Coast real estate boom frustrates renters, employers — but few want to leave

FORT BRAGG, 5/3/21 — A pandemic era real estate price boom on the Mendocino Coast has thrilled home sellers, frustrated buyers, employers, and even some agents — and made renting more difficult and expensive for working people. There are also fewer houses being built or becoming vacant on the Coast than inland or most of the rest of the state, which show up in the state and local figures of shrinking number of closed sales, fast rising prices and shrinking inventory.

After a period of fear at the start of the pandemic in 2020, the upward march has been steady and the market has finally eclipsed the Coast real estate boom that ended in 2007, real estate agents say.

The real estate market on the coast has rocketed under during the pandemic with two primary factors: a slew of Bay Area remote workers with lots of money, and an old guard of Coast residents who have no interest in leaving their scenic and pleasant homes. The result has been an even tighter real estate market than in comparable spots across the state. The increasing number of vacation rentals has also made life tougher for renters.

The fact that so few people want to leave the Mendocino Coast has so far thwarted the forces of gentrification, while contributing to a housing shortage for those currently searching for either rental or housing to buy. Another fact that has kept houses off the market is that sellers have not wished to expose themselves to strangers during the pandemic, real estate agents say.

“A lot of people aren’t ready or willing to leave, “ said real estate agent Rob Borcich, owner of Mendocino Pacific Real Estate “So what, that you can get an extra hundred grand for your house? Let’s say you had a $350,000 house are you now getting another $100,000 or even $150,000 for it. That kind of thing is actually going on in the city limits of Fort Bragg. Now you have an extra $100,000. What are you going to buy to replace it with? Everything is going up and people really like to stay on the Mendocino Coast when they get there,” said real estate agent Rob Borcich, who works in both Ukiah and on the Coast.

Another factor in the tight and hot market is very little new housing has been built on the Coast in the last decade. With the support of the city of Fort Bragg, a Humboldt county developer, Danco, is in the process of building a 69 unit project which includes a mix of senior, supported living and affordable units. The project, called The Plateau, is located on South Street near Adventist Health Mendocino Coast Hospital. Very little else is being built or is even proposed on the Coast even as demand surges. The housing situation is even tighter on the South Coast.

Mendocino Coast residential property sale prices have risen steadily since last June and have marched to all time highs in April 2021, statistics from the Coastal Mendocino Association of real estate agents (CMAR) show. The pandemic, new ways of working remotely and low interest rates are being credited with creating the boom.

Rental housing prices have also risen to new highs while the quality and quantity of rental property has fallen to new lows, renters say. The inventory of both for sale and for rent homes is way down, despite the big rise in demand, creating frustration in both home buyers and renters.

Statistics show that people who are here in Mendocino County as homeowners increasingly want to stay, despite the fast rising prices. The number of completed sales is actually down in Mendocino County 18.8%, while most of the rest of the state has been selling more homes as well as also selling homes faster and at higher prices, according to figures provided by the California Association of real estate agents (CAR). Fewer homes have been coming onto the market than when prices were lower. Year over year California and local home prices are not increasing quite as fast right now as they did starting in the summer of 2020 through the end of the year.

The tight market has locked out many people who want and need to live here. Jessica Fraidenberg fell in love with the Mendocino Coast when she came here last year with her chef husband and two children from Washington state, hoping for a less crowded place to escape the pandemic.

“With a minivan packed beyond a reasonable limit we drove all night to get here for Paul’s final interview. The smell of the trees coming over the crest into Comptche was Divine. My heart rose up to meet the life and hush that surrounded us. It was love at first sight! Thankfully Washington will forgive me for thinking this space is close to its equal in beauty,” she said, in an email interview.

But then it came time to look for housing.

“The landing was less smooth. Our little family of four was homeless and camping on the beach for just over a month. Luckily for us I had worked with the niece of a Little River land owner and we financed a trailer,” she said.

“Over the last eleven months we have applied for rentals, talked to every person we encounter and begged…yes, begged for a real place to call home. Recently out of an act of desperation I placed a reverse ad on Facebook. I have had over 900 people look at it. It’s devastating that over 900 people in a few days have been looking for affordable housing. It’s devastating knowing that even with all my efforts we are still technically homeless. And not because of a lack of income or some other ridiculous restrictions. Just simply, there isn’t enough housing for the amount of people. “

An informal survey of real estate agents, home buyers, sellers and renters indicates the upswing is causing further gentrification toward affluent retirees, people with second homes and those with jobs that allow for telecommuting. Rental property is further impacted by increasing numbers of homes being sold to those relocating from the Bay Area or turned into lucrative vacation rentals via services like Airbnb.

When a desirable home comes on the market there is no telling just how much it will bring.

Real estate agent Ann Beth “AB” Priceman, with Garden Ranch Real Estate, had sold a home for $550,000 to people who had to leave and go back where they had come from after just a year. They put the home up for sale for $650,000 last summer and sold it immediately. But a $100,000 gain in just one year isn’t uncommon.

Priceman lost out when one home seller asked her for a value, then a few weeks later got a higher value from another real estate agent.

