North Bay housing payments take big jump since pandemic

A typical North Bay homebuyer’s mortgage payment has jumped 50% or more than doubled in the past three and half years, in the aftermath of the pandemic and efforts to control inflation.

Local households have been buffeted by several economic torrents: a rapid rise in mortgage interest rates in the past two years, shortage in construction materials and labor, and until recently strong demand for what homes were available.

Napa County saw the largest increase in monthly home payments in the region’s six counties, up 111% from February 2020. Mendocino County saw the smallest, up 50%. In between were Sonoma County (107%), Solano County (95%), Marin County (91%) and Lake County (almost 73%). That’s based on the latest data from the California Association of Realtors and major mortgage underwriter Freddie Mac.

Here’s how a number of prospective local buyers are making such high down payments and monthly payments work, according to Amy Sawday Kramer in Compass’ real estate office in Healdsburg.

“I know of multiple families who are coming together to buy a (single) home,” Kramer said. Some are working parents with children in their 20s or 30s who can’t come up with a down payment or make enough to qualify for a loan.

“I don’t see it every year with a parent purchasing a home and planning to live in the home with their children, but I do see parents who are helping to purchase,” Sawday Kramer said.

She’s also seen it happen with home sales also. A client had a three-bedroom home with three children and wanted a four-bedroom home to be able to put the children in separate rooms. Yet their options for a four-bedroom home were well over $1 million, so they decided to leave the state, and they were joined by a brother and their third-generation-resident parents who all sold their homes so they could exit also.

That dilemma is playing out across the North Bay and California, according to Sonoma State University economist Robert Eyler.

“The last three years, that has been a real boon for homeowners, is making it more tough for folks that are renting and trying to own or are struggling just to rent but see themselves as being owners at some point,” Eyler said.

The good news is that home prices locally have come down in the past 12 months, but they’re still up from where they were three years ago, he said. And in that time, the cost of money to finance the homes has soared.

Here’s what the typical monthly principal-and-interest payment would look like by local county, based on the September median price for a single-family home at the Nov. 9 national average interest rate of 7.5% on a 30-year fixed-rate loan:

• Marin County: $9,230 (plus an estimated $1,897 for taxes and insurance) for a $1.65 million home
• Napa County: $4,978 (plus $1,023) for $890,000
• Sonoma County: $4,743 (plus $975) for $848,000
• Solano County: $3,360 (plus $673) for $585,680
• Mendocino County: $2,570 (plus $515) for $448,000
• Lake County: $1,492 (plus $299) for $260,000

Those payment estimates are based on a buyer’s coming up with a 20% down payment, which could range from $52,000 in Lake County to $330,000 in Marin County.

In February 2000, base monthly payments were $4,811 in Marin, $2,354 in Napa, $2,284 in Sonoma, $1,678 in Solano, $1,667 in Mendocino and $839 in Lake. At that time, the national average rate on a 30-year loan was 3.47%.

At 20% down, here’s the percentage of North Bay households with income that would qualify them to buy a home in mid-2023, assuming they spent 30% of what they made on housing, according to the real estate trade group:

• Marin County: 16%, down from 17% a year before, with a qualifying annual household income of $443,600
• Napa County: 19%, up from 16%, $214,400
• Sonoma County: 16%, down from 17%, $213,200
• Solano County: 26%, down from 28%, $148,400
• Mendocino County: 17%, up from 15%, $130,400
• Lake County: 28%, down from 33%, $89,600

Assuming first-time buyers would put as much as 10% down and put up to 40% of their income toward housing, the real estate association estimated that the proportion of local households who could afford a median-priced home in the middle of this year still was only at best nearly half the households in Solano and Lake, 44% in Mendocino, about one-third in Sonoma and Napa, and less than a quarter in Marin. And qualifying annual incomes were tens of thousands of dollars lower.

The real estate trade group for the state assumes first-time homebuyers put 10% down on a home. The 2022 national average down payment was 6% last year, and the lower limit to qualify for a jumbo loan is 3% down. Even at those levels, the monthly payment depending on the county would be an additional few hundred to a couple of thousand dollars a month, as the size of the mortgage would be much larger.

The rise in home prices combined with the rise in interest rates in the past two years to the highest level in 23 years. It remains to be seen whether the Federal Reserve will again hold off on an increase in its benchmark interest rate, after leaving it alone at the central bank’s November meeting. But declining yields on the 10-year Treasury bond, sent mortgage interest rates down for the third straight week Nov. 9 after peaking at 7.79% in late October.

As a result of the rise in rates, monthly payments in the North Bay are double (in Lake County) to 175% higher (in Solano County) than what they were the last time rates were this high (8.64% in May 2000). That’s because despite the interest rate not currently not being as high, home prices are risen in that time by 121% (Lake) to 206% (Solano).

“There's no doubt about the fact that even if we assume that wages have gone up, between the increase in interest rates, increase in insurance, among other things, the retreated home prices has not really made it that much more affordable,” Eyler said. “And in fact, it may be marginally worse.”

Jeff Quackenbush covers wine, construction and real estate. Reach him at jquackenbush@busjrnl.com or 707-521-4256.