Transitional Market – Napa & Sonoma County Real Estate On The Move

February 2013

Are we there yet? Do you know where we’re going? Where exactly are we anyway? All reasonable questions we might hear from a “fidgety” friend when heading across town or getting lost on the way to grandmas house. Since we’re not here to talk about heading over to grandmas house for a slice of apple pie, how do these questions relate to the real estate market? For one, we’re almost always traveling from one end of the spectrum to the other between a buyers market and a sellers market in real estate. And in a general sense we can determine the direction of the market. But, there are times when Buyers and Sellers may not actually be aware of what direction the market is headed and why. Especially when there are different types of buyers and sellers, industry and lifestyle. Today we’re going to delve into some of the mysteries of the transitional real estate market.


Are We There Yet?

This question is the most obvious to answer in extreme situations for both buyers and sellers markets. For a buyers market (where in the market presents the greatest opportunities for buyers) a great example would have been the last few years with very depressed prices from the high in 2008 combined with extremely low financing rates. Buyers who have had cash or the financing have had a field day with picking up numerous real estate assets for a fraction of the prices they were receiving just 5 years ago. This is an obvious sign that we were in a rock solid buyers market over the last few years. Sellers on the other hand have been taking it in the shins until recently as prices in wine country and throughout the Bay area have begun to rise and inventory has been limited compared to the recent past. Places like Silicon Valley and San Francisco are firmly in the grips of a sellers market while some of the more outlying areas haven’t quite arrived, but appear to be on their way.

Do You Know Where We’re Going?

This is a great question and one where I think I can provide some direction. The short answer is up! With real estate as a whole having been through such a downward spiral since 2008, numerous opportunities presented themselves whether it was residential, vineyard, estate or wineries. We saw a record number of vineyard and winery foreclosure sales through 2011 in both Napa and Sonoma Counties. Since then, foreclosure and distress sales have become much more rare. We’ve also seen the economy and wine market improve substantially albeit slowly and there is a noted long term wine grape shortage that has driven up grape prices. This combination has had a direct effect on the value of vineyards, plantable land, and all sectors of real estate in wine country. The result is that numerous industry participants have been playing monopoly and picking up prime vineyard and winery related properties before values take the next leg up. It’s safe to say that when the industry players are making big moves, it’s a good time to buy and values should be going up from here. This list below shows just some of the industry type sales over the last year.

Property Type
138 Acre Gaps Crown Vineyard, Sonoma Mountain
Kosta Brown & Kistler
Silverado Hill Winery, Napa
Laird Estate
125 Acres – 80 Acre Vineyard, Somoma Valley
880 Acres with Plantable Land, Pine Mountain – Cloverdale
Jackson Family Wines
200 Acres Sara Lee Vineyard, Russian River AVA
Jackson Family Wines
350 Acre Ramal West Vineyard, Carneros
Jackson Family Wines
Ramal East Vineyard, Carneros
Foley Family Wines
Lancaster Estate Winery & Vineyards, Healdsburg
Foley Family Wines
32 Acre Vineyard & Winery, Rutherford Napa
Hall Family Wines
87 Acres – 70 Acres Of Vineyard, Rutherford Napa
Frank Family Wines
Sausal Winery & Vineyard, Healdsburg
Silver Oak Winery
Valley Of The Moon Winery & Vineyards, Sonoma
West Cost Wine Partners
Mark West Wine Brand ($160m), Sonoma
Ridgeline Vineyard, Alexander Valley
Hess Wine Production and Warehouse, Napa
Broadstone Net Lease
Pezzi King Winery & Vineyard, Healdsburg
Wilson Wines


Where exactly are we anyway?

The list above gives some indication of where we are in the market. The industry players are definitely taking the position that now is the time to buy because prices are starting to go up and there’s enough optimism going forward in the wine industry and wine country to project a positive path towards the future. This is noteworthy regarding the transitional nature of the market and a point that lifestyle buyers should understand and take advantage of. In this scenario, with increasing prices and increasing demand it has taken on the direction of a sellers market (where in the market presents the greatest opportunities for sellers). Even so, I would caution sellers against pricing their vineyards, estates and wineries at unrealistically high prices as we are not yet in a rock solid sellers market in wine country.

The lifestyle buyer on the other hand has a different motivation for a wine country purchase from that of an industry player. Most of the time the buyer for a wine country / vineyard estate is drawn in through the romance, the beauty and the lifestyle but ultimately has to battle rationale in the final round of decision making. Having a strong wine / vineyard / grape sales market makes that decision much easier / logical. That said, it takes time for the word to spread beyond Napa and Sonoma about the turn around in the wine country market. Many buyers are still looking for a great deal because their local real estate market is still depressed. I have to tell them that train left wine country a couple of years ago. Then I have to work on changing their mindset to finding value and appreciating the upside that the turn in the market will provide. We’re fortunate to be an important part of the bigger Bay Area picture that is enjoying a resurgence due to the power and

ingenuity of Silicon Valley, the financial center and tourism magnet of San Francisco, the natural beauty and abundance of our region as well as all of the other amazing things that make this such a great place to live. The market is in transition and we should all be benefiting in one way or another. So where are we, you ask? As far as I’m concerned, we’re in the best place in the world!

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