Sonoma County homebuyers, renters strained as housing costs soar

Sonoma County homebuyers and renters know the ropes by now: A short supply, soaring costs and long waits are the defining factors of most housing searches.|

Eight unprecedented years of meager home construction continued in 2016 to take their toll on Sonoma County residents seeking a place to live.

First-time homebuyers lamented that rising values made it increasingly difficult to find properties in their price range. Prospective renters, meanwhile, once more found themselves running a gauntlet of fierce competition, sky-high rents and stringent qualifying criteria.

In searching for a rental, too often “you’re going to be one of a minimum of 100 other applicants,” said Kate Miller. Her family spent most of the year searching for a new rental and spent 15 days in a hotel this month before landing an apartment in east Santa Rosa.

After the long construction drought, home builders this year did increase activity, but not as much as officials first expected.

In response to the housing crisis, local officials began to take action in 2016. A significant step came in August, when Santa Rosa became the first local city to impose rent control, a decision that came in a split City Council vote over the objection of real estate interests.

Rent control opponents in September turned in enough voter signatures to force a citywide referendum on the matter. The future of the city’s rent control law - now suspended - could be up to voters in June.

‘Build, baby, build’

The new year is also expected to include efforts by city and county governments to turn ambitious housing goals into actual new units. The results remain to be seen. But given the decades-long battles here to restrict growth, it can feel striking to hear normally progressive officials sound the call for more development.

“Build, baby, build,” county Supervisor Shirlee Zane chanted at a recent housing summit, voicing what she says will be her motto for 2017. Housing represents an urgent need in the community, she said.

“People are suffering,” said Zane, whose district includes Santa Rosa, “and it’s our job as political leaders to do something about it.”

When a national housing bubble burst in 2008, home values crashed and demand for new homes tumbled. Housing construction plummeted and stayed at levels not seen in the county for at least four decades.

From 2000 to 2008, the county added 16,000 people and nearly 18,000 houses, apartments and condominiums, according to the state Department of Finance. In the next eight years ending in January of 2016, the county’s population grew by 27,000, but builders added only 6,300 housing units.

Low inventory

In the early years of the downturn, homebuyers turned from purchasing new houses and instead snapped up a wave of foreclosures and short sales, the latter being properties sold for less than the amount owed on the mortgage.

In 2009, such financially distressed properties accounted for over half of all single-family homes sold in the county.

But the number of distressed properties on the market has significantly declined in the past three years. To date this year, they accounted for just 4 percent of all single-family sales.

That decline is one reason why the number of homes being listed for sale in 2016 was at its lowest level in at least seven years. It also helps explain why the county housing market ended November with roughly a 1.6-month supply of available homes, a level considered a sign of a seller’s market.

“We’re just not seeing the inventory,” said Mike Kelly, an agent with Keller Williams Realty in Santa Rosa. “And hence, we’re not seeing the sales.”

Meanwhile, rising home prices have reduced the number of potential buyers. The county’s median home price hit a record $619,000 in August 2005, tumbled to a low of $305,000 in February 2009, and by last month had risen back to $575,000.

Priced out

As prices have rebounded, first-time homebuyers say it has become hard to find anything in their price range, typically $500,000 or less. Only about a quarter of county households today can afford to purchase a median-priced home here, according to the California Association of Realtors.

Some do find success. Jonathan Garza, a registered nurse, had been looking about six months when he saw a four-bedroom, two-bath home come on the market on Cambiaso Place in Santa Rosa’s Rincon Valley. He called his real estate agent at noon to arrange a look, and by 9 p.m. the owners had accepted his offer of $509,000.

“The stars aligned,” said Garza, who had one previous offer rejected. But here was a case where the sellers were looking to close quickly in order to buy another home, and no one else had yet made an offer on the home.

Belinda Andrews, a broker associate for Century 21 in Santa Rosa, said Garza succeeded because he was willing to swiftly make his best offer.

“When something comes on the market, you can’t wait,” Andrews said. “You have to go right away.”

For renters, the search for housing this year was hindered once more by a lack of available units. Two private companies that track county apartment data put the vacancy rate this fall at less than 3 percent, a level that rental managers and housing assistance workers say is essentially full occupancy.

