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Housing Affordability in California Edged Up in Late 2017

Housing Affordability in California Edged Up in Late 2017


According to the California Association of Realtors, after hitting a 10-year low in third-quarter 2017, slightly lower home prices and steady mortgage rates allowed more Californians to purchase a home in the fourth quarter of 2017.

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in fourth-quarter 2017 edged up to 29 percent from 28 percent in the third quarter of 2017 but was down from 31 percent in the fourth quarter a year ago, according to C.A.R.'s Traditional Housing Affordability Index (HAI). This is the 19th consecutive quarter that the index has been below 40 percent. 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 $111,260 was needed to qualify for the purchase of a $550,990 statewide median-priced, existing single-family home in the fourth quarter of 2017. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,780, assuming a 20 percent down payment and an effective composite interest rate of 4.17 percent. The effective composite interest rate in third-quarter 2017 was 4.16 percent and 3.91 percent in the fourth quarter of 2016.

Conversely, the affordability of condominiums and townhomes dipped in fourth-quarter 2017 compared to the previous quarter with 37 percent of California households earning the minimum income to qualify for the purchase of a $449,720 median-priced condominium/townhome, down from 38 percent in the third quarter. An annual income of $90,810 was required to make monthly payments of $2,270. Thirty-eight percent of households could afford to purchase the $446,800 priced condo or townhome in third-quarter 2017.

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

  • Twenty-nine percent of California households could afford to purchase the $550,990 median-priced home in the fourth quarter of 2017, up from 28 percent in third-quarter 2017 but down from 31 percent in fourth-quarter 2016.
  • A minimum annual income of $111,260 was needed to make monthly payments of $2,780, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 4.17 percent interest rate.
  • Thirty-seven percent of home buyers were able to purchase the $449,720 median-priced condo or townhome. An annual income of $90,810 was required to make a monthly payment of $2,270.
  • At the other end of the spectrum, Los Angeles, Madera, and Mariposa/Tuolumne were the most improved counties on a quarterly basis, with each of the counties climbing 3 percentage points from the previous quarter.
  • Five of nine counties in the San Francisco Bay Region recorded an affordability index of 20 or lower during the fourth quarter. Only Solano and Contra Costa counties posted an improvement in affordability, while Napa, San Francisco, San Mateo, Santa Clara, and Sonoma declined.
  • Housing affordability increased in 14 counties (Contra Costa, Solano, Los Angeles, San Luis Obispo, Fresno, Kern, Madera, Merced, Tulare, El Dorado, Humboldt, Mariposa/Tuolumne, Siskiyou, Sutter).
  • Fourteen counties experienced a decline in housing affordability from the third quarter (Napa, San Francisco, San Mateo, Santa Clara, Sonoma, San Bernardino, Ventura, Monterey, Santa Barbara, Stanislaus, Butte County, Lake County, Shasta, and Yuba). Lake, Santa Barbara, and Santa Clara counties dipped the most from the third quarter with each of them dropping two percentage points in the fourth quarter of 2017.
  • Housing affordability was unchanged in 15 counties (Alameda, Marin, Orange, Riverside, San Diego, Santa Cruz, Kings, Placer, Sacramento, San Benito, San Joaquin, Amador, Mendocino, Tehama, Yolo).
  • During the fourth quarter of 2017, the most affordable counties in California were Tehama (56 percent), Kern (54 percent), and Sutter, Tulare, and Kings, (all at 52 percent).
  • San Francisco (12 percent), San Mateo (14 percent), and Santa Clara (15 percent) counties were the least affordable areas in the state.   

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