The autumn selling season started right after Labor Day, but it will be another month or so before preliminary statistical data is available on home sales negotiated since then. However, it is clear that the recent volatility in national and international financial markets has not so far caused a severe adjustment to local home prices.
Sonoma County Home Price Appreciation
Short-Term & Long-Term
2012 – 2015, by Quarter
The second and third quarters of the year are typically the strongest seasons for Sonoma County home sales and in 2015 median sales prices continued their upward trajectory since the market recovery began in 2012.
1990 -2015, by Year
Return on Cash Investment
Comparing Buying a Home in Sonoma
to Inflation, Gold, the S&P 500 & Apple Stock
For the purposes of this analysis, we’ve broken home ownership into 2 aspects, the first being ongoing housing costs – mortgage interest, home insurance, property taxes, maintenance – which after tax deductions could be compared to the cost of renting a similar home. The second aspect, illustrated in the chart above, is the cash investment side of buying a home and the compound annual return on that investment, after closing costs and loan principal repayment are deducted, if one had purchased a median Sonoma house in 1994.
For the Sonoma County Median House calculation, we used the 1994 median house sales price ($193,000), with a 20% downpayment ($38,600) and paying 1.5% in buy-side closing costs ($2895) for a total cash investment of $41,495. Net proceeds were calculated using the Q3 2015 median house sales price ($540,000), deducting 6% in sell-side closing costs ($32,400) and the original 80% mortgage balance ($154,400), which equals $353,200. This equals an annual compound return on investment of 10.7% over the 21-year period, a huge premium over the inflation rate.
All of us should have put every penny we had into Apple stock in 1994, but barring that, purchasing a home in Sonoma would have been an excellent investment alternative. Three factors not included in the above analysis further increase the financial benefits of home purchase over the other investments graphed: 1) the $250,000/$500,000 capital gains tax exclusion on the sale of a primary residence (potentially saving up to $75,000 in taxes), 2) the “forced savings” effect of gradually paying off one’s mortgage (if one resists refinancing out growing home equity), which has a substantial wealth-building effect, and 3) over time, the ongoing cost of housing with a fixed rate loan, strategically refinanced when rates go significantly lower, will usually fall well below rental costs that continue to rise with inflation.
With financial assets subject to market cycles, changing the buy or sell dates in this analysis can dramatically affect the return. This is simply one scenario.
Median Sales & Prices
by Community & Bedroom Count
Median Home Price Appreciation
by Sonoma City and Town, 1999 – 2015
Since the above charts track the combined median sales price for both houses and condos, those communities with larger numbers of condo sales will have comparatively lower median prices: In Sonoma, condos sell for much lower prices than houses.
We performed the above analysis for 5 other Sonoma towns or regions, and our full report can be found here: Sonoma County Home Prices & Trends by City. Simply scroll down the webpage.
3rd Quarter Market Snapshot
If you have any questions regarding this report or if I can help
in any other way, please don’t hesitate to contact me.
These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and all numbers should be considered approximate. How any median or average statistic applies to a particular home is unknown without a specific comparative market analysis. We are not qualified to render legal or tax advice of any kind. Sales statistics of one month generally reflect offers negotiated 4 – 6 weeks earlier.
© 2015 Paragon Real Estate Group