How Stanislaus homes became unaffordable for many families. It’s the worst since 2014

SLO Tribune Bot

Only about a quarter of Stanislaus County families can afford the median-priced home here as would-be buyers are being squeezed by rising prices, less inventory, and higher interest rates.

The California Association of Realtors has released its latest housing affordability index, which shows that 24% of the county’s households could purchase an existing single-family home at the median price of $468,100 as of the end of September.

CAR said a buyer would need an annual income of $122,800 to afford a 20% down payment and a monthly mortgage of $3,070 for that home. The mortgage’s interest rate would be 7.14%.

Just three years ago, 47% of the county’s households could afford an existing, median-priced single-family home. The median is the halfway point, so half of the homes cost more and half cost less.

CAR states the median price for a single- family home was $370,000 as of September 2020 and a buyer would need an annual income of $68,000 to afford the $1,700 monthly mortgage. That was when interest rates were about half of what they are today.

The county’s affordability index is at its lowest level since 2014. Data on years before that were not immediately available.

PMZ Real Estate and Del Real Group associate broker Daniel Del Real said CAR’s affordability index understates the percentage of households that can buy a home because it’s based on a 20% down payment.

Del Real said his group sells about 300 homes a year. He said the majority of buyers put down 3% to 5% for a down payment. The lower the down payment, the bigger the loan and the higher the monthly payment.

He said this is the first time in his two decades in the industry that he has seen prices remain high despite rising interest rates.

“It’s the lack of inventory,” Del Real said.

He said the majority of the county’s homeowners have interest rates of less than 4%. Interest rates are now above 7%.

“Even if they wanted to sell, they can’t” he said. “They can’t let go of a 3% interest rate and buy something at 7%.”

Del Real said homeowners could be looking at paying about $1,000 more a month for their mortgage if they were to sell and buy another home.

CAR reported the median home price rose 5.9% — $434,500 to $460,000 — from October 2022 to October 2023 in Stanislaus County. And the number of homes sold dropped 28% over those 12 months.

October’s home price was 3.5% lower than September’s $469,500, and home sales were up 3.5% over the last month. But CAR states in a news release that statewide, it expects “positive year-over-year price growth should remain throughout the rest of the year as housing supply is projected to be tight in the coming months.”

Del Real expects there could be some relief if the Federal Reserve starts cutting interest rates next year as is anticipated.

He said potential home buyers are being shut out of the market by the lack of inventory and high interest rates and are being forced to rent, which in turn is contributing to rising rents.

CAR said just 15% of California households could afford to buy a home at the median price of $843,600 as of Sept. 30. Statewide, the affordability index was at its lowest since the third quarter of 2007.

Nineteen percent of Bay Area households could afford a median-priced home, while 23% could in Sacramento County and 14% could in the Los Angeles metro area. Nationwide, the affordability index was 34%, down from 39% the year before.