Cloverdale Market Report - January through August 2011

Real Estate Agent with Healdsburg Sotheby's International Realty

Cloverdale is a classic small town at the northern end of Sonoma County. The Alexander Valley appellation, a famed wine country designation, begins in Cloverdale. The housing boom was unkind here. Multiple developers projected strong growth for residential housing in Cloverdale and a multitude of projects were started in the early part of the 21st century. Many, like the Del Webb senior housing community, were finished long before the housing bubble collapsed. Others, including "The Brambles", a lovely development by Christopherson Homes, were finished just in time for the first buyers to get into their homes right at the peak of the market. Ouch! Most of the original buyers are licking their wounds elsewhere as their dream homes were foreclosed on or sold as short sales. Both the bigger homes and more modest neighborhoods were hard hit.

Cloverdale Market ReportSigns of the recovery are evident if you can glean data nuggets from charts that have too few data points to be completely meaningful...and if you know how to read the MLS data on active, contingent, pending, and sold properties.

This Cloverdale Unit Sales by Sales Condition chart shows the strong presence of REO transactions in the market. The dark brown bar represents well over half the sales in January, February, and March. Cloverdale REO sales are still strong in April, but during the summer months, there was in increase in short sales as a proportion of the market. The big change comes in August when normal, unstressed sales make up more than half the market. In addition, the volume of sales hit 24 units in August when the previous highest figure for this year was 17 home in March. It's not clear if this burst represents pent up buying, but there are some signs from the MLS that residential sales activity has continued to be strong in September.

Cloverdale Residental Sales StatusThere are currently 83 listings for single family homes in Cloverdale. 30 of those homes are either in escrow or have closed this month. At that rate, there are less than three months of supply, a condition that most observers would call a seller's market.  In the most desirable neighborhoods like the Brambles, homes priced well are selling even faster. It's too small a sample to be statistically important, but in the Brambles one listing just sold, three are contingent, and one is active. 

A few things are clear. As a seller, you still have to be aggressively priced to get offers. The presence of high quality, newer homes at bargain prices puts a lot of pressure on sellers who want to get top dollar for their smaller, older homes.

Eager buyers are present in the market. They are attuned to current values and will snap up properties at the prevailing selling prices, particularly the deluxe models that are selling at a bigger discount from their original price. Many buyers are grabbing second homes. Investors are picking up single family homes that will generate positive cash flow. First time buyers are able to move into nice condos for far less than the cost of renting would be. 

I was brave once, and called the bottom of the market in April of 2009 here on ActiveRain. I was lucky and we have been bumping along on a plateau ever since then. What I'm seeing in Cloverdale is the emergence of buying pressure from people who think now is a great time to get back into the market. Prices will always fluctuate, but home prices have been squeezed until all the fat has been wrung out of them. I see Cloverdale today as an excellent buying opportunity for both investors and people looking for a nice town to live or vacation in.

Comments (7)

Lisa Dunham
Alexandria, VA
Associate Broker, Alexandria Virginia Real Estate

A very comprehensive report Dave!  It definitely looks like August was an aggressive month for home sales, particularly regular home sales, in Cloverdale.  Nicely done!

Sep 22, 2011 02:03 PM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

Good graphs and depictions of the market, Dave. I think we will stay at the bottom for a long time, bounce around a little bit. I also believe short sales are not going away anytime soon. I tell my clients that they do not have a job security -- that the only person I see with job security in this marketplace is me, a short sale agent.

Sep 23, 2011 03:54 AM
Dave Roberts
Healdsburg Sotheby's International Realty - Healdsburg, CA

Elizabeth - until we get strong job growth locally, statewide, and nationally, I don't see where a big push in demand is going to come from. There's nothing on the horizon to indicate a strong recovery, so I have to agree that you are probably more secure than almost anyone else. 

One small ray of hope was the proposal to let homeowners that are current on their Fannie and Freddie mortgages refinance into 4% loans with a simplified plan. That might have taken some short sellers out of the market as their payments became more affordable. Unfortunately, the FHFA doesn't want Fannie and Freddie in that game, so we're probably not going to see that plan. Too bad, since it seems both simple and smart. 

