As the end of 2011 draws near, there is no doubt that the economy and housing markets 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. Q3 ’11 marked both the worst quarter since ’09 for the Dow Jones Industrial Average and a 160% increase in the VIX (volatility index).
The good news is, and something we must always keep in mind, that real estate is a local business! We do not necessarily follow, react or respond to national trends. 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 statistics on a quarterly or annual basis, we are reminded just how fragile this recovery has been.
Because the communities in Sonoma Valley are generally more dependent upon the economic and employment factors affecting some of the other cities in Sonoma County and the five surrounding counties, our clients’ confidence, job security and investment strategies are very much influenced by those same national and international news stories.
One of the most positive impacts we have seen over the past few years is the abundance of affordable housing in Sonoma County and Sonoma Valley giving first time buyers, investors and second home buyers that ability to enter and capitalize on the market. With interest rates at historic lows, these opportunities have come into reach for many as never before.
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 on the number of transaction and not necessarily on value increase. Right now, 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. Most buyers are approaching the primary home market as an investment in their home vs. speculation on an appreciating housing market.
One interesting factor in the Sonoma County statistics of Q3 this year is that the $2,000,000 to $4,000,000 price range has increased. In August of this year alone, eight sales occurred in this price range. Of those sales, only two were purchased with cash – the other six obtained financing. Clearly an indication that there is still confidence in real estate as an investment by high net worth buyers and financing is available to those that can qualify.
On a final note: 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 our market every day for buyers and sellers. Real estate is a very local business – we have micro-markets in all of Sonoma County 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.