Here in the "Wine Country" of the North Bay of San Francisco, affordability is hitting "Crisis" levels. We are seeing business groups openly asking the question--"Where will are people buy?" In our area as in many counties of the Bay Area our home affordability crisis is matched by soaring rental rates and a proliferation of temporary housing aka AirB&B and VRBO which greatly reduces the number of rentals available in the marketplace. . This surging real estate market is bringing about talks of limiting temporary housing, affordable building as well as the low hanging fruit of politicians—rent control.
The chart below show the affordability for the Bay Area counties. Even though we are the 2nd MOST affordable county we are way behind Solano which at 44% is THE most affordable Bay Area county. Sonoma County comes in at 24%. This means only 24% of our population making the median income for our County can afford to buy the median priced home.
One correction to note is the median home price of $565,790. Due to a non-feed from our local MLS to the California Association of Realtors, the price should be $529,900. This should be our affordability a bump but not much. But look at San Francisco--10%! Plus a median home price of $1,248,790. 1 out of 10 making the median income can afford to buy a home in SF. If you are in the dominant service industry things are bleak indeed.
Back in the year 2000 we had this same “crisis” but with a few twists—inventory was super low—400 homes for sale, the median home price was a very reasonable $230,000 but the wild card, as it is going to be next year, interest rates. 8.21% was the rate back in January of 2000. Your payment on a $300,000 loan was nearly double with today’s 4.25%.
What can we learn from this chart? If affordability is diminished at 4.25% imagine at 7% or 8%? My lenders and fellow Realtors all say, “Don’t worry—the Fed won’t cause that big of a jump—maybe 25 basis points (.25%).” When I started my career in 1978 rates were at 9.5%, quickly went over 10% and then a year later 18.5%. Can’t happen this time? If you are a buyer or seller waiting until next year you’ve got to ask the famous question Clint “Dirty Harry” Eastwood muttered, “Do you feel lucky?”
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