Middle-class residents priced out of Sonoma County housing market

As million-dollar home sales mount, frustration intensifies for working Sonoma County residents trying to attain homeownership.

They have made many futile bids in recent months equal to asking prices or sometimes higher, only to get trumped by cash offers, often from outside buyers and sometimes more than $100,000 over houses’ list prices.

The local market for single-family homes exploded this spring, pushing median prices and sales volume to levels lofty even for an area used to robust housing activity, and one that features much steeper financial entry than long-standing strong home sales markets in Texas and Florida.

With the pandemic-fueled market pushed to an all-time high single-family median price of $780,000 in May — partly by wealthy buyers from San Francisco, Silicon Valley and the Los Angeles area — many county residents are priced out.

They remain renters, although that’s no bargain here, either, with the average apartment in Santa Rosa costing $1,958 last month, over $500 higher than the national average of $1,428, according to RentCafe.

It raises the question: Has the imbalanced local home sales market, in which only 27% of county residents can now afford the median priced house, finally reached a tipping point?

To Jenni Klose, executive director of Generation Housing, an independent housing advocacy organization in Santa Rosa, the answer is a resounding yes. Her group is calling for a county home construction spree of 6,000 new houses and apartments a year through 2030 to bolster supply and help reverse the escalating housing affordability crunch.

While housing advocates ramp up urgency for county, city, business and elected leaders to make tackling the affordability quagmire a top priority, residents striving to buy continue to share disappointment and rejection.

‘Insane overbidding’

As husband and wife attorneys, Scott and Angela Emerick have a boutique law practice in Santa Rosa. He focuses on criminal defense representing clients in state courts on the North Coast, while she concentrates on immigration law with her cases primarily in federal court in San Francisco.

The Emericks have been leasing a three-bedroom duplex in Petaluma for four years. The property has a big backyard with ample space for their two boys, a 4-year-old and his brother almost 2, to play outdoors.

For the past six months, they’ve been searching for a house to buy in the $700,000 to $900,000 range. They’ve looked at about 10 houses but haven’t made a single offer. One home they were going to bid on got 17 offers in two days. It ended up selling for $140,000 over the $852,000 asking price, he said, despite needing a new roof and work done to the pool.

“We’re competing with San Francisco buyers who are buying up here sight unseen,” said Emerick, 45, and often engaging in “insane overbidding.”

The couple intends to keep saving money, figuring it could take one or two years before the market subsides enough for them to land a house. He said for the right property with four bedrooms, ample land and proximity to good schools they would pay up to $1 million or $1.1 million.

But they’re determined to avoid getting drawn into a bidding war.

He thinks from a practical standpoint the wild housing market eventually will need a “correction” and more reasonable prices will prevail. “Maybe when the people living the dream in Wine Country have to return to the office,” he said, regarding the new arrivals who are happily decamped in the county.

Rick Laws, a senior vice president at Compass real estate brokerage in Santa Rosa, estimated that group accounted for half of recent local home purchases.

“We recognize we’re more privileged than many in the housing market,” said Emerick, a San Anselmo native. “While it’s frustrating not to buy something now ... we figure we’ll get there. This market is nuts.”

Financial requirements to buy

Lender Scott Sheldon, branch manager at New American Funding in Santa Rosa, said in this “ultra-competitive” environment it’s imperative for buyers to have stable income, excellent credit and cash on hand for a 20% down payment.

To put that in perspective, Sheldon explained the financials required for a shot at buying a house priced at the $780,000 median in Sonoma County and making the monthly mortgage payment.

Here’s the breakdown:

– It requires a $156,000 down payment on a conventional 30-year mortgage carrying a 3.25% interest rate.

– To qualify for that home loan, county residents need to earn at least gross monthly income of $8,500 or $102,000 a year.

– For that dream house, the monthly mortgage payment with insurance and property taxes is $3,613. That’s not attainable for many in the county since latest U.S. Census Bureau figures show the median annual household income, meaning half earn less, is $81,018.

Sheldon acknowledged many individuals and families don’t have the financial wherewithal required to buy into this housing market.

He recommended adding a parent or grandparent to a mortgage as a co-signer. That can increase borrowing ability or tapping a 401(k) retirement account to pay off personal debt in order to qualify for the necessary mortgage or to boost the down payment, that in turn reduces the principal amount of a home loan.

Meanwhile, “contrary to popular belief,” there are houses available to buy in Sonoma County for $600,000 to $650,000, Sheldon said. “They are out there and they are attainable.”

But expect such homes to need a “fair amount of cosmetic love” and to draw multiple highly competitive offers, he said.

Coldwell Banker real estate agent Timothy Brown said it’s key for buyers to set their expectations based on the financial reality of today’s market, focusing on whether that means a single-family or luxury home, condominium or manufactured house is what they can afford.

“It really doesn’t matter the price level my clients are shopping in,” Brown said. “They always see that next tier and say ... I wish I could get there.”

Relying on family

Audra Meusx, 39, and her husband Trevor, 35, began saving 35% of what they earned with a goal of eventually buying their own home, after they moved in with her parents in Cotati in December 2015.

