details on 1354 Foothill Drive in Healdsburg

Housing: Start Small

The Great Equilibrium

Privacy and Open Space in Healdsburg

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Transaction Guide

Home Buyer’s Guide

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