Despite lower interest rates, the latest California Association of Realtors report indicates strong home prices weakened housing affordability statewide in the second quarter of this year. The minimum annual income needed to purchase a California home hit six digits for the first time since the Great Recession. Housing affordability has become the issue of concern for many communities that are losing their workforce to other more affordable cities and states.
According to the state Realtor group's Traditional Housing Affordability Index, which measures the percentage of all households that can afford to purchase a median-priced, single-family home in California, 31 percent of California households could afford to purchase a $516,220 median-priced home in the second quarter. A minimum annual income of $101,217 was needed to make monthly payments of $2,530, including principal, interest, and taxes on a 30-year fixed-rate mortgage at 3.85 percent interest rate.
The second quarter index was down from 34 percent in first-quarter 2016 and up from 30 percent in second-quarter 2015. California's housing affordability index hit a peak of 56 percent in the first quarter of 2012.
Compared to first-quarter 2016, it was more difficult to buy a home in 25 of 29 California counties in second-quarter 2016. Not surprising, seven of nine Bay Area counties recorded lower affordability numbers – Alameda (20 percent), Contra Costa (32 percent), Marin (18 percent), San Mateo (14 percent), Santa Clara (19 percent), Solano (45 percent) and Sonoma (26 percent).
"We are seeing lower housing affordability spill over to other Bay Area counties. This trend highlights the region's housing crisis and the need for more housing in the area," said Karen Trolan, president of the Silicon Valley Association of Realtors. "Cities are making great efforts to provide more housing to accommodate the increase in job demands. Our communities are working on balancing housing affordability with our region that has so many assets - great weather, higher salaries, and job opportunities."
In Santa Clara County, home buyers in the second quarter of this year needed a qualifying income of $212,740 to purchase a $1,085,000 median priced home. Their monthly payment, including taxes and insurance, amounted to $5,318. A National Association of Realtors report recently listed San Jose as the first city where the price for a typical home is over $1 million.
Cities in the Bay Area are looking at creative ways to increase their housing stock, like encouraging micro-units, building more housing in transit-oriented developments, promoting co-housing communities with shared facilities, and granting special exemptions for developers who set aside a certain percentage of units as affordable. Menlo Park is planning an additional 4,500 units in the Belle Haven neighborhood, and Mountain View is looking at adding up to 10,000 in North Bayshore.
Some housing development efforts have received mixed reaction from residents. Cupertino and Sunnyvale have anti-growth ballot measures on the November ballot. Cupertino's ballot initiatives target redevelopment plans for the former Vallco shopping center. Additionally, a proposal to build 200 teacher and staff units at the site of a former elementary school which has been closed faced significant community pushback and was finally dropped by the school board.
In Los Gatos, the North 40 project, which would include 320 homes, 49 of which are designated senior affordable units, and approximately 66,000 square feet of commercial and retail space, is meeting opposition from residents complaining about the traffic the project could cause and that the project is too dense. Several local businesses have expressed concern that new businesses in the North 40 would take customers away from their stores.
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.
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