Gap between monthly cost to buy or rent a home in Sonoma County narrows since 2017
On their way to the grocery store, A.J. and Christina Ward usually walk past the Century 21 Real Estate office on Healdsburg Avenue in Sebastopol. With a rubbernecker’s curiosity, they sometimes stop and look at the home listings displayed on the window.
Priced well beyond anything they could hope to afford, the local real estate market represents for the young couple a different sort of highway pileup or train wreck.
“We stop and look at the listings, and every time it’s just like this cloud of sadness,” A.J. Ward, 33, said.
Across the country, rising monthly rents, lower mortgage rates and stabilizing house prices have made buying a home more attractive. Even in Sonoma County, the gap between the cost of buying and renting has narrowed significantly since 2017, according to a recent report by Realtor.com. However, for many like the Wards, buying a house here is a dream unlikely to come true.
During the fourth quarter of 2019, it was 25% more expensive countywide to buy than to rent - down from 39% more costly to buy in the same October-through-December quarter of 2017 based on monthly mortgage costs and rents. Notably, the North Bay wildfires in October 2017 caused the median price of a house here to soar because of the extreme demand.
The softening and rebalancing local housing market has been good news for those who can afford to buy and have been sitting on the fence, as interest rates on mortgages decline and home prices plateau or decline. That includes extremely well-paid individuals or two-income families whose combined pay is a strong six figures. But it makes no difference for young couples like the Wards, who are priced out of the homebuying market regardless of how high monthly rents go.
For them, buying a house in Sonoma County, where the median price of a single-family home last year was $650,000, the future looks brighter elsewhere unless the housing market collapses here.
Ward, who is originally from Kansas City, Missouri, said he and his wife likely will have to leave the area to buy a house or even afford an apartment of their own. Ward first came here a few years ago after college and started working as a zip-line tour guide.
That’s when he fell in love with the county. He left for a time and in 2015 met his would-be wife in Colorado, while training her to be a zip-line tour guide.
The two married in 2016 and came back to Sonoma County, where Christina Ward has family, he said. He got a gig at Sonoma Canopy Tours, a project of Alliance Redwoods conference grounds in Occidental. She landed a position at Canine Companions for Independence in Santa Rosa.
They both love their jobs, but buying a house requires them to earn much more income no matter how low interest rates go.
Real estate agent Erika Rendino, who co-owns Re/Max Marketplace in Cotati with her husband, David, agrees that the closing gap between the costs of renting and buying primarily benefits those who already were in the market to buy.
“I don’t see that many new buyers,” she said. “When interest rates come down, it might mean $100 or $200 less a month for the monthly mortgage payment, but there’s nothing out there for $300,000. Those people are out, it doesn’t matter if the interest rates are 2%.”
The Realtor.com report compared the median monthly cost of buying a home vs. median monthly rent. It found that in 26 of 593 U.S. counties reviewed, it actually became more affordable to buy than to rent during the fourth quarter of 2019.
Cody Horvat, a spokesman for Realtor.com, said the gap between buying and renting during the fourth quarter of the past three years has been “shrinking dramatically.” It was 39% in 2017; 27% in 2018 and 25% in 2019, he said.
Horvat said part of the reason is the share of income needed to buy a house also has declined. During the October-through-December quarter of 2017, the median-priced home in Sonoma County required 71% of the median income. That rate dropped to 57% during the fourth quarter of 2019.
“Meanwhile, the share of income needed to rent in Sonoma (County) hasn’t changed much,” Horvat said in an email.
A “cooling” in the local housing market since 2018 and lower interest rates have led to greater affordability and greater opportunity for potential buyers, he said. But not for everyone.
“While buying is still not totally affordable for everyone, the decision between renting and buying in Sonoma (County) continues teetering toward equilibrium,” he said.
But one only needs to take a close look at the cost of buying a median-price home in Sonoma County to see that even equilibrium is unsustainable for many local renters.
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