Although home prices have softened in some places, higher interest rates placed a dent on housing affordability, reducing the number of Californians who could buy a home in the third quarter.
According to the California Association of REALTORS® (C.A.R.) Traditional Housing Affordability Index, the percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in the third quarter slipped to 29 percent from 30 percent in the second quarter of 2015 and unchanged from third-quarter 2014. The state's housing affordability index peaked at 56 percent in the third-quarter 2012. C.A.R.'s housing affordability index measures the percentage of all households that can afford to purchase a median-priced, single-family home in California.
California home buyers needed to earn a minimum annual income of $98,350 to qualify for the purchase of a $487,420 statewide median-priced, existing single-family home in the third quarter of 2015. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan would be $2,460, assuming a 20 percent down payment and an effective composite interest rate of 4.16 percent.
In comparison, home buyers needed to earn an annual income of $96,140 in the second quarter of 2015 to qualify for the purchase of a $485,910 statewide median-priced home. The interest rate in second-quarter 2015 was 3.95 percent.
According C.A.R.'s third-quarter 2015 Housing Affordability report, affordability of condominiums and townhomes also slipped in the third quarter, but were more affordable than single-family homes, with 38 percent of home buyers able to purchase a $390,740 median-priced condo or townhome. An annual income of $78,840 was required to make a monthly payment of $1,970.
Compared to the third-quarter 2014, housing affordability declined in all regions except Marin, San Luis Obispo, Santa Barbara, and Santa Cruz. Housing affordability held steady in the five regions of Napa, Orange, Monterey, Merced, and Placer.
In Santa Clara County, only 19 percent of households could afford to purchase a $965,000 medium-priced home. To qualify, buyers needed to earn a minimum income of $194,720 to make a monthly payment of $4,870. The housing affordability index was at 21 percent in third-quarter 2014.
In San Mateo County, the housing affordability index was at 13 percent in the third quarter. Buyers needed to earn $252,230 in order to qualify to purchase a $1,250,000 median-priced home. Their monthly payment would be $6,310.
"We are seeing some softening of home prices, but with affordability dropping significantly, many home buyers are looking for more affordable homes in outlying counties," observed Chris Isaacson, president of the Silicon Valley Association of REALTORS®.
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.