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May 18, 2024
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CA Housing Affordability Drops to Lowest Level in 10 Years


California’s housing affordability hit a 10-year low as tight housing inventory drove home prices higher and reduced purchasing power for homebuyers in the third quarter, primarily in previously more affordable regions such as the Inland Empire and Central Valley, according to the latest data provided by the California Association of Realtors® (C.A.R.).

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in third-quarter 2017 fell to 28 percent, down from 29 percent in the second quarter of 2017 and down from 31 percent in the third quarter a year ago, according to C.A.R.’s Traditional Housing Affordability Index (HAI). This is the 18th consecutive quarter that the index has been below 40 percent and the lowest since third-quarter 2015. California’s housing affordability index hit a peak of 56 percent in the first quarter of 2012.

C.A.R.’s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The index is considered the most fundamental measure of housing well-being for homebuyers in the state.

A minimum annual income of $112,100 was needed to qualify for the purchase of a $555,680 statewide median-priced, existing single-family home in the third quarter of 2017. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,800, assuming a 20 percent down payment and an effective composite interest rate of 4.16 percent. The effective composite interest rate in second-quarter 2017 was 4.09 percent and 3.76 percent in the third quarter of 2016.

Of particular note, housing affordability in Los Angeles County dropped 6 points from an index of 28 in the second quarter to an index of 22 in the third quarter as the area’s median home price jumped $81,000 in one quarter to reach nearly $600,000. Meanwhile, affordability improved in the Bay Area as prices leveled off from peaks across the region, most notably an $80,000 decline in San Francisco and a $77,500 decrease in Marin.

The affordability of condominiums and townhomes dipped in third-quarter 2017 compared to the previous quarter with 38 percent of California households earning the minimum income to qualify for the purchase of a $440,000 median-priced condominium/townhome, down from 39 in the second quarter. An annual income of $88,770 was required to make monthly payments of $2,220. Thirty-eight percent of households could afford to purchase the $443,400 priced condo or townhome in second-quarter 2017.

Key points from the third-quarter 2017 Housing Affordability report include:

• Compared to second-quarter 2017, housing affordability generally declined in Southern California and the Central Valley, but improved slightly across the Bay Area. Affordability improved in 15 of 43 tracked counties (Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Monterey, Santa Barbara, Placer, Amador, Butte, El Dorado, Mendocino, Shasta, and Siskiyou).

• Eighteen counties experienced a decline in housing affordability (Solano, Los Angeles, Riverside, San Luis Obispo, Fresno, Kern, Madera, Merced, Sacramento, San Benito, San Joaquin, Stanislaus, Tulare, Humboldt, Mariposa/Tuolumne, Sutter, Tehama, and Yolo).

• Housing affordability was unchanged in 10 counties (Santa Clara, Sonoma, Orange County, San Bernardino, San Diego, Ventura, Santa Cruz, Kings, Lake, and Yuba).

• During the third quarter of 2017, the most affordable counties in California were Tehama (56 percent), Kern (53 percent), and Kings, (52 percent).

• San Francisco (13 percent), San Mateo (15 percent), Santa Clara and Santa Cruz (both at 17 percent), and Marin (18 percent) counties were the least affordable areas in the state.

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