Housing prices are stable for now, but outlook is uncertain
by Liz Watson
An Oakmont home listed with Century 21 Valley of the Moon. Pictured is Broker Linda Frediani. Photo by Alec Peters
[Editor’s note: Interviews for this story were conducted the week of March 9, with some updates between then and press time.]
Since 2017, Sonoma Valley’s real estate market has been pummeled by two of California’s biggest wildfires to date, a flood, and now – just as the market seems to be recovering somewhat – the Coronavirus pandemic is altering human behavior in ways that may take years to understand, much less predict.
Sonoma Valley SnapshotListings and sale price figures released mid-March by Gerry Snedeker, CRB Broker/Partner at Better Homes and Gardens Real Estate, examine Sonoma’s regional real estate markets:
Sonoma Valley: There were 109 homes and condominiums for sale in Sonoma, Glen Ellen and Kenwood at the end of February.
Fifty-eight percent of homes in the Sonoma Valley (63 properties) are priced at $1,000,000 or above, and nine homes (24 percent) in February were sold at over $1,000,000.
Kenwood: There were five available homes for sale in Kenwood as of the end of February, half the number available a year ago, with an average asking price of $2.498 million.
Oakmont: There were 41 homes and condominiums available in Oakmont at the end of February, up 32 percent from a year ago. The median price of Oakmont homes sold in the past year has ranged from the high $500,000s to $800,000. The median price was $533,000 for the 14 homes that closed in February; this is a relatively low number of homes sold for Oakmont.
For now, the market remains brisk in all segments, including first-time buyers looking at homes priced under $1 million, according to Tina Shone, Sonoma Valley Realtor. “Further, low rates are good news for homebuyers.”
The picture up until last weekPrices, inflated during the immediate post-fire period in Oakmont, Kenwood and Glen Ellen, have settled about 10-12 percent higher than before the Nun’s Fire caused rebuilding costs to skyrocket countywide.
A regional shortage of labor hampered the rebuilding of the 5,300 homes lost in 2017’s conflagration. As for Sonoma Valley burn lots on the market today, prices have dropped dramatically in the past three years.
“Over the last 24 months or so, prices started coming back down to those prior to the 2017 fires,” said Doug Del Fava of W Real Estate. “We had a drop off in property values and now prices are back to where the market should have been.”
Speaking of the spring real estate market, “I think the market is just hitting its stride for 2020 with more spring home listings on the market,” said real estate agent Maurice Tegelaar in mid-March. “We are seeing more inventory. I expect in another two to four weeks, the real estate market will add another nine to 10 houses, an increase of 50 percent.”
COVID-19 unknowns aside, these realtors and their colleagues remain bullish on the Valley because of three constants — its beauty, size and geography. For second-home buyers with deep pockets, strength of amenities, views, country living, commute proximity to the Bay Area and relatively easy escape from San Francisco’s cold and fog, and the even denser, higher-equity neighborhoods of Silicon Valley and southern Marin, all attract would-be buyers. There remains much to choose from when coming from a position of cash equity. Those who are ready to retire are in an even better position to reap large equity rewards, whether they purchase in the 55+ community of Oakmont, or in Kenwood, Glen Ellen or Sonoma.
While the market is slower in homes priced under $880,000, for buyers laden with equity, price points are less of a hurdle and finding choices in the mid-to-upper markets are more encouraging.
“Second home market trends are very strong, with buyer profiles from the Bay Area dominating the market,” Tegelaar added.
The 18 homes currently listed in Glen Ellen and Kenwood are priced from $160,000 to $6 million: 10 are listed at $2.5 million, five are listed between $1.25 million and $2.5 million, and three houses fall between $160,000 and $1.25 million.
“There’s still a demand for weekend and retirement homes in the area, and also demand for property for those who want to have their children enrolled in local schools,” Del Fava noted.
