As the end of 2011 draws near, there is no doubt that the economy and housing market have not yet found the best footing for a recovery. The national and international news we are exposed to daily has been consistently volatile for the past three to four years. Clearly, we must always keep in mind that all real estate is local. What is happening in Chicago or Los Angeles or even San Francisco is not necessarily what is happening in our corner of the world. However, as we report the Sonoma and Napa County real estate statistics on a quarterly or annual basis, we are reminded just how fragile this recovery has been.
In a recent meeting, Joe Jackson, head of Wells Fargo Mortgage Ventures projected that the purchase market will increase 10-15% next year but probably based on numbers of transactions and not on an increase in value. Buyers in our market are very well educated, and conversant on recent sales and new listing inventory. We find buyers to be generally patient, focused, seeking value and not willing to make offers on overpriced listings. This makes the pool of qualified buyers keenly focused on the best priced inventory.
One chart in our newsletter this quarter breaks down Sonoma County’s real estate sales by price range, by month and then compares those year-to-date totals to the year-to-date totals in 2010. The price ranges with the highest percentage increase in number of sales were from $100,000 to $299,999 and those with the highest percentage decrease were from $500,000 to $699,000. While we can never be sure, we might be able to make some assumptions about why these have occurred.
First, it has been many years since there was an abundance of affordable homes in Sonoma County which has now given first time buyers the opportunity to enter the market. With interest rates at historic lows, homeownership has come into reach for many. Additionally, investors have found, for the first time in years, the ability to purchase properties that create a positive cash flow.
The price ranges that have experienced the greatest decrease in number of sales may have more than one factor influencing the change. These prices often represent a ‘move up’ market in our county and because of the large number of short sales and foreclosures in the price ranges below $500,000 the number of potential move up buyers has seriously decreased. In addition, these price ranges represent the cusp of the range in which buyers are able to obtain a conforming loan (that is up to $417,000 and until September 30th $662,500 for an increased conforming loan – that increased conforming rate is now $520,950). Qualifying for these loan amounts has traditionally, even recently, been easier than qualifying for jumbo loans. Jumbo loans are those loans that exceed these amounts. Having down payments and closing costs enough to obtain this type of financing has been more challenging in these economic times.
One last interesting note is that the $2,000,000 – $4,000,000 price range has actually had an increased number of sales YTD in 2011 over 2010. In August, 2011 alone, 8 sales occurred in this price range. Of those eight sales, only two were purchased with cash – the other six obtained financing. This is one indication that there is still confidence in real estate investment by high net worth buyers and financing available to those that can qualify.
We entertain ourselves internally by saying we feel like it has been Groundhog Day every day for the past three years. However volatile the national and international news may be, we still see opportunity in the Napa and Sonoma markets every day for buyers and sellers. Real estate is a very local business – we have micro-markets in Sonoma County neighborhoods that are far more robust than others. We welcome the opportunity to visit with you about your specific needs, housing interests or the real estate markets in general.
Click the charts below to enlarge.
