Despite fears of another recession and worries over a high unemployment rate, the Petaluma housing market remains stable with room for growth, according to many real estate brokers in the city.
Many brokers are pegging their bets on long-term growth in Petaluma, eyeing the widening of Highway 101, the SMART rail line, job growth via retail developments and and new home development hitting capacity they believe will help home values recover.
“Petaluma being a very desirable place to live will keep demand increasing,” said Paul Claeyssens of Leading Edge Properties. “Today, nearly all the housing that can be built has been built. The pricing is going to go up.”
The city's general plan limits the areas that can have housing developments, according to Claeysses, with most of the city already filled in, including the KB Homes development on Petaluma Boulevard South.
More housing is also expected with the development of the land around the downtown SMART station.
“When the commute to Marin and San Francisco becomes easier, that will be the boondoggle for us,” said Rick Warner of . Knocking 20 more minutes off a drive each morning should increase housing demand, according to Warner.
“The logic is super simple: it’s supply-and-demand,” said Warner.
But while hope springs eternal for higher pricing to come, the current housing market in Petaluma still falls squarely on sales of homes valued under $400,000. First-time homebuyers make up the bulk of these transactions.
“Young families in their twenties and thirties can buy now,” said Peg King of . “Before, they were priced out.”
King still sells about 60 to 75 homes a year, like she did during the market’s peak years of 2003 to 2006. But she makes about two-thirds to even half her previous income, mostly due to lower home prices.
The median price for the 313 homes sold between January and July of this year is $367,000, down from the median of $416,000 seen over the same period in 2010. While that doesn’t mean all home values in Petaluma have dropped in that same span, it does suggest that home sales remain dominantly in that below-$400,000 price range.
Brokers point to historically low interest rates as keeping the number of sales up, but Federal Housing Authority (FHA) loans have acted as a double-edged sword on pricing. On one hand, the down payment on an FHA loan is only 3.5 percent of the sales price. But the loan limit for these types of loans is $417,000, a threshold few buyers want to pass.
“There are two different markets,” Warner, of Keller Williams, said. “Normally, that above-$417,000 market has historically been people moving up.”
Those people who generally “move up” to bigger homes aren't doing so at the moment because bank loans, which require 15 percent down payment, are generally needed after the $417,000 loan threshold. Worries over the economy and the end of homebuyer tax credits have also slowed sales of higher priced homes.
Also keeping home values down are foreclosures and homes sold by banks. Bank-owned properties in Petaluma sold for an average of $324,500 in 2011, about $77,000 less than the average non-bank sale of $401,000 during the same period. Still the total number of homes on the market appears to be dwindling, giving some hope that the low prices will turn around soon.
“Every year I start thinking, ‘this is the year that it all comes back,’” King said.
For now, brokers have accepted the new reality of the housing market and plan to move forward. Some are very optimistic that things should turn around soon. Claeyssens sees the recession nearing an end, despite recent setbacks, and says that Petaluma is past the peak of foreclosures. For him, and many brokers, they have to believe that increases in home values in town are inevitable.
“Demand is increasing no matter what,” Claeyssens said.