Higher home prices, rising interest rates depress California housing affordability, C.A.R. reports

Housing affordability falls to 10-year lows, extending into traditionally more affordable regions

-- Twenty-six percent of California households could afford to purchase the $596,730 median-priced home in the second quarter of 2018, down from 31 percent in first-quarter 2018 and down from 29 percent a year ago.

-- A minimum annual income of $126,490 was needed to make monthly payments of $3,160, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 4.70 percent interest rate.

-- Thirty-six percent of home buyers were able to purchase the $477,790 median-priced condo or townhome. An annual income of $101,270 was required to make a monthly payment of $2,530.

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CALIFORNIA ASSOCIATION OF REALTORS

Aug 08, 2018, 09:30 ET

LOS ANGELES, Aug. 8, 2018 /PRNewswire/ -- Record home price increases and higher interest rates combined to constrain California housing affordability to the lowest levels in 10 years, the CALIFORNIA ASSOCIATION OF REALTORS^® (C.A.R.) said today.

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in second-quarter 2018 fell to 26 percent from 31 percent in the first quarter of 2018 and was down from 29 percent in the second quarter a year ago, according to C.A.R.'s Traditional Housing Affordability Index (HAI). This is the 21st consecutive quarter that the index has been below 40 percent. California's housing affordability index hit a peak of 56 percent in the second 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 home buyers in the state.

A minimum annual income of $126,490 was needed to qualify for the purchase of a $596,730 statewide median-priced, existing single-family home in the second quarter of 2018. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $3,160, assuming a 20 percent down payment and an effective composite interest rate of 4.70 percent. The effective composite interest rate in first-quarter 2018 was 4.44 percent and 4.09 percent in the second quarter of 2017.

While low housing affordability may be typical in many Bay Area counties, more traditionally affordable areas were at 10-year lows in the second quarter. Those that reached the decade-low include Alameda, Merced, Orange, Riverside, Sacramento, San Bernardino, San Diego, San Mateo, Santa Clara, Santa Cruz, and Sonoma.

Housing affordability for condominiums and townhomes also fell in second-quarter 2018 compared to the previous quarter with 36 percent of California households earning the minimum income to qualify for the purchase of a $477,790 median-priced condominium/townhome, down from 39 percent in the first quarter. An annual income of $101,270 was required to make monthly payments of $2,530.

Key points from the second-quarter 2018 Housing Affordability report include:

Housing affordability improved from second-quarter 2017 in 8 tracked counties and declined in 37 counties. Affordability in four counties remained flat.
In the San Francisco Bay Area, affordability improved from a year ago in San Francisco and Marin counties, primarily due to higher wages. Affordability fell in five counties (Alameda, Contra Costa, Santa Clara, Solano, and Sonoma). Affordability held steady in Napa and San Mateo counties.
In Southern California, affordability improved only in Ventura, and dropped in five counties (Los Angeles, Orange, Riverside, San Bernardino, and San Diego) compared to a year ago.
In the Central Valley, only Madera County saw an improvement in affordability from second-quarter 2017. Housing affordability decreased from a year ago in nine counties (Kern, Kings, Merced, Placer, Sacramento, San Benito, San Joaquin, Stanislaus and Tulare). Affordability held steady only in Fresno County.
In the Central Coast region, only Santa Barbara experienced a year-to-year improvement in affordability, while three counties (Monterey, San Luis Obispo, and Santa Cruz) posted a decline.
During the second quarter of 2018, the most affordable counties in California were Lassen (64 percent), Kern (53 percent), Madera (52 percent), Tehama (51 percent) and Kings (50 percent).
Santa Cruz (12 percent), San Francisco, San Mateo, and Mono (all at 14 percent), and Alameda and Santa Clara (both at 16 percent) counties were the least affordable areas in the state.

Housing Affordability slides (click link to open)

Affordability peak versus current
Annual required income peak vs. current
Monthly PITI peak versus current
Affordability by region peak versus current
Housing affordability by county

See C.A.R.'s historical housing affordability data.
See first-time buyer housing affordability data.

Leading the way…® in California real estate for more than 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than190,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.


CALIFORNIA ASSOCIATION OF REALTORS®
Traditional Housing Affordability Index
Second quarter 2018

STATE/REGION/COUNTY	2nd Qtr. 2018	Median Home Price	Monthly Payment Including Taxes & Insurance	Minimum Qualifying Income
Calif. Single-family Home	26	$596,730	$3,160	$126,490
Calif. Condo/Townhome	36	$477,790	$2,530	$101,270
Los Angeles Metro Area	29	$530,000	$2,810	$112,340
Inland Empire	41	$360,000	$1,910	$76,310
San Francisco Bay Area	18	$1,035,000	$5,480	$219,380
United States	53	$269,000	$1,430	$57,020