“It’s definitely one of the tightest markets I’ve ever seen,” said Jennielynn Holmes, director of shelter and housing for Catholic Charities in Santa Rosa.

As a result, landlords have been able to set stiffer requirements for credit scores and qualifying incomes.

For those living in emergency or temporary housing, Holmes said, “the length of stay has definitely increased” because people need more time to find long-term rentals.

For Kate Miller, the year began with her husband, John Roerig, and 8-year-old son, Elijah, living in a cabin in Forestville that had termites and leaked in the rain.

The landlord refused to fix the place, she said, and the couple moved out in early December.

A server in a restaurant, Miller said she was glad to move from the temporary hotel to their new apartment, but the family still needs to find something that is more affordable and offers a yard for her son to play in.

The couple has been in the county about 12 years, but has questioned whether they can afford to stay here.

“We’ve tried to put down roots,” she said, “but Sonoma County just eats them up.”

Rising rents

Those who do find a place can’t help but notice higher prices. The rent for the average two-bedroom, two-bath apartment in the county has increased 49 percent in five years to $2,122 a month, according to Real Answers, a Novato company that tracks data from large rental complexes.

Both Real Answers and Scott Gerber, managing director of Bradley Commercial Real Estate in San Rafael, said the county’s average apartment rent this fall rose slightly more than 7.5 percent from a year earlier.

Gerber said a good portion of the overall increase was due to landlords in Santa Rosa concerned about having future rent increases limited by rent control. Apartment rents in the city this fall rose 10.1 percent from a year earlier, compared to 5.9 percent in Rohnert Park/Cotati and less than 1 percent for Petaluma, according to his study.

In Santa Rosa, he said, landlords with below-market rents “were scrambling to catch up because of the threat of rent control.”

In Gerber’s report, Sonoma Valley this fall saw the largest increase, 11.8 percent. He suggested landlords there raised rents at a greater rate than peersbecause they were charging the smallest amount on a square footage basis of the four areas that he follows in the county.

Some relief anticipated

Looking ahead, Gerber predicted the county will get some relief in the coming year because of an apparent oversupply of new rentals coming on the market in San Francisco, the Peninsula and Silicon Valley. In time, some county residents will move south to take advantage of that housing and landlords will seek more modest rent increases.

“The rental market is certainly settling down,” he said.

In the new home market, builders are constructing more units this year, including three separate housing projects in Rohnert Park near Sonoma State University, the start of a new University District neighborhood that one day could hold more than 1,600 housing units.

Even so, in Santa Rosa the increase in homes didn’t amount to “as many as we had hoped,” said Mark Setterland, the city’s chief building official.

From July 1 through Nov. 30, the city issued 70 building permits for new single-family homes. That compares with 47 for the same period last year.

Randy Waller, an owner of W Real Estate in Santa Rosa, said his company is working with developers on five projects that originally were slated to open this year but for which sales will start in 2017.

The reasons for the rescheduling include delays getting lending or regulatory approval and difficulties finding enough skilled workers and subcontractors.

Even so, Waller predicted that next year a significant number of new homes should be available for sale.

“I think we’re going to enter into a healthier market for the first time in a long time,” he said.

In a review of current and possible prospects in Santa Rosa, Setterland counted slightly over 200 housing units currently under construction in the city, plus another 1,000 in some stage of the building permit process, 1,000 others that are under some kind of discretionary review by a city agency and over 3,000 that developers have brought forward for discussions but for which they have yet to file formal applications.

A push for more

By the end of 2017, Zane said she would like “shovels in the ground” for housing on three publicly-owned sites in Santa Rosa: the county’s Chanate Road and West College Avenue properties and the Sonoma-Marin Area Rail Transit Authority’s land near Railroad Square.

Similarly, Santa Rosa Mayor Chris Coursey said that in the coming year city officials want to move forward with plans to encourage the construction of 5,000 new housing units over the next eight years. The city wants half of those units to be deemed affordable.

Coursey suggested that in an earlier era some city residents “would have come unglued” at talk of building so many more units. But the council’s goal has yet to raise opposition.

“Housing development has been stagnant so long that I think everybody understands we need to do this,” he said.

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