I like the Oxford Learner's Dictionaries and the Collins Dictionary. To answer the question, "stem from" is moderately formal but the average person will hear it on the news once in a while. It wouldn't be used in casual conversation. Collins dictionary https://www.collinsdictionary.com/dictionary/english/stem stem 1. verb (stem from) If a condition or problem stems from something, it was caused originally by that thing. Much of the instability stems from the economic effects of the war. [VERB + from]

The average English speaker would understand it. It is a little formal and academic. It is often used in abstract discussions of things like traditions, idea, customs, laws, and history. "The US concept of property stems from British common law." "Growing anger over VAR stems from FIFA putting fans last."--"Forbes" magazine "Since bigotry stems from ignorance, education is key." It needs to be followed by something that functions grammatically as a noun. That could be an noun, but it could be a phrase, or a verb form that functions as a noun. In the second example above, "FIFA putting things last" works like a noun. You would probably not say "the car crash stemmed from brake failure" or "your itches stem from mosquito bites." Those make sense, but they sound strange and unnatural.