San Francisco Bay Area Home Affordability Improves in Q-3

San Francisco Bay Area Home Affordability Improves in Q-3

Residential News » San Francisco Edition | By Miho Favela | November 7, 2014 1:30 PM ET

According to the California Association of Realtors (C.A.R.), lower interest rates and minimal home price gains kept California's housing affordability in check in the third quarter of 2014 and even helped improve affordability in some high-cost counties in the San Francisco Bay region.

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in third-quarter 2014 was unchanged from the 30 percent recorded in the second quarter of 2014 but was down from a revised 32 percent in third-quarter 2013, according to C.A.R.'s Traditional Housing Affordability Index (HAI).  This is the sixth consecutive quarter that the index was below 40 percent.

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.

Home buyers needed to earn a minimum annual income of $94,960 to qualify for the purchase of a $467,700 statewide median-priced, existing single-family home in the third quarter of 2014.  The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,370, assuming a 20 percent down payment and an effective composite interest rate of 4.23 percent.  The effective composite interest rate in second-quarter 2014 was 4.32 percent and 4.36 percent in the third quarter of 2013.

The median home price was $457,140 in second-quarter 2014, and an annual income of $93,590 was needed to purchase a home at that price.

Key points from the third quarter 2014 Housing Affordability report include:

  • Compared to affordability in second-quarter 2014, 13 regions saw an improvement, 10 saw declines, and 10 were unchanged. The largest quarterly declines were in Santa Barbara, Los Angeles, and Napa counties due to mostly double-digit price increases from the previous quarter.
  • Santa Clara, San Francisco, and Alameda counties saw the greatest quarter-to-quarter improvement in housing affordability, primarily due to lower price growth.
  • During the third quarter of 2014, the five most affordable counties in California were Kings (64 percent), Madera (58 percent), San Bernardino (57 percent), Tulare (56 percent), and Merced (55 percent).
  • Santa Barbara at 14 percent, and San Francisco, San Mateo, and Marin at 15 percent were the least affordable areas of the state.  However, these three Bay Area counties saw a slight improvement in housing affordability from second-quarter 2014.
  • Napa, Santa Barbara, and Marin counties had the largest year-to-year declines in affordability, resulting from strong growth in home prices ranging in increases from 8.6 percent to 21 percent.
  • San Luis Obispo and Kings counties had year-to-year improvements in affordability mainly due to the slight decline in the interest rates from a year ago and only slight gains in home prices.
  • Housing affordability in Orange County was unchanged from the previous quarter and year due to minimal home price growth and lower interest rates.

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