2012 Market Recap and Beyond!
The results for real estate transactions for 2012 are in, and the news is encouraging. By nearly every measure, the market has improved with more homes being sold, for higher prices received, in less time, and for a greater percentage of the Seller’s asking price.
Last year 6,104 homes sold in Sonoma County, an increase of nearly 1,000 homes from 2011 levels. Sonoma Valley reported 596 homes sold in 2012, which surpassed 2011 by about 100 homes. In both cases volume was up by over 16 percent – a strong gain compared to recent years.
The market was surprisingly strong due to continued low interest rates, fewer distress property offerings, and sellers deciding it might be better to hold than sell, or if a sale was necessary pricing the property realistically versus the competition. The Sonoma County median home sale price increased 10% to $330,000 while the median home price for Sonoma Valley homes rose 4.8% to $419,250.
Sonoma Valley reports higher values than the County’s total due to the greater number of rural and luxury properties in our area sample. Activity improved in all price ranges with the strongest demand being for homes offered at price levels, which appealed to investors, first time homeowners, and those seeking second residences or vacation property. Historically low interest rates at below 4% for fixed rate 30 year loans gave buyers the ability to afford homes of greater value than in past years.
When matched with the lower available inventory, homes often received multiple offers, short escrow periods, and fewer failed escrows. One challenge is the ability for homes to appraise at new, higher values – especially for transactions which began after the market improved last Spring. We had transactions where the lender’s appraiser placed the value of one property at $35,000 below our contract price, while another deal had a value some $55,000 greater. One buyer had their patience rewarded when a short sale closed after five months with an appraised value $35,000 over the contract price – instant equity due to a rising market!
What’s available now? Currently there are less than 600 homes being offered for sale in Sonoma County and only 74 active listings within Sonoma Valley. By comparison, last year at this time there were more than 2,200 active listings in Sonoma County and nearly 175 active properties in Sonoma Valley.
Most agents bemoan the lack of available listing to show within the more affordable price ranges. The median price for Sonoma County homes now offered for sale is $629,500 with the average of the 600 homes being $1,061,581. Sonoma Valley’s median current offering is $859,500 with the average price for the 74 properties being $1,472,662. This means that if you are currently looking for a home in Sonoma Valley there are only 37 properties to look at under $859,500 – competition will be intense as new homes are offered in months ahead.
We have every reason to believe that our current market turn-around will continue. We base this opinion on the following:
- It is the stated public policy of the Federal Reserve Board to keep interest rates low until unemployment improves. They are doing this by both providing low interest loans to the nation’s banks and by buying blocks of better quality mortgage securities from banks so that funds remain available for new borrowers.
- While our national debate concerning our debt and deficit remains rancorous, we are optimistic that clear heads will prevail with the important tax advantages of real estate ownership being preserved – quite simply, the home sector of the economy is too important to the nation’s recovery to experiment with at this time.
- The worst is behind us, concerning the market decline we have experienced since 2005. Most of the problem mortgages, which began the Sub-Prime Mortgage Meltdown, have already been dealt with by foreclosure. For the problem loans remaining, the maintenance of low mortgage interest rates, both fixed rate and adjustable, have allowed many “under-water” mortgage borrowers to hang on while home values and the economy improves. Lastly, the nation’s remaining large banking institutions have weathered a terrible calamity, some would say of their making, and now are more willing to help troubled homeowners, complete short-sale transfers, and in some cases, loan modifications… okay, perhaps this is more of a prayer than a prediction…
A note of caution here… Past performance does not guarantee future results. We live with uncertainty on many economic fronts; nationally, statewide, and locally. Ideally, one makes the important decision to change their residence based upon real changes in their life: family size, employment, health to name but a few. If your circumstances require the sale or purchase of a home, the conditions have certainly improved if you are a seller. For buyers, you will need patience and a longer-term relationship with your Realtor.
Pat and Norm Brown have been serving the needs of Sonoma Valley residents as Realtors since 1989. They may be reached at either Sonoma Valley office of Frank Howard Allen Realtors. For more information call 707-939-2227 or email to firstname.lastname@example.org or email@example.com