Sonoma County Real Estate Report – 2016 1st Half Review

Long-term Trends in Median Home Sales Prices

1-2 Sonoma continued to see considerable home sales price appreciation in the first half of 2016. As a point of comparison, in San Francisco, where the market has begun to distinctly cool, median sales prices have started to plateau on a year-over-year basis.

Sonoma Median Home Price Appreciation by City 2011 to 2015 to 2016 YTD

These next 2 charts below look at median sales price appreciation 2011 to 2015, a period of very fast home-price increases starting in the depths of the distressed property crisis, and then more recent changes, 2015 through 2016 YTD. Except for Sea Ranch, every city in our analysis saw an increase in 2016 in median sales price, sometimes a small tick up and sometimes a substantial jump. Most of these communities saw a large number of sales in 2016 to date. Santa Rosa, Petaluma and the city of Sonoma, respectively, had the most sales, and Penngrove, Coastal Sonoma and Sea Ranch had the least. (Penngrove only had 17 sales.) Typically, the more sales, the more reliable are the statistics, but remember that median price changes do not correlate exactly with changes in home values, as they can be affected by a number of factors. It is impossible to know how median price changes apply to any particular property without a specific comparative analysis. 2-1 3-1

Affordability: Sonoma vs. the Bay Area

One of the trends showing up recently in Bay Area real estate markets is that homes in the more affordable price ranges, such as those in Sonoma, have continued to see home price growth, while median prices have plateaued or even ticked down in more expensive areas of San Francisco, Marin and the East Bay. The 2 charts following illustrate quite dramatically that Sonoma remains an extraordinarily good value when compared to most other Bay Area counties, and this is clearly a major factor in the strength of its market. However, it should be noted that if other local markets are starting to cool down, as they seem to be, it may be a sign of an upcoming transition in the Sonoma market as well. 4-1 5-1

Market Seasonality

6-1 In Sonoma, listing inventory gradually builds up in the spring and early summer with a parallel increase in sales. For the last few years, July has been the month with the greatest number of closed sales. Sales activity typically starts to decline in August and continues to subside through autumn and mid-winter before coming back to life in early spring. Because of the second homes market, Sonoma has a different cycle than other Bay Area markets, which usually peak in spring, drop in summer, climb again for an autumn spike, and then plunge for the mid-winter holiday season.

Mortgage Interest Rate Trends

7-1 Enduring financial market volatility, most recently caused by the Brexit vote in Great Britain, has continued to push mortgage interest rates lower. It is now just above the all-time low hit 3 years ago. Decreasing interest rates play a big role in lowering ongoing housing costs for buyers (and owners who choose to refinance). For the time being, this is a very good time to get a new home loan.

Negative Ramifications of Overpricing

8-1 We have undertaken studies of thousands of home sales that have occurred in recent years, looking at both homes that sold without going through a prior price reduction and homes selling subsequent to one or more price reductions. Across the Bay Area, the results are remarkably consistent: Overpricing a listing when it first comes on the market will typically result in the home selling for less money than it would have if it had been priced properly to begin with, sometimes much less. The longer a home stays on market, the less value it holds in the minds of prospective buyers, and the less likely buyers will compete for its purchase. It is vitally important not to overprice and waste the optimum period of marketing, i.e. when the home first hits the market and motivated buyers are paying most attention. Please let me know if you have any questions or I can be of assistance in any other way. These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. It is not our intent to convince you of a particular position, but to attempt to provide straightforward data and analysis, so you can make your own informed decisions. Statistics are generalities, longer term trends are much more meaningful than short-term, and we will always know more about what is actually going on in the present, in the future. © 2016 Paragon Real Estate Group

Ric Rocchiccioli

San Francisco Bay Area

DRE 01017500
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