Before you cheer the continuing rise in Stanislaus County home values, beware that home affordability rates are dropping.
Stanislaus home sales prices have jumped 31percent since last year, hitting a median $190,000 month. That’s $45,000 more per home than a year ago, DataQuick statistics show.
On the flip side however, there’s been a significant decline in the percentage of homes affordable to middle-income families.
Early last year when housing prices were still stuck on the bottom, 92.5percent of the homes that sold were considered affordable for the typical Stanislaus family. At the time, the county was ranked as among the most affordable communities in the nation for homebuyers, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.
But this fall Stanislaus’ affordability rate dropped to 68.4percent, which is close to the national average.
The drop was predictable. As home prices go up, affordability goes down and vice versa.
The price/affordability was so out of whack back in 2005 that only 3percent of the homes sold in Stanislaus were considered affordable to county residents. Back then, homes were selling for a median $396,000, but that didn’t last long. The breathtaking price plunge was followed by four years of bouncing along the bottom.
The pricing peaks and valleys have been more dramatic in Stanislaus than elsewhere in America, but the general trend is the same nationwide.
“The decline in affordability is the result of higher mortgage rates and the more than yearlong steady increase in home prices,” said David Crowe, the building association’s chief economist. “Some of the decline in the affordability index could be the result of a loss in some more modest-priced home sales as tight underwriting standards have limited the purchases by moderate-income families.”
What it takes to qualify for a mortgage has changed significantly since the real estate market went bust.
“A lot of bad things happened in this recession, but a couple good things happened,” said Bob Brazeal, a Modesto broker with PMZ Real Estate. He said sellers now deal only with people they’re “100percent sure” can qualify for a mortgage. “Buyers can’t even make an offer without confirming what they qualify for.”
Even with the tougher lending requirements, there have been plenty of eager buyers in Stanislaus.
“This past spring and summer was the craziest real estate market I’ve ever seen,” said Brazeal, who has been selling homes for 33 years. “Real estate values in our Valley dropped too low. As values firmed and started to rise, the investors came out of the woodwork. Local and Bay Area all-cash investors bought 50 and 100 homes at a time.”
Brazeal said fairly priced Stanislaus properties were getting a dozen or more purchase offers within a week of being listed for sale.
“Now the market is catching its breath,” Brazeal said. “We still have a lack of inventory, but it’s nowhere near as bad as it was. We’re still getting two, three and four offers per home, but it’s much closer to a normal balanced market.”
Even after increasing 31percent, Stanislaus home prices remain a relative bargain in California. The median sales price statewide last month was $357,000, up 25.3percent from October 2012.
In San Joaquin County, the median home sales price last month was $230,000, up 27.8 percent. The affordability rate there this fall was 54.7 percent.
In Merced County, the affordability rate was 71.1 percent. October sales prices are not available for Merced yet, but in September the median was $175,000, up 29.6 percent.
In Tuolumne County, the median-priced home sold for $195,000 in October, up 18.2 percent. The builders association does not track affordability rates for that county.