It's a strange time in the housing market right now as we move into the final quarter of 2024. Just as the dust is settling on all the changes in the real estate rules around how commissions are paid, we are now bumping up against a presidential election, then Thanksgiving, then Christmas and then winter! This is all on top of high interest rates that has impacted the Sonoma County housing market in 2024 by keeping many buyers out of the market through the year resulting in slower activity, especially at the higher end. However, with the Federal Reserve recently cutting interest rates in response to growing concerns about the economic slowdown and the persistent yet slowly easing inflation, the future looks brighter as we move into the final quarter of this year.
Based on our business, which is a pretty good anecdotal barometer of the market, because our business is fairly geographically diverse across the county and also across all price points, we have seen a noticeable change over the past month as more buyers have come off the sidelines, perhaps buoyed by the expected rate decrease and seeing this as a signal that we have turned the corner on the cost of boring money.
The decision taken by the Fed a couple of weeks ago was aimed at supporting economic activity, including housing, amid a series of mixed signals in the broader U.S. economy. While the labor market remains relatively strong, there have been signs of cooling in consumer spending and business investment, which raised concerns about sustaining economic momentum. Hence the perhaps larger than expected cut of 50 points. Since that rate cut we now need to take into account changes in the geopolitical landscape with events in the Middle East which further increases economic stability. That being said, even over the past week, there have been signals that there may well be more to come to try to reverse some of the current economic trends.
If we dive into the numbers we can see that from January to September 2024, a total of 126 homes were sold in Healdsburg, which is down 5.3% from the same period in 2023. This is actually counter to what has happened across Sonoma as a whole where sales are up 8% overall and 11% for homes that are over $1m. It’s hard to explain why except that perhaps for many purchases in Healdsburg, they are often not primary homes so more discretionary which we will get into in a little bit.
This decrease in year-on-year sales has resulted in a sharp increase in the number of homes for sale which have increased by 40 percent year on year with 102 homes currently for sale compared to 73 homes during the same period last year
This increase in inventory is reflected in the time it takes to sell a home which has also gone up nearly 30 percent with the average days on the market rising from 63 days last year to 80 days in 2024. If we look at the higher-end market for homes over $2m, then the average days on the market are even higher at 122 days. As homes take longer to sell, buyers are definitely sitting on the sidelines waiting to see if the price comes down before they decide to make an offer. At the same time, many sellers feel that their home is worth what it was a year ago which is probably not necessarily true depending on the type of home.
One thing I have noticed recently is that a lot of buyers feel that because of the high interest rates then they expect to be able to get a significant reduction on the list price of a home. While there are definitely homes that are significantly overpriced (I’ve never met a seller who thinks their home is worth less than it is!), despite interest rates being at their current levels there are still plenty of buyers willing and able to purchase homes close to list price so while the ratio of sold price to list price has fallen slightly, down from 97% last year to 96% this year, homes are still selling at only a 3 percent discount to the list price. So for a $1m home that is only a discount of $30k.
One of the key indicators for the health of the market which shows the relative balance of power between sellers and buyers is the months of inventory based on closed sales. This metric, showing months of available inventory has increased significantly, from 4.9 months to 7.2 months—a 47% rise. Indicating that for the first time in a long time, the market is no longer a seller market (As a rule of thumb, an inventory level of less than three indicates a strong seller market while an inventory level greater than six indicates a buyer's market)
A deeper dive into the buyer demographics reveals some interesting trends. Out of 129 total home sales in Healdsburg during this period, 66% of the purchases were made by non-owner-occupiers, meaning they were either second homes or investment properties. While 51 percent of purchases were cash purchases which also makes Healdsburg a fairly unique market.
Of those non-owner-occupied homes: 24, nearly 30 percent, were purchased by people already living in Healdsburg; 12 were bought by people from San Francisco and 15 buyers were from out of state, including neighboring states and further afield.
