The Sonoma County Income Property Report Q3 2023

2-4 UNITS S-\LES

The average sales price for the 3rd Quarter of 2023 was $997,395. This represents a -5.48% decrease from the period ending 2Q of 2023, and a 5.9% year-over-year increase from the 3rd Quarter of 2022. The average price per unit {PPU) for the 3rd Quarter was $478,588, which is up 77.7% from the 2nd Quarter of 2023, which recorded an average PPU of $374,623. The average days on the market {DOM) for 2-4 units in the 3rd Quarter of 2023 was 32, with 79 properties sold. This represents a -54% decrease from the prior Quarter and a -44% decrease in sales time from the same Quarter of 2022.

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As of this date, there are 47, 2-4 unit properties listed for sale in Sonoma County, 73 of which are under contract.

The average list price for the properties not under contract is $7,470,835, while the average list price for properties under contract is $889,790.

As discussed, the average sales price during the 3rd Quarter of 2023 was $997,395, while the average list price for properties under contract is presently $889,790. On average, the list-to-sale price differential has been 7-2% since we have been tracking this data. If this differential continues to hold true, we will likely see a Quarter-over­ Quarter decrease of up to -77% by the end of the 4th Quarter of 2023. While a -77% projected decrease seems ominous, it is important to note that the 4th Quarter historically brings slower market conditions. While we continue to report the Quarterly trends, the 72-month numbers provide a more accurate picture of market conditions.

All in all, the 2-4 unit segment continues to perform better than we expected, even in the face of interest rates exceeding 8%. Many investors prefer to buy now with less competition, believing that they will be able to refinance at lower interest rates as market conditions dictate. While institutional lenders are becoming increasingly reluctant to grant investor loans, local banks and credit unions are emerging as the true champions of this market, consistently extending loans when larger financial institutions hesitate.

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2-4 UNITS A VERA GE FOR SALE VS. SOLD PRICE Months of lnventOfy based on Closed Sales

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5 UNITS SALES Street Address 414 E 1st St

403 Butler Ct

405 Butler Ct 749 Mountain View Ave 2604 Petaluma Blvd N

730-734 Jefferson St

204 Sunnyslope Ave 327 Vallejo St 5185 Parkhurst Dr 752 Beaver St 1594-1596 Orchard St

5100 Roma St

615-617 Nason St 1029 St Helena Ave 3165 Wagner Pl 1523-1525 Shepard Ct 2855 Tachevah Dr 18465 4th Ave 17009 Cedar Ave

Area

Cloverdale

Cloverdale Cloverdale

Petaluma West

Petaluma West Petaluma West Petaluma West Petaluma West

Santa Rosa-Northeast Santa Rosa-Northeast Santa Rosa-Northeast Santa Rosa-Northeast Santa Rosa-Northeast Santa Rosa-Northeast Santa Rosa-Northeast Santa Rosa-Southeast Santa Rosa-Southeast Sonoma Sonoma

DOM Selling Date Listing Price Sales Price

79 18 18 57 32 40 22 26 44 51 12 18 6 0 17 28 31 66 46

9/6/23 8/15/23 8/15/23 8/16/23 7/7/23 9/15/23 9/1/23 9/8/23 7/19/23 8/28/23 7/21/23 8/25/23 9/18/23 9/1/23 9/26/23 8/15/23 9/29/23 9/12/23 9/18/23

899,000 725,000 725,000 899,950 1,100,000 995,000 1,100,000 1,150,000 1,250,000 1,300,000 735,000 1,250,000 675,000 1,625,000 649,000 799,000 1,350,000 779,000 995,000

875,000 715,000 715,000 845,000 1,100,000 950,000 1,120,000 1,150,000 1,235,000 1,200,000 721,500 1,320,000 746,000 1,625,000 665,000 799,000 1,345,000 765,000 945,000

OP/SP%

92.2 98.62 98.62 84.92 100 95.48 101.82 100 98.8 92.31 98.16 105.6 110.52 100 102.47 100 99.63 91.62 94.97

Bigs Units 3 2 1 2 1 2 1 2 5 2 2 1 2 1 0 2 4 1 4 1 1 2 0 1 1 2 2 2 1 2 1 2 1 4 3 2 2 2

MARKET CAP RATE Marl<etGapRete•

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As is our usual practice, we refrain from analyzing the sales trend data for properties with 5 or more units due to the low volume and significant variance in the types of properties sold, especially for the larger apartments.

Rather than focusing on the sales trend data, we find it more useful to monitor the average price per unit and cap rates, as they provide the most predictable metrics.

The 3rd Quarter brought 70 sales, with an average days on the market of 737. The average cap rate was 4.74%, and the average price per unit was $374,072. The average cap

Source -Costar

rate in Q2 was 4.9%, while the average price per unit was $275,295. Overall, these figures indicate that the market continues to sustain an approximate 5% capitalization rate.