In March 2018, they offered $578,000 — the absolute maximum they could afford — for a home because it was directly across the street from her parents’ house. Their offer was rejected and the house sold for $589,000.

When the pandemic emerged last spring, Meusx and her husband lost their jobs and relied on unemployment benefits. She’s a photographer and music lover who had been driving to San Francisco in the evenings to shoot live performances at concert venues. Her husband had worked in maintenance for Cinema West Theatres, the regional movie theater chain based in Petaluma.

With the pandemic easing, they decided in February to take another crack at buying a house.

“We saved $100,000 over the last five years, and we felt really good about that,” she said.

Career-wise they clawed back to solid footing the past few months. She got her upstart photography business called Shot Through the Heart Studio — named for the Bon Jovi hit released in 1984 — off the ground. Trevor launched his own handyman business Local Hero and Sons. Together, they’re now making more money than they’ve ever earned.

But local housing prices soared even higher since their earlier house-hunting foray. They soon learned they don’t have enough recent work income because of pandemic furloughs to secure a mortgage. And they have saved too much money to qualify for helpful lending terms under first-time homebuyer programs.

Nonetheless, they looked early this year at three houses listed between $499,000 and $599,000 and were humbled. Each had what Meusx called “major issues with the bones of the homes.”

They decided to put their home-buying quest on hold again and accepted an offer from her brother Ralan Hill to rent his three-bedroom house in west Santa Rosa and moved in May 15 with their 5-year-old son Brixton and 18-month-old son Cillian.

Meusx said her dream is that the local housing market “crashes” in a year, enabling she and her husband to buy a home in Petaluma where Brixton will start kindergarten in the fall. Or maybe they’d be able to buy a home in Cotati on the street where her parents have lived since buying the family house in 1980 for $82,500.

Sticking to budget

Among other things, Klose is concerned the red-hot housing sector reinforces to high school and college residents that homeownership is only a fantasy for them and so many will eventually exit the area.

“Many of the younger people we’ve talked to have resigned to themselves that if I’m going to live in Sonoma County, I’m never going to be a homeowner,” Klose said.

Meanwhile, with many residents stretched too thin with home-related expenses exceeding a third or more of their monthly incomes, she said they might not have enough money for food, health care, child care, among other necessities.

“You are going to have to make choices that are not conducive to a healthy lifestyle,” said Klose, an attorney and former Santa Rosa City Schools trustee.

That’s not what Joy Wilson, 29, who works in quality assurance for Lagunitas Brewing Co. in Petaluma, and her boyfriend, Luke, also 29, a software developer, intend to do. They want to buy a house along the Highway 101 corridor, preferably near the SMART commuter train line, between Petaluma and Santa Rosa, but they won’t abandon their financial game plan.

They’re preparing to make a $150,000 down payment, opt for a 15-year mortgage and want to keep the monthly payment around the $3,000 they’re paying in rent for a two-bedroom Santa Rosa apartment.

“If the math doesn’t check out, we’re not going to do it,” said the 2013 Sonoma State University graduate, regarding a home purchase.

Wilson figures she’s been to more than 50 open houses, viewing homes listed in the $500,000 range that usually quickly sell for at least $600,000.

“We’ll continue to bang our head against this wall that is the Sonoma County housing market,” she said, noting she and Luke are mulling maybe relocating abroad to the Netherlands or someplace in the United Kingdom.

Trying to set down roots

Ariel Beauhaire, 33, and her husband, David, 32, are also young college-educated professionals trying to buy their first home.

Since January, they’ve made bids on four houses listed in the $700,000 to $800,000 range, two in Penngrove and two in the west Petaluma area where they rent a single-family home with their son who will be 2 years old in August.

“We seem to be getting outbid by all-cash offers of at least $100,000 over the asking price,” said Beauhaire, a part-time speech-language pathologist who works in Novato and grew up in San Rafael.

“All we want is to buy our first home and set down some roots here.”

They’ve gotten accustomed to the west side of Petaluma in the four years renting the house there and would like to stay. Since it’s been “near impossible,” she said, to find an affordable house in that locale, they’ve expanded their search throughout Petaluma, north to Santa Rosa and to Sebastopol in west county.

They had their heart set on buying a house like one they live in, with three bedrooms and two bathrooms. With the market so competitive, they are also open to smaller homes with two bedrooms and a single bathroom they could potentially expand later.

They went hard after one home in Penngrove, offering $50,000 over the asking price, or $850,000. However, another bidder plunked down $150,000 over the asking price and got the house.

Beauhaire said she and her husband, an industrial engineer and native of France, have saved a sufficient amount of money for a downpayment, have stable income, excellent credit and actually qualify for a larger mortgage than what they intend to spend on a home.

“It’s really important to us to find a house within our means,” she said, noting they found that the price range they’re focused on appears to be “a really competitive price point.”

Despite the letdowns thus far in their house search, Beauhaire said they’ll keep looking.

“I think our house is out there,” she said.

‘This is home’

Although Scott Emerick said it’s “depressing” to be house hunting, the San Anselmo native said his family won’t leave the area.

“This is home,” he said of Sonoma County, where he and his 39-year-old wife have been building their law careers, getting involved in the community and forging friendships.

“We’re not willing to walk away from that to live someplace else.”