Petaluma housing market: Tough for renters, good for sellers

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Last month, Petaluma Realtor Doug Hecker prepared to put a four-bedroom, 3,000-square-foot west side home on the market for $1.34 million. But before he could list it, he was approached by an agent with a buyer, who offered $10,000 more than the asking price and bought it on the spot.

At the same time, he listed a similar home around the corner for $1.23 million. Within days, he had four offers, two of them cash, and all of them were more than the asking price.

“Honestly, it is a healthy market right now,” said Hecker, an agent with Coldwell Banker for 15 years.

A combination of factors including Petaluma’s proximity to high-paying Bay Area tech jobs, a lack of housing inventory and low interest rates has driven home prices in the city to levels not seen since the housing bubble in 2005 and 2006. But signs indicate that, at least in Petaluma, lenders and home buyers are showing more maturity than in the days before the market collapsed.

“After the wheels fell off the bus, the market here really turned a corner in 2012,” Hecker said. “It was like, game on, the bottom’s behind us. Buyers have been coming out of the woodwork. The difference now is that banks have tightened up rules and it’s a healthier market because buyers have skin in the game.”

A new report from financial advising company SmartAsset ranked Petaluma as having the 7th healthiest housing market in the state. The firm listed factors including a low percentage of Petaluma homes with negative equity or decreasing value and a high average of years living in a home — indicating fewer short sales and foreclosures — as factors defining the city’s healthy housing market.

But, while sellers may be enjoying a mini boom, the lack of housing stock, particularly starter homes and rental properties, have combined to make housing in Petaluma unaffordable for many, contributing to a crisis that has plagued Bay Area communities.

In SmartAsset’s survey of 2,000 U.S. cities, Petaluma’s housing market ranked 219th healthiest. The company found that, on average, home owners in Petaluma live for 14.9 years in their home, and their home costs as a percentage of income is 24.4 percent.

“People who are buying are staying and investing in the community,” said AJ Smith, vice president of content for SmartAsset. “We wanted to look for places that are stable and affordable, where it’s easy to sell a home with a low risk of loss.”

She said that homes in Petaluma spend an average of 55 days on the market, compared with the nationwide average of 150 days.

A separate report from mortgage research firm HSH ranked the San Francisco metro area, which includes the North Bay, as 4th on a nationwide list of housing markets that have recovered the most.

The survey showed that the Bay Area’s housing market is 41 percent above its peak value before the bubble burst.

Factored heavily into that statistic, however, is the emergence of the tech industry and abundance of high-paying jobs. But those not involved in the tech industry — teachers, firefighters, nurses and other laborers — have watched as housing costs have risen much faster than median wages, forcing many to look for housing outside of Petaluma.

That reality was brought into focus recently as eight Petaluma families were served eviction notices at their Walnut Street apartment complex. The tenants said a new owner raised their rents by about $700 shortly after buying the apartment complex in mid-December. Tenants were then served 60-day notices to vacate their apartments on Feb. 2, even if they were willing to pay the higher rents.

The move underscores a growing trend in the local resurgent housing market, where investors have been snapping up apartment buildings and raising rents.

“We are seeing unprecedented wipeouts of low-income tenant complexes — often substandard, and often immigrant-occupied,” said Ronit Rubinoff, executive director of Legal Aid of Sonoma County, a program that offers free legal advice to renters. “Tenants are being turned out all at once in order to raise rents and in many cases, people are being issued eviction notices on top of huge rent increases.”

Only around 1 percent of rental properties in Petaluma are vacant, creating intense competition among tenants looking for somewhere to live. As a result, rents have climbed 40 percent in the past four years, according to Real Answers, a Novato real estate research firm.

Mayor David Glass said the city informally studied whether rent control and other tenant protection policies would be viable after Santa Rosa first took up the matter last year, but found it could cost the city about $1 million a year to implement and enforce.

“I don’t see the point of spending thousands of taxpayer dollars studying something that we just plain can’t afford,” Glass said. “Don’t confuse that with desire. My family lost our house when I was young, I get it. But the city’s finances are overly stretched, we’re bare-boned as it is. I don’t know what the solution is.”

(Press Democrat Staff Writer Angela Hart contributed to this report. Contact Matt Brown at matt.brown@arguscourier.com.)

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