We are looking at a bifurcated wine country real estate market in 2024. A stronger economy along with improving interest rates generally bodes well for real estate. In contrast, the wine industry is struggling.... Read more
First things first, Happy 2023! Another year to enjoy this beautiful area we call home. With more than two decades of selling wine country real estate, I am still in awe of our backyard. The dynamic landscape is a constant reminder of the amazing diversity throughout Sonoma and Napa Counties, from the Pacific Ocean along the Sonoma Coast to the top of Mount Saint Helena in Napa County, and everything in-between. This is what makes our region (and wine) so special. More on that later.
Green Shoots vs Dead Wood
There is reason to be on the look-out for green shoots of optimism amid the doom and gloom of high inflation, high interest rates, a multi-year drought and lackluster sales of lower end wine. Believe it or not, now might be just the time to start looking past the dead wood.
When it Rains it Pours
Rain, lots of rain, too much rain, enough rain to fill the reservoirs and give our groundwater a boost. Certainly not a drought buster, but the recent storms have taken some pressure off water concerns for the meantime. I raise a toast to those of you who have been doing a rain dance. Keep it up, we need more rain before the end of the season. Let’s keep this party going for at least a few more months, our aquifers will be better for it.
Pain in the Supply Chain
As a result of the pandemic and associated supply chain issues there is no denying the higher prices on most goods and services. This has spread across the economy resulting in a period of high inflation. The Fed has aggressively raised interest rates to combat inflation making borrowing more expensive. As a result, the broader real estate market has taken a hit.
The good news is the worst appears to be over. Supply chain issues are easing up, inflation has slowed significantly, and the Fed appears to be tapping on the brakes for new hikes. Mortgage rates have been dropping for months from their peak in November. There is even some speculation that the bottom may be in for the real estate market. This remains to be seen but one thing is certain, quality matters.
One word that comes to mind when thinking of Napa and Sonoma is quality. People want to invest in quality. People want to live amongst quality and people want to share quality with their friends. In other words, people want to purchase quality real estate. The truth is, sometimes people find themselves in a situation where they must buy. For instance, the clock ticks on a 1031 tax deferred exchange and investments need to be made. Sometimes high-quality vineyards, vineyard estates or wineries fit the bill, strategy and /or dream.
You’ve Got Questions, We Have Answers
Whether it is a lifestyle buyer looking to build a home among the vines, a commercial investor looking for passive income or a winery that wants to better control cost of goods many of the same questions pop up.
Which varietals are in demand? Recently Sauvignon Blanc has been very popular while Cabernet and Pinot remain strong sellers in Napa and Sonoma Counties. Age and condition of the vines are also vital. A proven track record of production and pedigree can make a difference. What type of soils are on site? Water? Who has purchased the fruit in the past and for how much? Are there current contracts? Is it a vineyard designate? Are the grapes made into a standalone wine or a blend of multiple vineyards? So many factors, but one of the starting points is the location or appellation / AVA.
Location, Location, Appellation
The Appellation or AVA (American Viticultural Area) is a precise region. The region is set within boundaries created using variables that are unique to the specific area. Per the Alcohol and Tobacco Tax and Trade Bureau (TTB), “An AVA is a delimited grape-growing region with specific geographic or climatic features that distinguish it from the surrounding regions and affect how grapes are grown.”
So Many AVAs So Little Time
You could almost say that an AVA is the big brother of terroir. In many cases distinct grape varietals are known for being grown in certain AVAs. In other words, certain grape varietals naturally correspond with a particular AVA. For instance, a budding connoisseur might look for Cabernet grown in the Howell Mountain, Mt. Veeder, Oakville, Alexander Valley, Moon Mountain and Knights Valley AVAs among others. Chardonnay and Pinot Noir are known to excel in the cooler climates of the Sonoma Coast, Russian River and Carneros AVAs. Zinfandel from Dry Creek Valley is a no brainer but then there is always the exception to the rule, Zinfandel from the Russian River AVA is killer. Let there be no doubt that numerous varietals can do extremely well in a multitude of AVAs. Even so, it would be hard to find a Carneros Zin. Nuance lives large in wine country.
What’s Your Favorite AVA?
AVAs most certainly have their own personality traits. People have their preferred AVAs, almost like rooting for a favorite football team. They debate which film takes the crown for best movie or contemplating the difference between Picasso and Monet. Ultimately, the way we interpret wines from different AVAs is impacted by a combination of science, art and our individual personal taste. The passion that goes into these conversations can be quite amusing. Then there is the question, which AVA came first?
Which AVA Came First?
|Napa County AVAs Introduced
|Sonoma County AVAs Introduced
|Dry Creek Valley
|Wild Horse Valley
|Stags Leap District
|Russian River Valley
|Pine Mountain - Clvd Pk
|Oak Knoll District
|Moon Mountain District
|West Sonoma Coast
Changes Over Time
As time goes on, we further define and differentiate one area from another. It is interesting to look back at when various AVAs were introduced. It all started back in 1981 with the introduction of both the Napa Valley and Sonoma Valley AVAs. Napa Valley beat Sonoma Valley to the punch by about 10 months. 1983 was a big year, especially for Sonoma County introducing Dry Creek Valley, Los Carneros, North Coast, Chalk Hill, Knights Valley, Russian River Valley and Green Valley AVAs. Over in Napa County, 1983 introduced Los Carneros, North Coast and Howell Mountain. Napa Valley really stepped up their game in the 90’s adding Mt. Veeder, Atlas Peak, Spring Mountain, Oakville, Rutherford, St. Helena, Chiles Valley and Yountville.
A Long Break
Interestingly there were no new AVA’s in Sonoma County during the 1990’s. Since then, there have been no fewer than 12 AVAs added to Napa and Sonoma Counties. The most recent addition is the West Sonoma Coast, made official May 5, 2022 for Sonoma County and the Coombsville AVA in back in 2011 for Napa. All together there are a total of 36 AVAs in Napa and Sonoma combined. Sonoma County has 20 AVAs while Napa County checks in at 18, (North Coast and Carneros overlap both counties). So much for keeping it simple.
The diversity among AVAs is one of the things that makes our region so interesting and special. I am reminded of these characteristics with every glass of wine and am grateful for it every day. As we raise a toast to our region keep an eye out for more green shoots.
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