Not a day goes by without a client or a prospective client predicting doom and gloom in the housing market. I must confess, as I outlined in this post, in June it started to feel like something was changing. Now that we have completed the first six months of the year it is interesting to look back at what happened in January to June 2022, but also take a look at some of the market indicators to see what we might expect down the line. Below I have analyzed some of the data for the Healdsburg market for the first half of this year. How many Healdsburg homes sold? What was the value of those homes? Who is buying homes? How are prices in the Healdsburg housing market? In addition, I also took a look at some of the leading indicators to give us a view into where the market might be heading in the future. (I pulled data from a combination of sources including the MLS as well as tax records.)
It feels like the first half of this year picked up exactly where we left off in 2021 and 2020 before that. If I look specifically at Healdsburg, as an example of one of the higher priced markets, we have seen a median price increase of 41% from Q2 in 2020 to Q2 in 2022, while there has been a 34% decrease in the number of homes that sold in the first half of this year compared to the first half of 2021. However, this is because of the lack of inventory as opposed to lack of buyers. The 108 homes that were sold represented a combined property value of $172m! The homes were sold at an average of 99% of list price with a staggering 42% of offers being cash. That's right, $78m of cash came into Healdsburg alone. Of those 108 homes sold, exactly a third were sold with multiple offers and the highest number of offers being nine.
While it is hard to draw too many assumptions from looking at the tax records and where the primary billing address is for tax records, 56% of all transactions had an alternative address as the primary billing address. In other words, these were buyers who did not allocate their primary address as the Healdsburg home they purchased. This could be for many reasons but most likely it is because it is a second home, an investment property or the purchasing entity was a company with a different billing address.
The median price of homes is continuing to rise with the median price now at $1.21m, a 19 per cent increase compared to the first 6 months of 2021. Although the days on market prior to the close of escrow is incredibly low, at 53 days, it is actually quite a bit higher than many other parts of the county, where the average days on market has been down in the low 30s. Given the number of my clients who are looking to buy homes with a pool, it is also interesting to note that across the entire 95448 zipcode (the greater Healdsburg area) there were just 22 homes that sold with pools.
It is well known, that a home that is within a 15 minute walk of the Plaza commands a premium. It is hard to put an exact number on it but if you do the analysis of median prices in the city limits and within the downtown district, there is generally a 25-30 per cent premium. If we look at the 27 homes that sold in the first half of this year in the downtown district (an area with Powell St on the north side, University on the East but taking in 1st and 2nd Streets, then over to Healdsburg Avenue), these homes sold in 45 days compared to 53 days and sold with a higher median price of $1.29m. In the downtown area, eight homes, the equivalent of 29% of all homes got multiple offers. If you have a home in the downtown area or are looking for one with a pool, you can expect a huge premium for the home because there were just 6 sold in the first half of the year.
It is always fun looking at the houses that stood out. What was the highest priced home in the City? In the more rural parts of Healdsburg? Which home sold for the highest $ per sq ft? Which Healdsburg home attracted the most number of offers? Which Healdsburg home sold for the most over asking price?
This award goes to 511 Hidden Acres which sold for $4.125m. This was a largely newly built home which backs onto the golf course (not everyone's ideal location). This broke the record for the highest price for a home that is outside of the downtown area. 511 Hidden Acres home was initially marketed at a price of $4.495m but after four price cuts was slowly reduced to a more realistic, but still eye poppingly high, price!The house which holds the record for the most expensive downtown house is 533 Matheson St which sold for $4.45m in January 2021.
1020 Langhardt Drive was put on the market at $1.1m but after the first weekend it got 3 offers and sold for 34% over asking price at $1.475. It is interesting to see that the home that sold for most over asking price only got 3 offers. Generally there is a strong correlation between the percentage over asking price and the number of offers which is why I will often run those numbers as part of trying to help clients understand where offers may land.
Needless to say, this house was one of the few houses in Healdsburg city under $1.5m that had a pool. I am sure the pool was a significant factor in someone paying over the odds for this home, as it was for the next one.
This award goes to 620 University St which attracted 9 offers selling for $1.55m having been put on the market at $1.195m. This one also had a pool! I don't have any absolute data that says since Covid, homes with pools attract a disproportionate number offers and go for more over asking than homes without, but I am sure this is true.
This award goes to 304 Plaza St which recently sold for $2.35m which equates to $1612 per sq ft having been listed at $1.895m. It is probably no surprise at this point to learn that the house also had a pool, albeit a small one. It also has the prized Plaza St address although because it is on the corner of Fitch and Plaza, I would argue it is a Plaza St address in name only compared to the other Plaza homes that are in the cul-de-sac, just a block from the square.
One of the biggest challenges is still inventory levels with inventory for June 2022 across Sonoma County still down 24% from the same month last year. In Healdsburg, the situation is even worse with listings 45% down year from April to June 2022 compared to the same period last year. If there is a shortage of sellers in a market that has historically been very favorable towards sellers, it is hard to believe that the inventory problem is going to be solved any time soon. That being said, there will be fewer buyers, because over the past few weeks it is clear that some buyers have stepped back from the frenetic activity of the last couple of years. The combination of stock market declines, high inflation and high interest rates, with another 0.75% rise on the way, will inevitably result in houses taking longer to sell. We are already seeing the early indications of this, with the number of price reductions increasing eightfold from February 2022, when there were 32 across the county, to 276 price reductions in June 2022. We can also see that the percentage of listings going into contract is also falling, with 42% of listings going into contract compared to 46% in the previous month. This indicates that we can expect to see the number of days on market increase as well the number of months of inventory increase. For example in Healdsburg, the data shows us that the market is less favorable to sellers with the months of inventory creeping up to 3.4 months. (Anything less than 3 months is considered a sellers market and anything more than 6 months a buyers market).
There is no question that the first six months has been an incredibly strong but we are now entering a hybrid market which is neither good nor bad for sellers or buyers. If you are a buyer, for the first time in a long time there will be opportunities to get offers accepted that just wouldn't have been accepted a couple of months ago. Similarly if you are a seller and have a good house and price it well, there are sufficient buyers out there to maximize your returns.
It is always hard to say what will happen in the future but I feel there are certain segments of the market that should be well protected from any significant corrections for a few reasons: Firstly, as we can see in the first half of this year where 42% of purchases in Healdsburg were cash, there are still a lot of people sitting on cash. Secondly, we shouldn't underestimate the change in working practices and the ability of people to work remotely and its impact on the housing market in the key destination markets in Sonoma County. While there is a lot of talk about a recession, for smart buyers and sellers, there is a good opportunity to make the most of a market that will have its challenges but will present some good opportunities for people who are in it for the long haul. You just need to be more selective to make sure your timing is right.
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