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Sonoma County home prices decline to lowest level this year

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Sonoma County home sales rebounded in October, boosted by a spate of price reductions that pushed the median price to its lowest level of the year.

The median price of $649,500 has fallen from its June peak of $700,000 and now is nearly unchanged from a year ago. The price decline in October from a year ago is rare for a housing market that has steadily gotten more expensive for more than six years.

Meanwhile, the sales of 420 single-family homes last month represented a 27 percent advance from a dismal September and the highest level in three years for October, according to The Press Democrat’s monthly housing report compiled by Pacific Union International senior vice president Rick Laws.

Last month’s price reductions show homebuyers have gained negotiating power after years of sellers holding the advantage, regularly enjoying multiple offers and getting higher prices for their properties.

“Buyers have leverage out there for the first time in three years,” said Adam Menconi, team leader and broker of Prosper Real Estate in Santa Rosa.

Even though the nation’s housing market shows signs of slowing, the bump in local sales last month serves as a reminder of the demand still here for houses after a decade of sluggish residential construction and the destruction of about 5,300 homes in October 2017 during one of the worst wildfires in California history.

The October sales increase came from buyers who closed deals after months of wariness about paying too much for a place to live in the county, several agents and brokers said.

“The serious sellers reduced their prices,” said Jeff Hill, an agent with Bertolone Realty in Santa Rosa. For example, Hill listed a home on Terra Linda Drive in Santa Rosa where the seller recently reduced the asking price to $695,000 and the property this week went into escrow.

Laws of Pacific Union cited a “push back on price” by buyers as the most likely reason sales had hit an 11-year low in September.

“There’s still a lot of buyers who want to buy, but they just don’t want to overpay,” he said.

Working with the local multiple listing service, Laws found that sellers had cut prices on roughly a third of the houses on the market in October. That amounted to nearly 540 properties.

County home prices, meanwhile, have more than doubled since a national housing market crash depressed the median price to a low of $305,000 in February 2009.

For the past six years, Sonoma County housing conditions have made it a sellers’ market with steadily increasing prices and a relatively low number of homes available for sale.

More recently, the local housing market can be divided into two periods following the historic Tubbs fire in October 2017. The disaster set off a scramble by fire survivors for replacement housing. In the first six months after the fire, home sales increased by almost 11 percent compared with the same period the year before, or slightly more than 200 houses. In the next six months, sales dropped by 7 percent, or nearly 200 houses.

Meanwhile, the median price climbed 13 percent from September 2017, the month before the devastating fire, through June. But by late spring, agents began to notice a sales slowdown, followed by the decline in the median price.

Initially, many sellers seemed slow to adjust to the shifting market, agents said. Instead, they kept thinking buyers would keep paying the escalating prices they did in the months after the fires.

“You’ve got people right now trying to get re-acclimated to the new reality of the Sonoma County real estate market,” said Menconi of Prosper Real Estate.

Nationwide, the sense of a slowdown appears widespread. Three out of four Americans think their local housing market is “cooling off,” according to a survey released last week by ValueInsured, a Dallas-based provider of insurance to protect home down payments and equity.

Also, the California Association of Realtors reported Thursday that October home sales declined 7.9 percent from a year ago. Sales statewide for the past three months were the lowest on a seasonally adjusted basis since February 2015.

“Homebuyers continued to put their homeownership plans on hold in October and wait out the market,” state Realtors’ association President Jared Martin said in a statement. Noting that mortgage rates were at a seven-year high, he predicted “this phenomenon will likely continue for the near term as buyers wait for further price adjustments and for interest rates to stabilize.”

Homebuyers locally have greater leverage because they’re finding more homes listed from which to choose.

At the end of October, there were 1,040 single- family homes for sale. That was over 400 more than a year ago and the most homes in the county available for the month in seven years.

“It seems like we’re selling about the same number of units, but with a lot more inventory,” said Brian Connell, the managing broker at the Santa Rosa Mission Office of Coldwell Banker. As a result of the extra home inventory, “we’re seeing price reductions where we maybe wouldn’t have seen them six months ago.”

Even though the housing sector is tilting away from sellers, it doesn’t yet represent a complete switch to a buyers’ market. October ended with home inventory equal to two and a half months of supply at the current pace of sales. A balanced market would have a supply between three and six months, agents say.

“It’s continued to be a seller’s market,” said Gerrett Snedaker, broker/partner at Better Homes and Gardens Real Estate/Wine Country Group. “It’s coming back a little in the buyers’ favor.”

Connell and others rejected the idea that county home sales will dramatically slow in the coming months. They acknowledged that houses here remain out of reach for most county residents, with slightly more than a fifth of households able to afford the median-priced home. And rising interest rates may continue to limit who has the financial means to buy local residential properties.

Still, housing demand for now remains strong enough because of a relatively healthy county economy, a decade of scant home construction and a continuing supply of buyers from more expensive parts of the Bay Area.

“We’ve still got a lot of money coming from the South Bay,” Menconi said. Buyers from there and the San Francisco peninsula say “their money goes farther” in Sonoma County.

Laws said the county has another reason to expect ongoing demand for houses next spring: Many fire survivors still need to make decisions on permanent housing.

As of October, more than 3,000 owners of burned residential properties — about three in five in the county — had yet to seek a permit to rebuild their houses, according to public records. For most survivors, their insurance coverage paying for them to live in rental housing will end in September.

Laws said such residents soon will need answers to such questions as: “Are we going to rebuild? Are we going to buy (another house)? Are we going to Bend (Oregon)?” As a result, he said, some will choose to buy a replacement home here.

You can reach Staff Writer Robert Digitale at 707-521-5285 or robert.digitale@pressdemocrat.com. On Twitter @rdigit.