Plummeting Affordability in California takes a Breather

What passes as a measure of home affordability inrnCalifornia may stagger some who live in other parts of the country and only aboutrna third of the households in the state can meet the affordability test, but atrnleast that number stopped falling in the fourth quarter of 2013.  The California Association of Realtors® (C.A.R.)rnreports that its Traditional Housing Affordability Index (HAI) has stabilizedrnand remained relatively unchanged from the third to the fourth quarter.  This followed six straight quarters ofrndeclines.  </p

At the end of the quarter the index stood at 32,rnmeaning that 32 percent of home buyers in the state could afford to purchase a median-priced, existingrnsingle-family home in California.  Thernindex stood at 48 percent in the fourth quarter of 2012.  The index for the entire United States is 56rnpercent, down from 58 percent in the third quarter and 69 percent one year ago.</p

Home buyers needed to earn a minimumrnannual income of $89,240 to qualify for the purchase of a $431,510 statewidernmedian-priced, existing single-family home.  The monthly payment, including taxes andrninsurance on a 30-year fixed-rate loan, would be $2,230, assuming a 20 percentrndown payment and an effective composite interest rate of 4.43 percent.  Thernmedian home price was $352,450 in fourth-quarter 2012, and an annual income ofrn$66,860 was needed to purchase a home at that price.</p

California housing affordability hitrna record high of 56 percent in first quarter of 2012 but has steadily declinedrnsince then, as a lack of housing supply and high demand drove up home pricesrnsharply and significantly reduced affordability. </p

San Mateo at 15 percent and SanrnFrancisco at 16 percent were the least affordable areas in the state, followedrnby Santa Barbara (17 percent) and Santa Cruz (18 percent).  The HAI was highest in San Bernardino (64rnpercent), Kings County and Medera (both 62 percent) and Tulare (61 percent.)

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