Sonoma County Housing Trends - A Grand Flatness...

I have a love hate relationship with charts. I love them...everybody else hates them. Unfortunately, there is no better way to convey a huge amount of information as quickly as you can graphically so I will continue to make occasional charts when the results can illuminate a story.

A lot of people are on the sidelines of real estate today. Interest rates are as low as we're likely to see them. The affordability index for my area is the best it has been in decades, so homes are as affordable as they have been in a long time. However, in spite of low rates and reasonable prices, many potential buyers fear the market may still have a long way to fall. So, in the same way that you might coax young children into swimming by being in the water to support them, a graphical presentation can reassure wannabe buyers that they aren't going to drown in today's market.

First things first: a giant chart and then a discussion beneath it.

The first thing to note here is not the bursting housing bubble. That's a fascinating story of loss and grand delusion on a national scale, but it's not the story this chart or I want to tell. My story is the right hand side of the chart that I have captioned as "More or Less Stable Market". There is definitely volatility in these numbers. I can see where the first time buyer tax credit bumped up prices in early 2010. I can see where worries about Europe helped slow down the market in the summer of 2010. What I can't see is anything that should scare a potential buyer out of the market.

We have had a run of nearly three years of relative stability in the housing market that has followed the worst recession to hit the United States since the Great Depression. As we creep into recovery there are still plenty of hardships. Lots of people remain unemployed and underemployed. But we have had those things for the last three years and the housing market has survived. People looking for fast appreciation don't see much to like in a flat market performance, but people looking for a house to call home can be reassured that a house bought in today's market is unlikely to suffer the fate of a home purchased in the summer of 2007. There just isn't that much excess value baked into the real estate cake.

I did a quartile analysis to see if the median price figures I normally look at might have been skewing the results. Instead, I am reassured that the median is still a useful shorthand for talking about the market as a whole. We can see that the 75th percentile has performed better than the median and is acctually up about $25,000 since the low point three years ago. I think that's telling us as much about the job market as it is about housing. The good jobs that can support a home priced in the $450,000 price range are still here. The big change for that tier of the market is the reduction from over $750,000 that buyers would have paid to be at the 75th percentile. It's a heck of a lot easier to make payments on $450K than $750K.

At the 25th percentile, the change is large in percentage terms even if they aren't saving quite as much as their more affluent peers. Here, the price change is over 50% with a dollar savings from pre-bubble of around $250K per home. People in the market know that much of the demand we are seeing in this price range is from investors buying single family homes. That was unheard of ten years ago when prices for any rentable home vastly exceeded the rent that could be charged.

It's all good, ladies and gentlemen. In April of 2009 I called March 2009 as the bottom of the bubble's deflation right her on ActiveRain. I may still eat crow if prices edge down through the lows from that time, but I don't see any cataclysm on the horizon that will take ten or fifteen percent off today's prices. So if you're a renter thinking of buying, get out there and stake your modest, affordable claim to a piece of the American dream. The money you save over the next 30 years will be your own.