Oakmont outlookWith inventory up across Sonoma County, Broker Linda Frediani of Century 21 Valley of the Moon, agrees with the post-fire adjustments. With decades of experience selling property at the Century 21 location in Oakmont, she, too, sees her market settled back to 2017 prices. She has maintained a constant 30-plus listings of homes, duplexes and triplexes at any given time in Oakmont.
Today’s listings are on the market for about four months, noted Frediani, from a low end of $635-650,000 to a high end of $1.5 million. Those numbers are close to the pre-fire 2017 market.
“The profile of buyers is they telecommute and eventually sell their Peninsula home,” Frediani said. “They move into a second home in Oakmont as a first step toward retirement. They are in their 60s and by and large are from the South Bay.”
In Oakmont, home values have been enhanced by the Oakmont Village Association’s purchase of the 250-acre golf course, including all buildings and lands.
Since buying the two golf courses and business this winter, the Oakmont Village Association leased their operation of the two courses to Advanced Golf Partners, LLC (AGP), for 20 years. AGP plans major remodeling and re-branding of the golf course restaurant (the former Quail Inn), to be called Luna. Extensive décor and menu changes will be designed, says Frediani, to attract more people, both from Oakmont and beyond. The West Course will become Valley of the Moon Golf Course, and East Course will become the Sugarloaf Golf Course.
Will COVID-19 upend the market?Real estate professionals are still working, showing homes via virtual tours since their offices are all closed. With continued COVID-19 fears, the uptick of Oakmont houses hitting the market is a development to watch. Add to that, the potential for power shutoffs once fire season kicks into gear, which can directly impact elderly residents on respirators and their need for power 24 hours a day, explained Realtor Denise Paup of McBride Realty. “We have felt in the spring there would be more listings.”
“Families want the elderly closer,” she noted, while adding, “There is no single reason driving listings.”
Whether newcomers buy their home here as a second home for now, or, as they often have over the decades, cash out of the $2 million and up Peninsula housing market, there is greater uncertainty due to the stock market slide, and the unknowns of COVID-19 itself.
Frediani said that one of her listings recently fell out of escrow specifically because of the buyer’s concern about the impact of the virus; they were unsure they would be able to keep their job.
On March 12, California Association of Realtors (CAR) issued an industry update, with plans for modest revisions to its real estate market forecasts. At least “modest” according to Better Homes and Gardens’ Snedeker, “unless the virus outbreak accelerates beyond current expectations.” A softening market on top-end prices is expected, but there are some offsetting effects, said Snedeker.
• Wealth effects will impact the top end of the market
• Recession risks increase if consumers lose confidence
• Macro-economic data remains resilient thus far
• Turbulent financial markets make real estate relatively more attractive
• Mortgage interest rates are likely to remain low
For a full look at CAR’s report, go to www.car.org/knowledge/pubs/newsletters/newsline/covid31120.
“As we get further into the pandemic,” says Del Fava, “we’re going to see a lot more impact from this.”
With extreme single-day losses, regains and overall hits to stocks in recent days, Del Fava watched a well-heeled buyer grow anxious and back out of an estate purchase in western Sonoma County. He expects the investment real estate market to take “a little bit of a break to see how this [COVID-19 emergency] settles in.”
That being said, Del Fava notes segments are very active and there remains a “pretty good stream of activity for general housing. Anything over $3 million will be taking a back seat.”
Echoes Shone, “There will always be activity. There are so many outside forces and what I’m saying is, people forget the word ‘market.’ This is not like a stock where you call your broker and say, ‘sell it.’ Value is the function of a market. There are opportunities for those with enough cash available. If you’re staying in the Sonoma Valley market, that’s the mindset.”
Until the COVID-19 crisis passes, the Sonoma Valley real estate market will be affected by added forces beyond the control of sellers, buyers, or their agents. It is one day a time, not business as usual, ahead.
As a staff writer and freelancer, Liz Watson has written news and feature articles for decades. This is her first article for the Kenwood Press. Liz lives in Sonoma Springs.