“If she had come back to me, I would have told her the higher price then. Prices are rising so fast, it’s hard to keep up,” Priceman said.

“We have a lot of agents working a lot harder and buyers who are frustrated because there is not the inventory out there that they want to buy. There are a lot of people with cash who can’t spend it,” said real estate agent Scott Roat, who has practiced real estate locally since 2005.

Roat saw one home go for more than $200,000 over asking price on the South Coast, with such overbids once unthinkable on the Coast. He said overbids in the past were usually by a few thousand dollars just to show the buyer was serious.

Shelly Long-Welborn purchased a home in Irish Beach in August at what seemed like too much money. She is a real estate agent in the Sacramento area escaping to a dream home and rolled the dice, based on the trends.

“It was competitive then like it is now. Everything that comes on the market here sells in like a week with 10 offers made,” she said in a telephone interview. The property has gained $100,000 in equity just since August she said. It’s a whole different world than a few years ago when Coast real estate would sit and sit. “ The agent told me they used to have three year listings,” Long-Wellborn said. 

When the pandemic hit, welder Kyle Larrain thought of escaping the Bay Area to a safer place, a seemingly sleepy rural Mendocino Coast.

“I had a warehouse shop for my tools that I moved to Mendocino during 2020. I wanted to move out of a shared space in the Bay Area to a space I could occupy myself to be less exposed to COVID. I had thought housing would be easier to come by so I moved the tools first,” Larrain said.

While he found space near Albion for his welding shop setup, finding a home to rent was a much bigger challenge with very few units available, especially on the Coast. 

“I’ve been looking for something for the last five months. I looked at a few places and could have applied to one but $900 for a studio with missing floor boards, no kitchen and garbage and abandoned cars in the yard was just not worth it. Anything decent seems to get grabbed up really quickly by the most appealing applicant. The landlords I’ve spoken to sound very picky and have a take it or leave it attitude. Camping in my car around the area seems to work out when I need to and I use hotels in Ukiah to shower, but can’t afford it nightly.”

A request on the MCN Listserv  brought two dozen people willing to tell these stories, including families, working people and even those with money to buy a home. With prices going up and offers being made above asking prices, those with cash are king. Home financing maxes out at the appraised value of the home, meaning that people need cash to pay more than that.

“Those who have the cash to make up the difference get the home when multiple offers are made,” said Long-Wellborn.

While the pandemic broke many people financially, others are flush with cash after having their lives put on hold by multiple lockdowns and not spending money on travel, in person shopping or eating out..

The real estate boom, also taking place countywide and statewide, pushed the median sale price of a Mendocino Coast residential property to record local highs, hitting $532,500 in March, according to the Mendocino Coast Association of real estate agents. 

Although the sample size of 28 sold listings in March 2021 (versus 21 solds in March 2020) is too small by itself to indicate a trend, it’s part of a big pandemic upward swing in price that came after a period of fear ending in June 2020. Priceman remembers the apprehension homeowners initially had about buyers and COVID. Tours, open houses and other real estate selling activities were quickly canceled and new paperwork and selling protocols came into effect. There are currently efforts to reinstate open houses and other once normal activities being considered by the California Association of real estate agents (CAR). Buyers and sellers both had to sign new acknowledgements about risk. Sales were actually way off March through June 2020, then took off like a rocket in July of 2020. (With the time escrow takes figured in, the turnaround really began in May). Home sales on the Coast went from 61 closings July through September of 2019 to 133 on the July through September 2020 calendar.

But higher prices have simply not encouraged greater numbers of Coast homeowners to list property, as supply of homes coming onto the market shrunk year over year for most of the pandemic months despite rising prices and reports of people making offers above asking prices, something that had not been part of the Mendocino Coast real estate scene previously, local real estate agents say. A total of just 253 homes came onto the market in 2020, versus 283 in 2019. With more going out, that means much old inventory sold, leaving slim pickings and competition for real estate buyers.

“I have some buyers who have put in 2 or 3 offers and they keep getting overbid,” said Priceman, who has been in real estate since 1999 and locally since 2005. While this is common in San Francisco and some other parts of the Bay Area, properties had rarely for more than asking price until the pandemic hit, local real estate agents said.

Local real estate sellers attribute the big upswing in prices to both low interest rates and people ready and able to flee more crowded areas due to COVID and the great increase of working from home.

Roat said he is seeing younger buyers during the boom. He said news such as the arrival of Starlink satellite service and other improvements to internet access are crucial to some of these younger buyers.

The questions used to come from people about to retire about health care and the cultural life on the Coast, but that has changed.

“Now it seems to be can I work from home? Can I get broadband here that will work for me?” Roat said.

“The people coming here now have probably dropped a decade. They may have gotten through their 30s and have amassed some money. They don’t want to be in the congestion anymore, they may be tired of things like their cars are getting broken, into and they just decide to leave the city and come here.”

Many of the sellers have traditionally been people in their 70s or 80s who moved to the Coast in their 50s or 60s as part of a lifelong dream to ‘do this before they died,’” Roat said.

“Now they are thinking more about health care and moving for that reason, and to downsize,” Roat said.

