By any measure the Sonoma County housing market has had a boom year. The overall sales hit a record 15 year high up 25% compared to 2020 with median prices increasing by 8%. Not only were more houses sold but the average days on market decreased by 22% from 62 days to 48 days.
For buyers who were active in the market it probably feels like every house sold with multiple offers while sellers felt like they could name their price. However, for every home that sold for over asking price, there were a similar number of properties selling at under asking price with the net effect being that on average sale prices exactly match list prices.
If we look at the market for homes over $1m, the increase in sales volume was even more dramatic with a 63% increase in sales volume. For homes over $2m, the increase in sales volume was up an eye watering 82%.
How Did Different Geographic Markets Compare?
While a lot of the data on the housing market is at a national or county level, it is interesting to look at the different geographic markets within Sonoma County. While I work with both buyers and sellers in all parts of the county, for the purposes of this analysis, I analyzed house price sales in four markets: Sebastopol, Russian River, Healdsburg and Sonoma.
On average, all of these markets significantly outperformed the Sonoma County average. This is probably in part because all of these markets are ones which over the past two years have attracted buyers from the Bay Area as the pandemic has resulted in people moving away from San Francisco.
Russian River Sales Volumes Increase 29%
The Russian River markets including Guerneville and Monte Rio saw sales increase by 29%, over three times the Sonoma County average. The other market that saw a similar sales volume increase was Healdsburg with a growth of 27 per cent over the previous year. While Sebastopol has been a hot market for the past couple of years, the volume of properties coming on the market restricted the growth to just 17%.
Healdsburg Sees The Biggest House Price Gains
While Sonoma County has median house price growth of 8%, the Healdsburg market saw the biggest gains with median house price growth a staggering 23% compared to the previous year. While this makes life difficult for buyers with median house prices now $1m with average prices at $1.5m, it is music to the ears of sellers looking to bank the financial gains of the last few years.
Sonoma and Sebastopol had median price gains of 19% and 17% respectively, but Russian River only had gains of 11%. Given the competitiveness of the Russian River market over the past year this definitely surprises me because of all the markets, this feels like the one that had the most competitive homes attracting over ten offers. This competitive nature of the Russian River market is reflected in the average days on market number of just 48 days compared to the Healdsburg market that had the longest ‘Days on Market metric at 68 days. Russian River was also the market that had the highest sales price to list price ration with houses, on average, selling for 4 per cent over asking price.
Where Are People Buying Second Homes?
Since the beginning of the pandemic, a lot of home sales have been from people from the Bay Area. Just walking around town it has been noticeable how many more homes are occupied. I was curious to understand if the number of people buying a non-pimary residence had increased because there are more buyers from out of town or if the percentage had gone down because people were shifting their primary residence from the Bay Area to Sonoma County. I only have the data for Healdsburg but it shows a continued increase in the number of homes being purchased as a secondary property (either second home or investment property). In 2019 and 2020 the percentage of homes that were purchased as none-primary homes was 37% and 47% respectively, and it rose again in 2021 with 55% of all purchases being designated a non-primary residence. While it is always hard to read too much into these numbers, my hypothesis is that while there are definitely more people spending more time in Sonoma County, with the pandemic being a trigger for people finally investing in a secondary property, most people have kept their primary residence while they work out if they can live up in Sonoma County full time once the pandemic is over. Perhaps then people will start to downsizing their footprint in San Francisco or near their place of work and shift their primary residence to Sonoma County.
The area where there are most non-primary purchases is the Russian River where 76% of all purchases were non-primary residences. In my view, the reason for this is two fold. The average price point for homes in the Russian River is just $649k compared to somewhere like Sebastopol that has an average sales price of $1.2m which makes it a lot more affordable for people from the Bay Area looking for either a second home or investment property. The other big driver for the purchase of homes that are designated a non-primary residence is the fact that despite the introduction of a cap on the number of vacation rentals (see separate blog post here), it is still one of the easiest places in Sonoma County to find a home that is eligible for a vacation rental permit.
How Much Over Asking Did Homes Sell For?
In both the Russian River and Sebastopol there were homes that sold for 62% over asking price. 21070 Bohemian Ave in Monte Rio sold for $485k and 21755 Burndale Road, Sonoma sold for $2.252m, both of which were 62% over asking price. While Healdsburg had the biggest sale price increase it was also the only market where the sales price was on average 96% of asking price. That being said there were some properties that attracted offers over asking price, such as 328 University St that sold for $1.5m, 36% over asking price.
In Summary
With record sales volumes and with median prices continuing to rise, the Sonoma County housing market, continued to be driven by people from the Bay Area seeking sanctuary outside of the population density of places like San Jose and San Francisco. The growth in markets such as Healdsburg mirror the investment into the city with projects such as The Mill District, Montage and the continued development of the food and wine industry centered around Single Thread. Russian River on the other continues to benefit from its lower price point and the ability for people to purchase a second home which they can use and yet generate income to help pay for the running costs.
With interest rates going up and offices likely to require a greater physical presence from their employees, the big question is whether or not the housing market in Sonoma County will continue to be fueled by in 2022 by the influx of money from the Bay Area.
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