Real estate experts around the North Bay are getting early inklings that housing markets in the region are cooling after several years of rapid appreciation in sale prices and rents.
Some of it is thought to be related to the destruction of more than 6,000 dwellings in Sonoma, Napa, Mendocino and Lake counties during the wildfires of last October and this past summer, sending thousands looking in those and surrounding areas for alternate housing. But there are other local indicators a shift may be underway toward more of a market balance.
“Post-fires, there was a rush to shelter, and that rush to shelter drove prices up for rentals and resales,” said Rick Laws, senior vice president in Pacific Union International’s Santa Rosa office. “At the higher end, we were seeing some properties that were being purchased for replacements for Fountaingrove homes that are selling for 100 to 200 percent what the original prices were.”
The Fountaingrove area of northeast Santa Rosa is one of the higher-end housing areas of Sonoma County, with a number of homes over $1 million. The area was in the path of the Tubbs firestorm, which destroyed 1,420 homes there before it jumped Highway 101 and consumed almost as many dwellings in the Coffey Park neighborhood.
COMFORTABLE IN TEMPORARY HOUSING
A number of the fire survivors received as much as two years of funds from their insurance policies for similar housing and now have found alternative domiciles, reducing demand in the market, Laws noted. The Press Democrat recently estimated that as many as 7,000 relocated to other parts of Sonoma County from the burned Santa Rosa areas, and 1,300 may have left the county.
“We have found out now that people did get comfortable (in an alternate location), starting in summer and continuing to the fall we have had price resistance,” Laws said. “In spring, there were multiple offers on everything, so sellers wanted to lead the market and were adjusting their pricing accordingly.”
By fall, many sales going into escrow in Sonoma County have had one offer on them and the price had been reduced to sweeten the deal, he said. That resistance is leading to houses remaining on the market longer.
“It’s a healthy shift,” Laws said. “It does not mean the market is falling, but prices are settling to more of a balanced market.”
There might be another burst of home-shopping next year, as significant rebuilt housing returns to the market over the next six to 12 months and insurance rent allowances end, Laws said. But whether there will be more survivors who opt not to rebuild may not be known until then, as the cost of reconstruction is better-known amid the ongoing shortage of labor in key construction trades, and inflation in materials prices from California fires and natural disasters in other states.
MARKETS EASE ELSEWHERE
The shift in the housing market from the early months of this year is also being felt in Marin and Napa counties, according to Robert Bradley, managing broker of Bradley Real Estate, which has 11 offices and about 400 agents in the three counties.
“We’ve seen a shift in 2012 to a seller’s market, and now the momentum is shifting toward buyers,” Bradley said. Rather than a general fall in prices, putting buyers totally in the driver’s seat of negotiations, it’s more of a flattening out of growth, he said. “Prices, in my estimation, probably peaked for this cycle.”