Lower interest rates and level home prices combined to improve overall California housing affordability in the fourth quarter of 2015 compared to the previous quarter, according to the California Association of Realtors (C.A.R.). Affordability, however, was down when compared to the previous year.
The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in fourth-quarter 2015 edged up to 30 percent from 29 percent recorded in the third quarter of 2015, but was down from 31 percent in fourth-quarter 2014, according to C.A.R.'s Traditional Housing Affordability Index. This is the 11th consecutive quarter that the index has been below 40 percent and is near the mid-2008 low level of 29 percent.
California's housing affordability index hit a peak of 56 percent in the first quarter of 2012. 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 $96,640 to qualify for the purchase of a $483,050 statewide median-priced, existing single-family home in the fourth quarter of 2015. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,420, assuming a 20 percent down payment and an effective composite interest rate of 4.07 percent.
The median home price was $488,540 in third-quarter 2015. Home buyers needed to earn an annual income of $98,580 to purchase a home at that price.
Unchanged from the previous quarter and year, 39 percent of California households earned the minimum income to qualify for the purchase of a condominium or townhome in the last quarter of 2015. An annual income of $78,720 was required to make monthly payments of $1,970.
Regionally, affordability improved slightly across the state with affordability gains mostly in the higher-priced areas, while less expensive regions experienced minimal effects due to level home prices. During the fourth quarter of 2015, the five most affordable counties in California were Kings (61 percent), Merced (55 percent), San Bernardino (53 percent), Tulare (54 percent), and Fresno (49 percent).
Sixteen counties saw quarter-to-quarter improvements in housing affordability, with Contra Costa (37 percent), Los Angeles (27 percent), Alameda (22 percent), Sonoma (26 percent), and San Joaquin (38 percent) counties leading the way. San Francisco (11 percent), San Mateo (14 percent), and Marin (17 percent), counties were the least affordable areas of the state.
In Santa Clara County, 20 percent of home buyers could afford to purchase a median-priced existing single-family home in fourth-quarter 2015, up from 19 percent in third-quarter 2015, but down from 22 percent in fourth-quarter 2014. Santa Clara County home buyers needed to earn a minimum annual income of $188,060 to qualify for the purchase of a $940,000 countywide median-priced, existing single-family home in the fourth quarter of 2015. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $4,700, assuming a 20 percent down payment and an interest rate of 4.07 percent.
"The continued low interest rates and the stable increases in home prices are encouraging for affordability of purchase in some areas," said Karen Trolan, 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.