The latest California Association of REALTORS® (C.A.R.) report indicates the state's housing affordability level remained steady during the July-through-September period of this year due to lower interest rates and smaller home price gains. Affordability even improved in some high-cost counties in the San Francisco Bay Area in third-quarter 2014.
The percentage of home buyers who could afford to buy 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 it was down from a revised 32 percent in third-quarter 2013, according to C.A.R.'s Traditional Housing Affordability Index. This is the sixth consecutive quarter that the index was below 40 percent.
California 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.
Santa Clara, San Francisco, and Alameda counties saw the greatest quarter-to-quarter improvement in housing affordability, primarily due to lower price growth. Santa Clara County was at 21 percent, up from 19 percent in second-quarter 2014. Santa Clara County home buyers needed to earn a minimum annual income of $174,620 to qualify for the purchase of an $860,000 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 $4,370, assuming a 20 percent down payment and an effective composite interest rate of 4.23 percent.
While housing affordability eased in the counties of San Francisco, San Mateo, and Marin from second-quarter 2014, these counties still remained the least affordable in the state, with a third-quarter affordability index of 15 percent. San Mateo County's affordability index was 14 percent in second-quarter 2014. Home buyers there needed to earn a minimum annual income of $217,260 to qualify for the purchase of a $1,070,000 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 $5,430, assuming a 20 percent down payment and an effective composite interest rate of 4.23 percent.
The most affordable counties in California in third-quarter 2014 were Kings (64 percent), Madera (58 percent), San Bernardino (57 percent), Tulare (56 percent), and Merced (55 percent).
C.A.R. Vice President and Chief Economist Leslie Appleton-Young said housing affordability is the "Achilles heel of the California economy." High housing costs impact jobs, long-term economic growth, neighborhoods and even family stability, Appleton-Young told members of the Silicon Valley Association of REALTORS® (SILVAR) at their general membership meeting last month.
"The solution to affordability is supply," said SILVAR President David Tonna. "Right now, our region is impacted by strong job growth, but there is a very tight housing supply and it is impacting home prices. Even the rental market has inadequate supply."
According to MLSListings Inc., Santa Clara County's October inventory of single-family homes was down 9 percent from the previous month and down 6 percent from October 2013. San Mateo County's inventory was down 14 percent from September 2014 and down 28 percent from inventory in October 2013.
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.