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Homes in lower price ranges show big increases in sales

NORTH BAY – Spurred by a flurry of activity at the low end of the market, home sales showed signs of an uptick in the North Bay.

The high number of foreclosures, which are contributing to the sales increase, has kept prices down in Sonoma and Napa counties, while prices have recovered in Marin County.

Following an increase in the number of homes going under contract starting in March, the number of closed sales of residential property rose more than 4 percent to 412 in Sonoma County in May, compared with the same month a year ago, according to data from Bay Area Real Estate Information Services MLS. The trend didn’t hold up in the rest of the North Bay. Sales fell 17 percent to 90 in Napa County for the same period and 33 percent to 207 in Marin County.

But the number of homes under contract – properties where sales are either contingent or pending – rose year-over-year in all three counties, climbing by 42 percent to 577 in Sonoma County in May, 44 percent to 137 in Napa County in May, and 14 percent to 289 in Marin County in June. New contracts are seen as an indicator of future sales activity in the next one to three months, a sign that sales this summer could outpace last summer.

According to Mike Silvas, owner of Napa-based Morgan Lane Real Estate, the data showing increased activity matches the experience of his sales agents, who have seen a rise in the number of buyers, particularly in the market for cheaper homes.

“We’re seeing people have to make offers on more than one property before they get one, especially at $500,000 and below,” Mr. Silvas said.

The $500,000-and-below price range is leading the market in all three counties. In Sonoma County, May sales of homes under $500,000 were up 79 percent year-over-year, while sales between $500,000 and $1 million were down 46 percent. In Napa County, sales under $500,000 were up 88 percent while sales in the higher range were down 48 percent. In Marin County, sales in the low range increased 9 percent, and sales in the higher range dropped 47 percent.

Experts say the sales are being boosted by the high number of distressed, must-sell properties at the low end of the market, which is driving prices down. During the first half of 2008, 57 percent of home sales under $500,000 in Sonoma County were distressed, meaning the properties were in some stage of foreclosure. In Napa County the figure is 60 percent; in Marin it is 50 percent. Comparable data for previous years was not available, because the MLS only recently created a category for foreclosures.

Even in the $500,000 to $1 million price range, more than 15 percent of properties are distressed in all three counties.

According to broker Rick Laws, manager of Coldwell Banker Northern California’s Santa Rosa office, the number of foreclosures is unprecedented in previous real estate downturns.

“We have kind of an artificial market in a way,” Mr. Laws said.

The sharp rise in foreclosures has pushed median sale prices down sharply in Sonoma and Napa counties. In May, the median home sale price dropped 32 percent year-over-year to $400,000 in Sonoma County and fell 30 percent to $460,000 in Napa County. In Marin County, the median price rose 8 percent to $949,000.

Mr. Silvas said it is not clear how long it will take for the market to stabilize, but the sell-off of distressed properties could be the first step.

“Nobody’s going to ring a bell and say ‘Hey, we’re at the botton.’ It’s anybody’s guess where the bottom is. Maybe we’ve passed it, maybe we haven’t.”

The MLS data for this report was provided by Mr. Silvas, Mr. Laws and Robert Bradley, owner of Marin County-based Bradley Real Estate.