Cheaper mortgages and income growth improve housing affordability in California. With alower cost of borrowing and higher income levels, more Californians could afford a home purchase during the third quarter of 2019.
According to the California Association of Realtors' Traditional Housing Affordability Index (HAI), 31 percent of California home buyers could afford to purchase a median-priced, existing single-family home in third-quarter 2019, up from 30 percent in the second quarter of 2019 and up from 27 percent in the third quarter a year ago. California's housing affordability index hit a peak of 56 percent in the third quarter of 2012.
A minimum annual income of $120,400 was needed to qualify for the purchase of a $613,470 statewide median-priced, existing single-family home in the third quarter of 2019. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $3,010, assuming a 20 percent down payment and an effective composite interest rate of 3.85 percent, the lowest rate since third-quarter 2016. The effective composite interest rate was 4.17 percent in second-quarter 2019 and 4.77 percent a year ago.
Housing affordability for condominiums and townhomes also improved in the third quarter compared to the previous quarter, with 43 percent of California households earning the minimum income to qualify for the purchase of a $465,000 median-priced condominium/townhome, up from 40 percent in the previous quarter. An annual income of $91,200 was required to make monthly payments of $2,280. Thirty-six percent of households could afford to buy a condominium/townhome a year ago.
When compared to a year ago, housing affordability improved in 42 tracked counties and declined in five counties. Affordability remained flat in one county. In the San Francisco Bay Area, affordability improved from third-quarter 2018 in every county. San Francisco County was the least affordable, with just 18 percent of households able to purchase the $1,580,000 median-priced home. Forty-seven percent of Solano County households could afford the $460,000 median-priced home, making it the most affordable Bay Area county.
During the third quarter of 2019, the most affordable counties in California were Lassen (64 percent), Kings (55 percent) and Madera (52 percent). The minimum annual income needed to qualify for a home in these counties was less than $56,000. Mono (17 percent), San Francisco (18 percent), and San Mateo (20 percent) counties were the least affordable areas in the state.
San Francisco required the highest minimum qualifying income in the entire state. An annual income of $309,600 was needed to purchase a home in San Francisco County, though down from $343,240 in second-quarter 2019.
In Santa Clara County, 22 percent of households could afford to purchase the $1,240,000 median-priced home in the third quarter of 2019, up from 20 percent in second-quarter 2019 and from 17 percent a year ago. Homebuyers needed a minimum annual income of $243,200 was needed to qualify for the purchase of a $1,240,000 median-priced home. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $6,080.
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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