San Francisco Bay Area
Alameda	16	$1,000,000	$5,300	$211,960
Contra Costa	29	$695,000	$3,680	$147,320
Marin	18	$1,400,000	$7,420	$296,750
Napa	25	$707,250	$3,750	$149,910
San Francisco	14	$1,625,000	$8,610	$344,440
San Mateo	14	$1,650,000	$8,740	$349,740
Santa Clara	16	$1,405,000	$7,450	$297,810
Solano	38	$450,000	$2,380	$95,380
Sonoma	20	$695,000	$3,680	$147,320
Southern California
Los Angeles	26	$557,220	$2,950	$118,110
Orange	20	$830,000	$4,400	$175,930
Riverside	37	$405,000	$2,150	$85,850
San Bernardino	49	$290,000	$1,540	$61,470
San Diego	23	$645,000	$3,420	$136,720
Ventura	28	$670,000	$3,550	$142,020
Central Coast
Monterey	19	$647,000	$3,430	$137,140
San Luis Obispo	22	$618,500	$3,280	$131,100
Santa Barbara	20	$695,000	$3,680	$147,320
Santa Cruz	12	$905,000	$4,800	$191,830
Central Valley
Fresno	47	$268,390	$1,420	$56,890
Kern	53	$244,000	$1,290	$51,720
Kings	50	$235,000	$1,250	$49,810
Madera	52	$238,000	$1,260	$50,450
Merced	42	$265,000	$1,400	$56,170
Placer	41	$495,900	$2,630	$105,110
Sacramento	41	$374,000	$1,980	$79,270
San Benito	30	$571,000	$3,030	$121,030
San Joaquin	38	$373,380	$1,980	$79,140
Stanislaus	45	$315,000	$1,670	$66,770
Tulare	48	$233,000	$1,230	$49,390
Other Calif. Counties
Amador	44	$335,000	$1,780	$71,010
Butte	38	$320,000	$1,700	$67,830
Calaveras	43	$329,000	$1,740	$69,740
El Dorado	38	$525,000	$2,780	$111,280
Humboldt	33	$315,000	$1,670	$66,770
Lake County	37	$283,000	$1,500	$59,990
Lassen	64	$192,500	$1,020	$40,800
Mariposa	39	$320,000	$1,700	$67,830
Mendocino	22	$430,000	$2,280	$91,140
Mono	14	$624,500	$3,310	$132,370
Nevada	32	$435,000	$2,310	$92,200
Plumas	42	$297,000	$1,570	$62,950
Shasta	46	$265,500	$1,410	$56,280
Siskiyou	48	$207,500	$1,100	$43,980
Sutter	45	$299,950	$1,590	$63,580
Tehama	51	$215,900	$1,140	$45,760
Tuolumne	43	$308,500	$1,630	$65,390
Yolo	33	$469,500	$2,490	$99,520
Yuba	45	$290,000	$1,540	$61,470




CALIFORNIA ASSOCIATION OF REALTORS®
Traditional Housing Affordability Index
Second quarter 2018

STATE/REGION/COUNTY	2nd Qtr. 2018	1st Qtr. 2018	2nd Qtr. 2017
Calif. Single-family home	26	31	29
Calif. Condo/Townhome	36	39	38
Los Angeles Metro Area	29	32	31
Inland Empire	41	43	43
San Francisco Bay Area	18	23	21
United States	53	57	55

San Francisco Bay Area
Alameda	16	22	19
Contra Costa	29	36	31
Marin	18	18	17
Napa	25	28	25
San Francisco	14	15	12
San Mateo	14	15	14
Santa Clara	16	17	17
Solano	38	42	44
Sonoma	20	21	25
Southern California
Los Angeles	26	28	28
Orange	20	21	21
Riverside	37	39	39
San Bernardino	49	52	51
San Diego	23	26	26
Ventura	28	31	27
Central Coast
Monterey	19	23	21
San Luis Obispo	22	25	26
Santa Barbara	20	22	16
Santa Cruz	12	15	17
Central Valley
Fresno	47	49	47
Kern	53	56	54
Kings	50	52	52
Madera	52	50	44
Merced	42	43	48
Placer	41	44	43
Sacramento	41	44	45
San Benito	30	32	33
San Joaquin	38	40	43
Stanislaus	45	48	47
Tulare	48	50	52
Other Calif. Counties
Amador	44	45	42
Butte	38	41	39
Calaveras	43	46	49
El Dorado	38	42	40
Humboldt	33	36	36
Lake County	37	40	38
Lassen	64	68	64
Mariposa	39	44	50	r
Mendocino	22	25	27
Mono	14	8	25
Nevada	32	37	39
Plumas	42	47	47
Shasta	46	49	47
Siskiyou	48	48	47
Sutter	45	49	53
Tehama	51	51	57
Tuolumne	43	49	46
Yolo	33	41	35
Yuba	45	49	43