Affordability Lowest Since 2008 in California

The affordability of California homesrnis dropping rapidly as prices continue to soar and now higherrninterest rates are compounding the problem. The CaliforniarnAssociation of Realtors®rn(C.A.R.) reported today that its Home Affordability Index (HAI)rndropped 8 percentage points from the first quarter of 2013 to thernsecond.</p

ThernHAI measures the percentage of homebuyers who can afford to purchaserna median-priced single-family home in the the state. C.A.R. alsornreports on the affordability in select regions and counties withinrnCalifornia. </p

Arnsignificant number of homebuyers were shut out of the market duringrnthe quarter as home prices and interest rates rose. Thernaffordability index fell from 44 percent in the first quarter to 36rnpercent in the second, the first time the index had dropped below 40rnpercent affordability rate since the third quarter of 2008.. Duringrnthe second quarter of 2012 the index was at 51 percent. </p

In the second quarter the price of a median pricedrnsingle-family home statewide was $415,770 compared to $316,490 a yearrnearlier. The effective composite interest rate was 3.64 percentrncompared to 3.55 percent in the first quarter of 2013 and 2.82rnpercent in Q2 2012a. These increases meant that, to purchase thatrnmedian priced home would require an annual income of $79,910 tornqualify for a 30-year fixed rate mortgage including taxes andrninsurance and assuming a 20 percent down payment. The requiredrnmonthly payment on this mortgage would be $2000. In the secondrnquarter of 2012 the qualifying income to purchase a median pricedrnhome was $62,440. </p

C.A.R. Said nearly all regions of the staternexperienced sharp quarter-over-quarter declines in housingrnaffordability, with Bay Area and coastal regions recording therngreatest decreases in the index due to significantly higher homernprices. At an index of 71 percent, Madera County was the mostrnaffordable county of the state, while San Francisco and San Mateorncounties tied for the least affordable at 17 percent. The housingrnaffordability index for the United States in the second quarter wasrn60, based on a median home price of $203,500 and qualifying income ofrn$39,110.

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