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The Sonoma County Real Estate Market – November 2016 Report
While much of the Bay Area has begun to see cooler real estate markets, the Sonoma market continues to maintain substantial heat, with strong buyer demand and low inventory still the general prevailing situation. Besides the other benefits of living in Sonoma, the relative affordability of homes here when compared to other Bay Area counties is a major factor in this dynamic. In fact, it is a consistent trend across the region that the more affordable home-price segments have continued to be the strongest. The market is definitely softer for what would be defined as luxury homes in each county. The real estate market usually goes into semi-hibernation from just before Thanksgiving through mid-January, with listing and sale activity plunging during the holiday season. However, this can still be an excellent time for buyers, because competition for listings declines rapidly.

Sonoma Median Home Price Trends By Quarter, Since 2012

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Bay Area Median House Sales Prices by County For 3rd Quarter 2016

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Sonoma, Marin, San Francisco, CA & US Home Prices By Year, Longer-Term Trends

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Click on the map below to access median home prices by city across the Bay Area

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Selected Market Dynamics Statistics Months Supply of Inventory (MSI)

The lower the MSI, the stronger the demand as compared to the supply of homes for sale. The under $1 million market remains deep in seller-market territory. The market for higher-priced homes is significantly cooler and subject to more dramatic fluctuations in MSI. (This is common in virtually all markets.) 5

Average Days on Market

Average days on market for homes selling without prior price reductions have not changed substantially from Q3 2015 & 2014. As will be seen in later charts, homes that go through price reductions before selling usually take much, much longer to sell. 6

Sales Price to List Price Percentage & Average Days on Market With & Without Price Reductions

The 2 charts below dive into pricing and overpricing issues by breaking out 1) homes that sell without going through a prior price reduction, 2) listings that sell subsequent to price reductions, and 3) listings that simply do not sell (expire). The first chart is for the house and condo market under $1,000,000, and the second is specifically for luxury homes, defined here as homes selling for $1 million or more.

Sonoma Homes under $1 Million

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Sonoma Luxury Homes, $1 Million+

8 Homes that are priced well at the moment of hitting the market, prepared to show and marketed comprehensively, are still selling very quickly at high percentages of asking price. However, overpricing usually has significant negative ramifications, including the possibility of no sale at all.

Luxury Home Sales by City

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Bay Area Case-Shiller Home Price Index Rate of appreciation changes by price segment 5-County SF Metro Area

Case-Shiller Index numbers all refer to a January 2000 price of 100, and track appreciation since then. Thus 243 on the chart signifies a price 143% above that of January 2000. For the purposes of this report, the direction of the trend lines is more important than the actual numbers. 10 Across the Bay Area, the pressure of demand has shifted in the past year, and that is showing up in the appreciation movements of the different price segments. The Case-Shiller Index does not measure changes in median sales prices, but has its own special algorithm to determine same-home appreciation. This short-term chart illustrates how lower-priced houses have continued to appreciate rapidly (as in Sonoma), while appreciation for mid-price houses is slowing, and the prices of more expensive houses have more or less plateaued or even ticked down a bit. Bay Area condo prices have also begun to decline, but this statistic is probably being unduly influenced by the condo market in San Francisco, where condo prices are much higher, and where a large number of new-project condos have recently been hitting the market. The Bay Area Index for August 2016 was published in late October. Chart: Long-Term, Case-Shiller Bay Area Home Price Trends

Bay Area Average Asking Rents

11 The same dynamic regarding comparative affordability is playing out in the rental market as in the for-sale market. Statistics are generalities that can sometime fluctuate without great meaningfulness, and any one statistic may be an anomalous outlier. Longer term trends are much more reliable than short-term ups and downs. 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.

© 2016 Paragon Real Estate Group

Ric Rocchiccioli

San Francisco Bay Area

Real Estate License #01017500
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