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Strong Napa & Sonoma Valley real estate market undergoing major shift in 2020-2021

Referred to as the “Great Reshuffling,” the North Bay residential real estate market is undergoing a transformation with many remote workers moving in and longtime residents burned out from fire threats considering moving out.

As a result of this shifting of residents, Wine Country market trends show the area experiencing a sellers market with really low inventory, high median values and surging sales for homes in the millions of dollars for the quarter ending Sept. 30.

A market in which sellers wait to place their homes on the market is trouble for buyers.

Active listings in Sonoma County plunged for the third quarter ending in September to about 700. That’s about half of what it was a year ago at this time of year.

In Napa County, active listings dropped from 525 to 325 in the same period, Compass Realty reported.

“I think this is driving up prices. Every sector seems to be impacted,” said Carol Lexa, North Bay Association of Realtors president who runs Compass Realty in Healdsburg. “If interest rates stay low and inventory stays tight, we’ll maintain a strong market.”

Sales in Sonoma County’s luxury home market, characterized by housing priced above $2 million, surged in the third quarter to 100. The average was about 30 sales in the second quarter of this year as well as the last four years.

Napa County’s luxury home sales for the third quarter just ending Sept. 30 didn’t increase as much, but it still held its own with a strong 48 exchanging hands in a smaller jurisdiction. Most quarters in the last three years have averaged about 26 sales.

Napa County’s median sales price has accelerated every year in the third quarter since 2016, with the exception of last year. This year made up for the unusual dip — going up by $100,000 to $825,000.

Since 2016, Sonoma County has shown consistent growth for the fall quarter.

The median now stands at $715,000, according to the broker metrics of homes placed on the Multiple Listing Service.

“We may see the upcoming spring as a boom in listings,” Lexa predicted. “We still have people looking.”

As agents have found from the previous quarters, the North Bay housing market has remained strong because prospective buyers in San Francisco, the Peninsula and down into the South Bay around San Jose are able to live anywhere since being told by their employers they can work remotely.

What’s not to love about the North Bay?

It was Monique Orsot’s dream to live in the city of Sonoma. So at age 41, the senior program manager in Salesforce’s real estate division took the plunge out of her rent-controlled studio apartment in San Francisco where her company is based to live out her dream in the Wine Country. She’s able to work remotely for Salesforce.

“I’m very lucky. The timing was right. I had cash on hand and never thought I’d be able to afford anything here,” she said.

She took the time to look around and found what she was seeking in a townhouse blocks from the Sonoma Square.

“It was cheaper than most rents in San Francisco and is a great investment,” she said.

As for worrying about fires, Orsot has taken solace in being close to town.

“They’re not going to have the square burn down,” she said.

Making room for new buyers?

But others who have lived in the North Bay for years may not stick around.

They are pondering now whether to sell and move out of the area because of all of life’s misfortunes, no matter how desirable the region is.

A new phrase has been coined — “fire fatigue.”

Fire threats, evacuations, power outages and poor air quality can weigh heavy at times for people trying to already negotiate a global pandemic and consequential economic upheaval.

Many said it was going to be easy, and they were right.

“Somehow 20-year residents have had it with the fires. They’re burned out and know their houses are worth something. Others are moving in, since they can live anywhere. We’re seeing the cross over between them,” said Adam Goldberg, a real estate agent with KB Properties in Sebastopol.

His client, Allyn Scura, may consider the option of leaving after 13 years, but the idea of abandoning her 5-acre Sebastopol place off Barnett Valley Road that she built from the ground up presents “a huge dilemma,” she fretted.

“Sebastopol has never burned (like other communities), but I don’t want to be naïve. If I know why, I can manage poor air quality and do the fire mitigation on my property and structure my life around it,” she said. “I designed and built this property and put my blood, sweat and tears into it. We love it here. But the idea of going through this (fire threat) every year is a real dilemma.”

The self-made eyewear designer may decide that she and her husband should leave and move into their San Clemente rental home, but Scura admits he doesn’t want to go, and her 16- and 21-year-old daughters are “upset” about the notion.

“If I had my druthers, I’d stay (in Sebastopol) and live out our dream of half the time in Sebastopol and half in San Clemente,” she said.

Another Santa Rosa agent has just started to hear the rumblings from clients that have also asked themselves a very existential question: “Where would I go?”

“There are other problems in every other area you can think of, and most I have talked to don’t want to leave friends and families,” said agent Pat Avila, who herself was burned out of her home during the Tubbs Fire of 2017.

According to Zillow economist Jeff Tucker, there’s an added benefit to residents deciding to leave.

“It’s quite possible to cash out of a Bay Area home, live anywhere else in the country and even retire with the home equity,” he said. “San Francisco is the best example of that. It’s reflected in the data that people don’t want to move too far when they’re moving out.”

The glut of listings in San Francisco has grown 2.5 times year over year.

Plus, San Francisco residents recognize they can seize on more space, especially when seeking a room to establish an office if they’re working remotely.

As for demographics, the trend is pronounced in millennials, Tucker cited.

“They are buying homes now as they move into their 30s. They’re just getting to it later like they did with marriage and kids,” he said.

The low interest rates have also made the life choice more attractive.

Sure, inventory is low — but as these enterprising millennials get rid of student loan debt and establish themselves in the workplace, they can overcome price obstacles with higher Bay Area incomes.

Low inventory is not a trend reserved to California that drives up the demand.

Sales are up 10.5% from a year ago and back to pre-COVID-19 levels of early 2020, the National Association of Realtors reported.

The number of U.S. homes listed dropped 35% this September compared to last year, Zillow reported.

“That’s a staggering change. I think of a pool of homes as bathtubs draining faster than four to five months ago. It makes the buyers more competitive over fewer options,” Tucker said.