Record high Sonoma County home prices, rents put new squeeze on residents
After about six months in Los Angeles, Madelyn Swanson decided she’d had enough of Southern California and made plans last fall to move back home to Sonoma County.
She soon landed a job at a local lighting design and manufacturing company, where she plans to start next month. But upon looking for an apartment, Swanson, who grew up in Petaluma and Rohnert Park, discovered rents have skyrocketed since she last lived in the area in 2018 as a Santa Rosa Junior College student.
Even with a relatively good-paying job, Swanson, 23, said she’ll likely need to settle for a $1,300-a-month room in a shared house to ensure she can still make her car and health insurance payments.
“Sonoma County is home, but it’s like, can I afford to be home?” she said.
Throughout the pandemic, soaring local rents and home prices — which both hit record highs in April — have forced renters and buyers to make similar choices and compromises. And despite signs the local home real estate market could be approaching its peak, experts say Sonoma County residents shouldn’t expect housing costs to come back to earth any time soon.
Those growing costs, even in the face of mounting uncertainty across the broader economy, have only increased concerns about whether many low-income workers, middle-class families and young professionals can comfortably afford to live in Sonoma County.
“(Rising housing costs) can change the way our communities work, and who works here,” said Sonoma State University economist Robert Eyler.
Sonoma County’s median apartment rental price hit a record $1,964 in April, a 16% increase from April 2020, a month after the pandemic took hold, according to rental website Apartment List.
Median single-family home prices in the county, meanwhile, reached an all-time high of $870,500, a 16% spike from a year ago — and a staggering 34% increase since April 2020, according to data from local Compass sales manager Jim Michaelsen.
Local housing experts have pointed to a mix of historic-low mortgage rates, surging inflation and a rush of wealthier home buyers fleeing urban centers for pushing up rents and home prices over the past two years. Those pressures have only exacerbated the county’s long-standing affordable housing shortage as it continues to rebuild the roughly 6,000 homes lost to wildfires since 2017.
In recent months, rising borrowing costs and erratic financial markets along with persistent inflation and global supply chain issues have raised the prospect of an impending economic downturn. But Eyler, the Sonoma State economist, said such concerns don’t mean the local housing and rental markets are on the verge of collapse.
Eyler said the main reason is simple: After decades of sluggish housing construction, there aren’t nearly enough homes for all of those looking for new places to live in Sonoma County.
“Unless there’s new supply or a real shift in demand, there's not going to be a real change in the market,” he said.
Still, Eyler and local real estate professionals said that when it comes to single-family home prices at least, a “slowdown” could be on the horizon. That’s because recent interest rate hikes by the Federal Reserve to curb inflation have sent average mortgage rates climbing from around 3% to above 5%, meaning the cost of a new home loan has become more expensive.
If interest rates continue to rise over the coming months as expected, Eyler said, economic forecasts should show home prices leveling by early next year.
Already, the higher rates have cooled the frenzied competition among home buyers seen earlier in the pandemic, said Erika Rendino, owner of RE/MAX Marketplace in Cotati. Even so, there are still plenty of buyers placing bids to keep prices high.
“This is an opportunity to get in with less competition,” Rendino said. “It’s not an opportunity to put low offers on properties that will most likely go for the asking price.”
Michaelsen with Compass said that even if higher interest rates have caused some buyers to exit the market, the extremely low number of homes for sale in the county is helping keep prices high. In April, there were just 869 homes on the market in the county, compared to 1,177 the same month a year prior.
Michaelsen added that affluent home buyers from tech hubs like San Francisco and Silicon Valley — some snapping up new vacation homes — generally aren’t too concerned about increasing mortgage costs.
“All of these people with cash (bids) don’t care one way or another,” Michaelsen said.
But for buyers without vested stock options, the rising interest rates can make all the difference.
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