During the second quarter of 2014, continued home price increases led to the decline of housing affordability levels in 19 of 26 counties in California, the California Association of REALTORS® (C.A.R.) said Wednesday.
The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California fell from 33 percent in the first quarter of 2014 to 30 percent in second-quarter 2014 and was down from 36 percent in second-quarter 2013, according to C.A.R.'s Traditional Housing Affordability Index (HAI). C.A.R.'s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in the state.
California home buyers needed to earn a minimum annual income of $93,590 to qualify for the purchase of a $457,140 statewide median-priced, existing single-family home in the second quarter of 2014. The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $2,340, assuming a 20 percent down payment and an effective composite interest rate of 4.32 percent.
According to C.A.R., housing affordability has fallen 26 percent since first-quarter 2012, when housing peaked as the most affordable in California. With home prices rising at double-digit rates throughout 2013 and interest rates higher than in early 2013, both the monthly payment, including taxes and insurance (PITI), and minimum income required to purchase a home, jumped more than 66 percent at the statewide level.
The San Francisco Bay Area has the least affordable counties in California, with San Francisco, San Mateo, and Marin all at 14 percent; Alameda at 18 percent; and Santa Clara and Contra Costa at 19 percent.
Job growth and high wages, primarily driven by high tech companies in the Bay Area, have fueled the demand for housing. The tight inventory that has led to higher prices has impacted affordability, especially for first-time home buyers, said David Tonna, president of the Silicon Valley Association of REALTORS®.
"Santa Clara County is now ranked as having the highest median household income in the country, but as many analysts are saying, we have to be careful that our booming economy benefits all income levels. It's especially worrisome that first-time home buyers are being priced out of the market because home prices are above their reach," said Tonna.
In Santa Clara County home buyers needed to earn a minimum annual income of $184,160 to qualify for the purchase of a $899,500 median-priced, existing single-family home in the second quarter of 2014. The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $4,600, assuming a 20 percent down payment and interest rate of 4.32 percent.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.