Higher wages along with lower seasonal home prices pushed California's housing affordability higher in the first quarter of 2018, according to the California Association of Realtors. In fact, 28 regions saw improvement from previous quarter, with six of nine Bay Area counties posting a higher affordability.
C.A.R.'s Traditional Housing Affordability Index indicates 31 percent of homebuyers could afford to purchase a median-priced, existing single-family home in California in first-quarter 2018, up from 29 percent in the fourth quarter of 2017, but down from 32 percent in the first quarter a year ago. This is the 20th consecutive quarter that the index has been below 40 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 homebuyers in the state.
A minimum annual income of $111,500 was needed to qualify for the purchase of a $538,640 statewide median-priced, existing single-family home in first-quarter 2018. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,790, assuming a 20 percent down payment and an interest rate of 4.44 percent. The interest rate in fourth-quarter 2017 was 4.17 percent and 4.36 percent in the first quarter of 2017.
Strong wage growth in the San Francisco Bay Area pushed affordability higher from the previous quarter in six of nine Bay Area counties - Alameda, Contra Costa, Napa, San Francisco, San Mateo, and Santa Clara. Affordability fell in the counties of counties Solano and Sonoma, and held steady in Marin.
According to C.A.R., 17 percent of homebuyers in Santa Clara County could afford to purchase a median-priced, existing single-family in first-quarter 2018, an improvement from 15 percent in the fourth quarter of 2017, but down from 19 percent in first-quarter 2017. Homebuyers needed to earn a minimum annual income of $284,210 to qualify for the purchase of a $1,373,000 median-priced single-family home in Santa Clara County in first-quarter 2018. Their monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $7,110, assuming a 20 percent down payment.
San Mateo, San Francisco and Santa Cruz counties had an affordability index of 15 percent and were the least affordable counties in the state in the first quarter of 2018. San Mateo County homebuyers needed an annual income of $326,040 in order to qualify for the purchase of a $1,575,050 median-priced home there. Their monthly payments would amount to $8,150.
"It's good to be aware that strong wage growth has pushed housing affordability upward a bit, but the reality is unless you are a dual-income earning household, and even then it would be hard, it's be tough to afford a median-priced home in Silicon Valley," said Bill Moody, president of the Silicon Valley association of Realtors. "First-time homebuyers and single-family households cannot compete at this level. We need to increase our housing supply in order to have a more balanced market."
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.