Median Sonoma Valley home price surges past $1 million
As the country and the area recover from the pandemic, the median price of a Sonoma Valley home zoomed to $1,090,000 this April, a 50-percent markup compared with April 2020.
The price jump was driven by a dearth of homes on the market, remote working options and the ebbing of COVID-19, real estate experts said. While a 50 percent price jump might seem extreme, it’s partially because the market took a hit when the lockdown began in 2020.
“This time last year, people were far less likely to even think about buying or selling,” said David Kerr, a real estate agent at Corcoran Global Living. “They were worried about not getting sick. They were worried about surviving.”
This was the case not only in the Valley, but throughout the state and much of the country, said Sheharyar Bokhari, senior economist for real estate firm Redfin.
“Last April, the market shut down in a sense because of the stay-at-home order,” Bokhari said. “Only the buyers who were most serious and in need of a home were buying at that time.”
In the Sonoma Valley, a mere 29 homes sold in April 2020, with a median price of $725,000, and it took 48 days on average for a house to sell.
“Looking at houses was a lot harder. People didn’t know what they were going to do. We hadn’t gotten our footing yet,” Kerr said.
In contrast, in April 2021, 77 homes sold, and it took an average 34 days for a house to be snapped up, Kerr said.
Also offsetting the seemingly whopping price jump is the fact that with the small number of homes in the Valley, a large number of high-priced homes selling is enough to make a big difference.
The experts agreed that the option of working remotely and not being subject to a punishing commute has drawn buyers to the Valley and the North Bay.
“Prices in the core Bay Area have slipped, but in the North Bay there definitely has been a surge in prices,” driven in part by people who now can work from home, said Robert Eyler, a professor of economics at Sonoma State University.
“Some of the demand is that people are looking for a better lifestyle,” Eyler said.
Buyers are seeking outdoor space and at least three bedrooms so one can be used as office space, according to Kerr.
“They will be working part time or full time up here and then commuting to their office in San Francisco or on the peninsula maybe two days a week,” Kerr said.
The WFH, or work-from-home, factor also went into effect in other parts of California and the nation, Bokhari said.
Buyers shopping Redfin, an online national real estate brokerage, began looking specifically at homes in the suburbs and rural areas featured on the website, the senior economist said.
Just as buyers flocked to the Valley, they have flocked to Lake Tahoe in California and Cape Cod on the East Coast, Bokhari said.
Century 21 real estate agent Marguerita Castanera said, “The pandemic has created a whole new genre of buyers.
“They need an office or two at home for people working remotely, they need a gym at home, they need a Zoom room for kids to go to school,” Castanera said.
“Home is everything now,” she added. “It’s not only where the heart is but where the work is, where your life is.”
While the work-from-home option has made a difference, perhaps the most important factor is the small number of homes on the market in the Valley sought after by many eager would-be buyers.
“It’s probably a function of both strong demand and limited inventory, which is the classic way you get price jumps,” Eyler said.
In general, there is limited inventory in the Valley. For example, in 2019, a more typical year, only 384 homes sold in the Sonoma ZIP code, versus 2,014 in Santa Rosa, according to the multiple listing service.
The pandemic has reduced the amount of inventory even further. As of May 31, there were only 96 single-family homes and two condominiums for sale in the Sonoma Valley.
This translates to only 1.4 months of inventory. This means that if no new homes were to come on the market, it would take 1.4 months for all the homes currently on the market to sell.
In a balanced market, three to five months’ worth of inventory is available. Less inventory favors sellers, as the law of supply and demand comes into play. Frustrated buyers bid higher and higher amounts for the few properties available in hopes of outbidding competing would-be buyers.
“It has been more affordable to buy homes here than it is to build them, so we have this chronic supply issue, which has added to the frenzy we are seeing,” said Erin George, 2021 president of the North Bay Association of Realtors.
George pointed out that low interest rates are also a factor. The interest rate for a 30-year fixed mortgage is presently hovering in the low three percent range, the president said.
“That gives a buyer more purchasing power,” George said.
In real estate, as in everything else, 2020 was a time of unprecedented developments. As the pandemic eases, 2021 is emerging as a year of adjustment for the real estate industry.
“This last year was a wild year in the nature of the economy and how people looked at home purchasing,” Eyler said.