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California’s housing market has broken another record.
A newly released study by the California Association of Realtors shows that housing affordability dipped yet again in the second quarter of this year, dropping to a nearly 17-year all-time low.
The numbers come as higher home prices and elevated mortgage rates continue to push borrowing costs to all-time highs. Statewide, the cost to buy a home jumped 9% compared to the same time last year, according to the report.
The report shows that 1-in-7 people, or only 14%, can afford to purchase a median-priced single-family home in California, down from 17% in the first quarter of this year.
For comparison, in the second quarter of 2012, a majority of homebuyers – 56% – could afford to purchase a median-priced single-family home in California.
According to the newly released report, to qualify for a home with the state’s median price tag of $906,600, California homebuyers would need a minimum annual income of $236,800. Their monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $5,920, assuming a 20% down payment and an interest rate of 7.1%
Nationwide, the minimum required annual income was half of what was needed in California. Compared with California, about one-third (33%) of the nation’s households could afford to purchase a $422,100 median-priced home, which required a minimum annual income of $110,000 to make monthly payments of $2,750.
“It has gotten tougher for buyers to purchase a median-priced home in the current market environment, especially in the Bay Area,” Eileen Giorgi, president of the Silicon Valley Association of Realtors, said. “Despite higher household incomes, higher home prices and elevated mortgage rates continue to keep housing affordability near its all-time lows across most counties.”
San Mateo and Santa Clara counties
Only 16% of homebuyers in both San Mateo and Santa Clara counties could afford to purchase a median-priced single-family home in their respective counties during the second quarter of this year, down from 17% at the start of the year and down from and 18%, compared to the same time last year.
In San Mateo County, households needed a minimum annual income of $574,800 to purchase a home with the county’s median price tag of $2.2 million. Their monthly payment, including taxes and insurance, would be $14,370, assuming a 20% down payment and an interest rate of 7.1%.
Santa Clara County wasn’t far behind. Homebuyers there needed a minimum annual income of $524,000 to qualify for the purchase of a $2-million median-priced home. Their monthly payment, including taxes and insurance, would be $13,100.
San Mateo and Santa Clara were the only two counties in California where homebuyers would need to earn more than $500,000 annually to afford a home. Marin and San Francisco counties required the next highest minimum incomes in the state at $469,200 and $444,000, respectively.
Least- and most-affordable counties
Mono, Monterey and Santa Barbara counties were the least affordable counties in California, according to the report's Housing Affordability Index, which measures a person’s ability to afford a home compared to their income or the average income for their county or market.
In Mono County, only 5% of residents could afford to purchase a home there, making it the least-affordable county in the state, followed by Monterey County (8%) and Santa Barbara County (9%). Each of those counties required a minimum income of at least $267,600 to purchase a median-priced home, the report shows.
Not all areas of the state, however, are unaffordable for the average homebuyer. In Lassen County (located in the northeastern part of California), 52% of residents can afford a median-priced home of $249,950, making it the most-affordable county in the state. With 35% of residents able to buy a home, Glenn County in the Central Valley was the second -most-affordable county followed by Del Norte and Tehama County (34%) and Tehama County (34%).
Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.
