Autuum Market in Marin and Sonoma

Html for September Marin-Sonoma newsletter:
Paragon Real Estate Group
Paragon Real Estate Group

North Bay Autumn Selling Season Begins
Against Backdrop of Market Volatility

September 2015 Report for Marin & Sonoma Counties
by Paragon Real Estate Group
Including 12 custom charts


Real estate markets are essentially determined by the balance – or imbalance, as is often the case – between buyer demand and seller supply of homes to purchase. Underlying that dynamic are economic, political and demographic factors – some local, some not – such as population growth, employment, new home construction, high-tech booms, consumer confidence, interest rates, affordability, stock market movements, shenanigans in Congress, and ballot proposals, to name a few. Even environmental factors, such as droughts and earthquakes, can jump in and affect the market. These factors are all jostling for effect, ebbing and flowing, sometimes appearing out of nowhere to shake things up, or suddenly shrinking and quickly forgotten.

We are neither blithe optimists, for whom boom times will never end, nor inveterate pessimists, who see bubbles and crashes behind every shrub. For what it’s worth, based on our survey of current economic fundamentals, we don’t expect an imminent crash in the U.S. stock market or in Bay Area real estate values. (This short New Yorker article is excellent on recent market volatility: Drop in the Bucket) However, economies and markets naturally experience fluctuations – short-term ups and downs, times of slowing and flattening – and it’s certainly possible that the balance between buyers and sellers might shift, that the frenzy in our market may subside, and that home prices may plateau or even tick down to some degree. On the other hand, due to the scale of the Bay Area’s economic boom and our generally inadequate supply of housing, demand may continue to exceed supply, and the pressures of recent years may continue.


New Listings Coming on Market

In Marin, September kicks off the autumn selling season, the second busiest after spring, and the listings that come on market in the 4-5 weeks after Labor Day sustain the market until the mid-November slowdown. In Sonoma, the bigger market of the two (mostly because of Santa Rosa) and where second-home sales play a significant role, the most active period of sales stretches from early spring to mid-summer. It then gradually declines through the end of the year. Preliminary indications are that this September may be a very active month for new listings. If this is true, and especially if it marks the beginning of a trend of more listings coming on market, that might cool the competitive, low-inventory, “seller’s market” of recent years . If buyers are more hesitant due to recent financial-market volatility, that would also affect the market dynamic. In our opinion, neither factor is likely to flip us into a crashing or recessionary market.


Percentage of Listings Accepting Offers

This chart above illustrates the surge in buyer demand from the end of the last recession through the 2012 – 2015 recovery. Having the percentage of listings accepting offers in a given quarter over 50% and, during this past quarter, hitting 60% in Sonoma and 62% in Marin – extremely high percentages historically – has applied consistent upward pressure on home prices.

Months Supply of Inventory (MSI)

Months Supply of Inventory is another statistic clearly delineating the high demand/low supply dynamic that has prevailed in Marin and Sonoma, and indeed throughout the Bay Area.

Average Days on Market

Generally speaking, homes sell more quickly in Marin than in Sonoma, and, right now during its current market frenzy, sell even faster in San Francisco (SF not shown on chart). Average days on market increase and decrease seasonally depending on the county’s market cycles: In Marin, they drop dramatically in spring – typically the most competitive season – usually increase in summer, drop again in autumn, and then jump dramatically during the winter holiday months. As mentioned, Sonoma has a slightly different cycle, with days on market dropping lowest in spring/early summer and then gradually increasing until hitting their peak at the end of the year.


S&P Case-Shiller Home Price Index

An updated Case-Shiller Index chart for the San Francisco Metro Area, outlining the real estate market cycles going back to the 1980’s. (The June Index was released on August 25th.) Over the past several decades, we’ve never seen a crash or significant “correction” in Bay Area real estate that was not in conjunction with a major, sustained, national economic event. This chart is for all price segments, but the highest priced homes actually had the smallest bubble and crash, and are now above their 2006-2007 price points; the lowest priced homes had an enormous bubble and crash (due to the subprime-loan fiasco) and are still well below 2006 peak values; and the mid-price home tier’s bubble and crash was about halfway between high and low, and has just hit previous peak values again. Very generally speaking, heading north from Golden Gate Bridge through Marin and into Sonoma, one moves from high-price to mid-price to low-price tiers (but various communities buck that trend).

The numbers on the graph refer to a January 2000 price of 100; thus, the number 215 signifies a price 115% above then. It is interesting to note, that as of the June Index report, all three Bay Area home-price tiers – low, mid and high – have readings reflecting the exact same appreciation rate since 2000, which may be a sign of an equilibrium being reached in the market. Our full report: Case-Shiller for SF Bay Area


Housing Affordability

The California Association of Realtors recently released its Housing Affordability Index for the 2nd quarter of 2015. All Bay Area counties saw declines in affordability – as measured by the percentage of households that can afford to buy the median priced single family dwelling. Sonoma is more affordable than Marin, and Marin is more affordable than San Francisco, which is now only 2 percentage points above its all-time low of 8% in Q3 2007. The city has higher home prices and lower household incomes than Marin, thus its affordability rating is lower.

HOUSING AFFORDABILITY IS A COMPLEX SUBJECT AND OUR FULL REPORT, which also charts median home prices, rents, interest rates and inflation-adjusted housing costs by county, is here: Bay Area Housing Affordability


Median Home Prices and Economic Indicators

Median home prices for Marin, Sonoma and California since 1990; also showing
San Francisco’s for 2014-2015 YTD. Home values vary, but trend lines are similar.

National, Marin, Sonoma & SF unemployment trends: All positive.
Marin consistently maintains one of the lowest rates in the nation.

National household-debt-to-GDP and mortgage-debt-service ratios –
huge issues in the 2007-2008 crash – have declined significantly since then.

Sustained movements in the S&P 500 largely correlate to Bay Area home-
price trends. Short-term financial-market fluctuations typically have no effect.

Price to Earnings (PE) Ratios of the S&P 500 Index climbed a bit high
in mid-2015, but not egregiously so compared to historical averages.
With the recent correction, the ratio has declined again.


“Renting can make sense as a lifestyle choice or because of income constraints. As a means to building wealth, however, there is no practical substitute for homeownership.”
Homeownership & Wealth Creation, 11/30/14, NYT op-ed article

Sonoma isn't actually in Case-Shiller's 5-county San Francisco Metro Statistical Area, but we believe the home-price trends delineated in the C-S Index are similar among all Bay Area counties.

Our goal is not to convince you of a certain position, or to minimize the effects of market cycles, but to provide you with what we believe to be straightforward data, so that you can make your own informed financial decisions pertaining to the buying and selling of real estate.

These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and all numbers should be considered approximate. Sales statistics of one month generally reflect offers negotiated 4 – 6 weeks earlier.

© 2015 Paragon Real Estate Group
No one knows Bay Area real estate better than Paragon.
Paragon Real Estate Group
(415)738-7000 | (415)565-0500 |
Patricia Carapiet
Lic# 00895957
1400 Van Ness Avenue
San Francisco, CA 94109
Direct (415) 738-7218
Cell (415) 990-9125