Home affordability in California was significantly reduced last quarter, thanks to sharp rise in housing prices last spring. The California Association of Realtors (CAR) said it hadn’t seen such demand in the spring buying season since 2007, at the crest of the last decade’s housing crisis.
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The CAR’s Traditional Housing Affordability Index (HAI) noted that the percentage of buyers who could afford to buy a median-priced existing single-family home fell from 34 percent to 30 percent in the second-quarter. As a point of comparison, the HAI hit a peak of 56 percent in Q2 of 2012.
What this means is that prospective buyers need to be earning a minimum income of at least $95,980 a year to be able to purchase a $485,100 home, which is the current median price for a single-family home in the state. For such a purchase, the monthly payments, including tax and insurance on a 30-year fixed rate loan would be $2,400.
That compared with the median home price of $441,610 in Q1 of 2105, for which buyers would need an annual income of $87,540.
Digging deeper into the CAR’s report, we can see that condominiums and townhouses were considerably more affordable than single-family homes. The CAR says 39 percent of buyers are currently able to purchase a $388,250 median-priced condo or town house. To do so, buyers would require an annual income of $76,820, with monthly payments of $1,920.
Housing affordability fell in almost every region of the state compared to the previous quarter, except for Kings County where the rate stayed steady due to growth in spring home prices. Marin, Orange, Monterey, San Lusi Obispo and Santa Cruz also bucked the trend, with housing affordability actually improving in those counties. However, all remaining counties in the state saw housing affordability decline.
The CAR added that Marin, San Luis Obispo and Santa Cruz counties (in the Bay Area) posted the largest year-to-year housing affordability improvement thanks to growth in annual incomes and reduced interest rates. San Luis Obispo and Santa Cruz in particular saw a big rise in incomes relative to home prices, and said the areas are becoming popular with tech workers due to their proximity to the Bay Area.
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