This statistic is quite emotive for a lot of people, particularly those people who have lived in Healdsburg all their lives. It is easy to jump to conclusions that all these sales of homes that are not primary residences are by people from the Bay Area buying up inventory but nearly 20% of them are from people who already live in Healdsburg or rather who have their primary residence here. Perhaps this is because it is Healdsburg residents who understand how special Healdsburg is so are happy to invest in real estate in this market or else who have half an eye on getting older and perhaps are looking to ultimately downsize in Healdsburg to a smaller home. see This data shows that while local buyers are still active, Healdsburg continues to attract out-of-town buyers from the Bay Area as well as out-of-state buyers.
Healdsburg can be split into two distinct markets—city properties and rural properties. The city of Healdsburg accounted for 70% of the home sales, with an average price of $1.34 million and a median price of $987,000. In contrast, rural Healdsburg saw much higher price points, with an average sale price of $2.39 million and a median of $1.625 million.
The difference in prices reflects the premium buyers are willing to pay for rural properties, which often come with larger lots, more privacy, and, in many cases, unique features such as vineyards or panoramic views. It’s no surprise that these properties continue to command top dollar, even as the overall market cools slightly because there are relatively few of them that are close to town and so are attractive to out-of-town buyers.
Even though overall sales are down, certain properties are still generating significant interest. A notable 32% of all homes sold (35 out of 108) received multiple offers even in a market where interest rates have been riding high. The property that garnered the most attention was 544 Fieldcrest Drive, which attracted six offers. This was a fixer in Fitch Mountain Villas so someone is no doubt looking to fix it up and sell it at a premium in three to six months. This indicates that while the market is slowing down, there will always be a market for people to buy a home that has the potential to be remodeled and sold as a turnkey home.
Another trend worth noting is the demand for properties with pools. Out of 129 sales, only 15 homes included a pool, and just 7 of these were within city limits. This scarcity of pool properties makes them a hot commodity, especially for buyers seeking the wine country lifestyle. There is no question that the number of buyers looking for homes with a pool outstrips the supply. That being said, of all the projects you can do to improve a property, adding a pool is probably the easiest. However, if you are buying a rural property, you just need to make sure that you understand the rules for a pool when it comes to setbacks from wells and septic systems.
This is the question I always get asked and it's never black and white as it depends so much on individual circumstances. However, if it was me and I was looking to buy a property in Healdsburg right now, I would be keeping a keen eye on properties coming on the market. Not because I would be wanting to buy the first property that came along but because I think for a buyer who sees a property they love, now is a good time to buy. That being said, you can afford to be choosy because buyers do generally have the upper hand right now but if you wait until the spring, I think you will be likely to be competing with a lot more buyers and will end up paying more. You just need to accept that for the first six months, you will be paying a slightly higher interest than perhaps you would like to be. However, that’s going to be cheaper than paying an extra 2 or 3 percent on the purchase price next year.
If you are looking to sell, right now is probably not the best time except for a turnkey remodeled home, just because we have a pending presidential election, then we come into Thanksgiving and Christmas not to mention winter. If it is totally dialed in and priced correctly, you will likely be able to get an offer before Thanksgiving. We have a number of listings right now that we are quietly marketing off-market because we don’t want to put them on so they will accrue days on the market through the next couple of months. That being said, the downtown market is resilient throughout the year so while I would likely sit out November and December, I actually think January, weather permitting, may actually be a pretty strong month. For a more rural property or a property that isn’t in the sweet spot for the target buyer, I think you are better of waiting until the end of Q1 to be able to take advantage of an increase in the number of buyers in the market.
As we look to 2025, with uncertainty around the election removed and with interest rates certain to be lower than they are now, it will likely be a better market for sellers. The big question is how many sellers have been sitting on the sidelines fearful of attracting buyers with the high interest rates. If we get lots of new inventory, coupled with the large number of homes that remain unsold through the winter, the market could still favor buyers. However, I think the more likely scenario is that as buyers come back into the market they will be competing for somewhat limited inventory. All of these add uncertainty to the market, making it important for buyers and sellers to stay informed about the hyper-local market because even in Sonoma County, both geographic and price segment markets behave very differently depending on where and how much a home costs. from segment to segment
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