Can you afford to buy a house in California?
It’s probably tough, as pricey residences are now more difficult to buy than they have been in a decade.
California’s housing affordability hit a 10-year low in the third quarter, with tight housing inventory driving home prices higher and reducing purchasing power for homebuyers, primarily in previously more affordable regions, such as the Inland Empire and Central Valley, the California Association of Realtors said Thursday.
But housing affordability also slipped in Los Angeles County, CAR said in a statement.
The percentage of home buyers who could afford to purchase a median- priced existing single-family home in California in the third quarter fell to 28 percent, down from 29 percent in the second quarter of 2017 and down from 31 percent in the third quarter a year ago, according to CAR’s Traditional Housing Affordability Index.
This is the 18th consecutive quarter that the index has been below 40 percent and the lowest since third-quarter 2015, CAR said. California’s housing affordability index hit a peak of 56 percent in the first quarter of 2012.
CAR’s housing affordability index measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. The index is considered the most fundamental measure of housing well-being for homebuyers in the state.
A minimum annual income of $112,100 was needed to qualify for the purchase of a $555,680 statewide median-priced existing single-family home in the third quarter of 2017, CAR said. The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $2,800, assuming a 20 percent down payment and an effective composite interest rate of 4.16 percent. The effective composite interest rate in second-quarter 2017 was 4.09 percent and 3.76 percent in the third quarter of 2016.
Housing affordability in Los Angeles County dropped 6 points from an index of 28 in the second quarter to an index of 22 in the third quarter as the area’s median home price jumped $81,000 in one quarter to reach nearly $600,000. Meanwhile, affordability improved in the Bay Area.
The affordability of condominiums and townhomes dipped in third-quarter 2017 compared to the previous quarter with 38 percent of California households earning the minimum income to qualify for the purchase of a $440,000 median- priced condominium/townhome, down from 39 in the second quarter. An annual income of $88,770 was required to make monthly payments of $2,220. Thirty-eight percent of households could afford to purchase the $443,400 priced condo or townhome in second-quarter 2017.
—City News Service