In The News

Jeff Schween for The Press Democrat – Don’t Be Cavalier With Your Condo

Don’t Be Cavalier With Your Condo

Another NBA championship is within reach of the Golden State Warriors this year. Having set records all year in numerous categories it is the only victory left in sight. They may soon dispense of their nemesis from the prior year along with all the doubters hungover from their last championship season. Similarly our real estate markets have continued to set records as well. The markets we have come to know thus far this year have been setting records for their lack of supply, intense demands and month over month price improvements.

Our regional markets have recaptured much of the value that was lost during the Great Recession. We have seen single family homes make significant gains back to within five percent of their pre-meltdown prices and, in some submarkets, even surpass these old records. The market has also had a substantial appetite for multi-unit investment properties and land, both residential & agricultural, though nothing is being pursued as voraciously as properties within the classification of townhomes or condominiums presently. This niche of the market usually trails the single family home market at both ends of its cycle and typically represents the entry point into any submarket for many buyers.

Sonoma County, the largest in the North Bay with a population surpassing 500,000 people, is seeing a frenzy of activity within this market niche’. According to BAREIS MLS, Sonoma County closed out May with its highest level of pending sales in the last five years. As inventory has come forward each month it is still being met with a swell of demand from buyers. The median price of a condo or townhome in Sonoma County jumped four percent from a year earlier to close out last month at $324,000 – reflecting a value of $297 per square foot.

As May concluded there were 68 units that found their way to closing, while the market caught a fast break with another 94 condos garnering accepted offers during the month. The markets insatiable desire to purchase real estate was reaffirmed during the month with the absorption rate spiking upwards to 110 percent – still the highest in the North Bay – and buyers applauded the bounce in new supply as 78 properties made their debut in the market.

The absorption rate is calculated by dividing the total number of homes sold in a month by the total number of homes available for sale at the end of the same month. A high absorption rate – 20 percent and above – indicates that the supply of available homes will shrink rapidly, thereby increasing the odds that an owner will sell a property in a shorter period of time. Conversely, an absorption rate below 15 percent is indicative of a buyer’s market, meaning homes are selling more slowly.

As the markets to the north were tipping off, Marin County’s condo market stayed in hot pursuit. Having a well located condo in Marin over the last several decades has been like dunking over a seven foot center – rewarding. As May concluded, Marin buyers had a mere 77 condos to select from – 18 percent more than the prior year at this time. The vigorous demands of buyers continued as 60 units turned-over, while 66 more properties captured accepted offers. The ebb and flow of activity managed to stay on a quickened pace with 63 fresh units coming off the bench thereby pressing the play of absorption upwards to 78 percent.

Marin’s markets are still controlled by those who own property not those seeking it. The median price of a townhome or condo in this county has fluctuated mightily and closed out May at $516,000 – a retreat of seven percent from May 2015 – indicating a value of $464 per square foot, the same as a year earlier. So whether the Warriors conquer mighty LeBron and his band of Cavaliers, or not, keep in mind this is just entertainment to those not actually involved in playing the game and, though it can warm the soul to enjoy, you must stay sharply focused on your own personal prize – winning out on your next home!

Jeff Schween

By Jeff Schween, of Pacific Union International’s Santa Rosa office.