We have been documenting the US housing market — particularly in hot cities like Seattle, San Francisco, New York City, Miami, and Las Vegas — appears to be headed for the most significant slowdown in many years.
Across the country, existing home sales have peaked, reflecting declining affordability, greater price reductions, and deteriorating housing sentiment. This could be the beginning of a turning point, where housing prices across the country have not just plateaued, but could soon experience a noticeable drop.
About two and a half hours north of San Francisco, another slowdown is festering in Sonoma County’s residential real estate market; sales and home prices have tumbled in November while the number of homes available for buyers jumped, said The Press Democrat.
In November, the county’s median housing price crashed to $615,000, a decline of more than 9% from the record peak of $700,000 in June, compiled by Rick Laws of Compass real estate brokerage.
In the last three months, the number of homes sold declined to its lowest level in eight years; it is almost like the entire real market paused. Moreover, the inventory of homes for sale at the end of November exploded, from 515 to 909, a 77% increase from a year earlier.
Lori Sacco, a managing broker at Vanguard Properties, blames the November year-over-year inventory spike, not on the weakening of the real estate market, but rather the October 2017 Northern California wildfires that burned thousands of homes.
Sacco said, “a correction is happening now, relative to the bump we had due to the fires.”
“Though the market appears to be trending toward a greater balance between buyers and sellers…The North Bay wildfires are likely to affect the local market and economy for years to come. The November correction is on top of the normal seasonal decline that takes place leading into the winter months and during the holidays,” she said.
The rapid slowdown in sales and prices is the most evident throughout the Bay Area, but mainly in the North Bay and Sonoma County, due to the October 2017 wildfires, which destroyed 5,334 homes.
Selma Hepp, vice president and chief economist at Compass, said “months after the fires, home sales declined 11% the North Bay, compared to the previous year. But home sales jumped 15% in November 2017, when many buyers responded to a sort of post-fire panic or “knee jerk” reaction.”
According to Hepp’s report, “year-over-year home sales in the Bay Area saw declines in November, December and January last winter, sales in the North Bay remained elevated during that period. That sales boost, however, ended in March, when North Bay sales activity began to slow, mirroring the decline across the entire Bay Area.”
By 3Q 2018, Sonoma County posted the most significant year-over-year decline of all Bay Area counties, at 26%, according to Hepp’s analysis.
Sacco also said higher-end luxury homes in the $2 to $3 million range are not selling, as it appears that market has seized up.
No one knows how far and how fast real estate markets could plummet into 2020. Turning points take time to materialize, however, it seems like people could start panicking, as early as 2019.
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