Sep 23, 2011 04:32 AM

As always good graphs Dave. But I'm not sure if your bottom call is holding up as well as you think. We're certainly bumping along but I'd say the trend is down.

The Christopherson development you cite is a statistically small sample, but there was a home that sold in the spring of 2009 in the neighborhood for $420,000. Do you think it could command this price today? Moreover if you look at all the sales in Cloverdale over the last 3 years you'll see that sales under $100k were virtually non-existent in 2009 and are much more common today.

An even better indicator is looking at large developements in Windsor, Santa Rosa, and Petaluma where the homes are nearly identical and plotting out the sales prices. Again, you'll see the trend is down.

That said, the fact that prices have come down since 2009 (my interpretation of the data) lends support to your conclusion: now is a (better)* time to buy. [Sorry but can't agree with 'excellent' unless it relates to two unique circumstances I outline below]

I'm still advising anyone that still pays attention to me to hold off unless 1) you find the place of your dreams or 2) you don't have much to put down and would like to take advantage of a low down-payment govt backed loan (while they last) at phenomenally low rates (while they last).

I shutter to think what would happen to the housing market and economy in general if rates were to shoot up (take a look at what's happening in Europe). However, I've been so bad at predicting interest rates I should probably give up. If rates on 30Y mortgages stay at or below 4% (still hard to believe!!!!) then you're correct that housing could be a good investment if you're in it for the long-haul, especially in the sub-$300k levels. 


Sep 30, 2011 10:00 AM
Dave Roberts
Healdsburg Sotheby's International Realty - Healdsburg, CA

HHB, nice to hear from you. As always, you have interesting comments about the market that I don't fundamentally disagree with. My market call of the bottom may still be intact at the low end, but there has been continued softening at the higher end. I see it as a market compression with less spread between price ranges. If the spread between the second and fourth quintiles was $200,000 in 2009, it might be down to $100,000 now while the lowest quintile has been relatively stable since then. I may run that analysis, but I think your general sense of softening is probably accurate. 

I also agree that rates are phenomenal right now. My latest buyesr just closed with a 3.875% rate for a 30 year fixed loan.  For the first time in a long time, an investor can purchase a home in Sonoma County and rent it to generate positive cash flow. Not every home. Not every market. But it's possible.

I welcome your continued acute observations of the market. I was just reading Winston Churchills eulogy for Neville Chamberlain.

It is not given to human beings, happily for them, for otherwise life would be intolerable, to foresee or to predict to any large extent the unfolding course of events. In one phase men seem to have been right, in another they seem to have been wrong. Then again, a few years later, when the perspective of time has lengthened, all stands in a different setting. 

That captures the essence of your interest rate prognostications and half of what I think on any given day. Right or wrong is almost irrelevant. We both come by our thoughts honestly.



Sep 30, 2011 02:13 PM

Great quote from Churchill. Those three sentences are more eloquent than anything I've ever written in my life. [That thought reinforced as I see I spelled 'shudder' with two t's. Cue pounding head against keyboard].

But part of the reason that we can't foresee or predict unfolding events is our inability to predict outliers. Nassim Taleb has made a living stressing this point over the last decade. Something I've come to realize is that our debates at the margin are not what's truly important. It may turn out that a prospective home buyers saves 10% by listening to me, or gains 10% by listening to you... we will find out in a few years. Either way those are not life shattering events to those who might take our advice.

What scares me is the outliers. When things go haywire they do so rather quickly given that no one sees them coming. As I mentioned above look how quickly places like Ireland have gone from 4.5% rates to 13%! []

Not that we can predict these events or even should live our lives as if they could happen. The bottomline is if the future confines itself to the realm of our discourse (housing will slowly decline/housing will slowly discover) that's a big sigh of relief for all involved.

Thanks again for the exchange. Always entertaining...

Oct 03, 2011 12:03 PM
Dave Roberts
Healdsburg Sotheby's International Realty - Healdsburg, CA

I agree with your bottom line. If we can stay between the white lines, we'll be fine. I think Nassim Taleb has made a brilliant splash with his ideas, but there's simply no way to live by planning for the outliers. 

Someday when HHB wants to share a bottle of wine for a leisurely discussion of these topics, I'll buy.

Oct 03, 2011 01:32 PM