Is gentrification happening? Gentrification is when a newer, more affluent class of buyers remakes a community. It is particularly controversial in areas where poor or minority communities are forced out. On the Coast, the concern is that essential workers will not be able to afford rental housing or housing to buy.

One thing that defeats Coast gentrification is the low supply of properties available. What won’t move out can’t be gentrified. Roat pointed out that many long time residents never put their homes up for sale, no matter how high prices go. Some Coast real estate listings get sold over and over, while many others never sell.

“The number of people moving is not a critical mass of people to change our lifestyle and our way of living our lifestyle, a Mendocino lifestyle that’s pretty entrenched, “ Borcich said. 

Regular surveys of rental properties on Craigslist and other local classified sources show a definite price rise between April 2020 and April 2021. There are fewer Coast rentals on Craigslist in April 2021 than there were in April 2020

Ingrid Noyes moved to the Coast from West Marin five years ago because she could no longer afford to live where she grew up.

“So now I’m here, and it’s nice here, just a little far away from family and a lifetime of friends,” she said. Then just after lockdown hit last March she had to relocate with 60 days notice.

“The prices here have gone up noticeably even just since I’ve been here. It’s already starting to go the way of West Marin here. I thought housing prices would come down this year — not! Instead city people are moving here even more and driving prices up, at least so it seems,” Noyes said.

Welder Larrain doesn’t think he can keep his business going in Mendocino county.

“I’ve lived in California for 20 years and have lived all over. The housing situation here is the worst I’ve ever experienced. The lease on my shop is coming up later this year and I’m going to move out of the area before I get any more invested. Inability to find housing is a real problem for trying to grow into a business. It’s hard enough already.”

Employers say bringing people to the Coast is made more difficult by lack of housing.

Renee Kaucnik, human resources manager at Redwood Coast Medical Services (RCMS) on the South Coast said they actively place ads to help workers find housing.

“Last year we lost two employees, one bi-lingual, which we cannot afford to lose, due to not finding housing and one being displaced because the owners of the rental they were in decided to move to the area themselves in order to leave the city during the pandemic,” Kaucnik said in an interview by email.

She said the growing stock of vacation homes is a major obstacle for workers.

“There are multiple homes used for vacation rentals. The owners may not realize the impact on this community for having so many vacation rentals versus long-term rentals available, but if they’ve spent any time here at all, they must know of RCMS and realize it takes people to run this operation. Other business owners in our area have the same issue. Another obstacle is the unrealistic cost of a rental. Unless we are talking about an ocean-front, nicely appointed home, the amounts charged for rentals here is usually out of reach for 50 to 60 of my 75 employees,’ she wrote.

Landlords have such a great position they can be very picky about who they want.

“Surprisingly people have offered their rental information for one of our ‘doctors’ to use and when I tell them I have many other staff (RNs, MAs, admin staff to support the clinical staff, etc) who need housing, they become less enthusiastic and less cooperative. However, there have been times where providers were hired and ready to come to work for us, including doctors and a dental hygienist, but ultimately declined our offers because of no available housing,” she said in an email.

Ukiah has a much different situation, with much more housing available but prices still rising, Borcich said. He said Ukiah once was the cheaper sister of the Coast, but those days are gone thanks in part to the attraction of farmland and vineyard land to investors.

The California Association of real estate agents said all 51 counties tracked by C.A.R., including Mendocino and all surrounding counties, reported a gain in median price on a year-over-year basis. Statewide, active listings fell 51 percent in March from last year — the third consecutive month that listings declined more than 50 percent. On a month-to-month basis, for-sale properties inched up by 5.3% in March and should climb further in the coming months as the market moves into the spring homebuying season, while the economy continues to improve, C.A.R reported in a press release.

The available supply of homes for sale continued to tighten up across the state, with all major regions near their record low levels. Forty-nine of the 51 counties reported by C.A.R. recorded a decline in active listings on a year-over-year basis in March, and 30 of them dropped more than half of what they had a year ago. San Francisco (95.3%) and Sonoma (8.7%) were the only counties in California with an increase in active listings from the prior year, C.A.R reported. The median number of days it took to sell a California single-family home hit a record low of 8 days in March, down from 15 days in March 2020. The per square foot price of a single-family home remained elevated. At $357, March’s price per square foot was an all-time high. The price per square foot was $288 in March a year ago. The 30-year, fixed-mortgage interest rate averaged 3.08% in March, down from 3.45% in March 2020, according to Freddie Mac. The five-year, adjustable mortgage interest rate was an average of 2.78%, compared to 3.16% in March 2020, C.A.R reported.

When will it all end?

Borcich said concerns about inflation could mean a correction in the market in six months to a year, as the economy gets hotter and money more expensive.

“I think it’s going to be sooner. It’s going to take some move by the Fed. When you have an interest rate as low as 3%, it opens up the market to an extra 20% of the population. But if interest rates rise by a quarter or half percent, that’s going to put a lot of people out of the buying qualification,” said Borcich.

(Frank Hartzell worked for Borcich as a real estate agent in 2007–2008).

The post Coast real estate boom frustrates renters, employers — but few want to leave appeared first on The Mendocino Voice | Mendocino County, CA.