It has become unaffordable for many families to purchase a home in California. According to California Association of Realtors Traditional Housing Affordability Index, fewer than one in five (16%) homebuyers could afford to purchase a median-priced, single-family home in California in the second quarter of this year, down from 19% in the first quarter and down from 17% in the second quarter of 2022. Housing affordability in the state hit the lowest level in nearly 16 years as interest rates stayed above 6% for the third straight quarter and home prices remained elevated due to the low supply of homes for sale.
California households needed a minimum annual income of $208,000 to qualify for the purchase of a $830,620 statewide median-priced home in the second quarter of 2023. The monthly payment, including taxes and insurance (PITI) on a 30-year fixed-rate loan, would be $5,200, assuming a 20% down payment and an interest rate of 6.6%. The four counties with the highest minimum qualifying annual income to purchase a home were San Mateo County ($504,400), Santa Clara County ($451,200), Marin ($443,600) and San Francisco ($403,600).
Even condominiums and townhomes are becoming unreachable for homebuyers. Only 25% of households could afford a typical condo/townhome in Q2 2023. An annual income of $160,400 was needed to make the monthly payment of $4,010 on a $640,000 median-priced condo/townhome.
Only 17% of San Mateo County households could afford to purchase a median-priced home in Q2, compared to 19% in the previous quarter and 15% in Q2 last year. A homebuyer needed a minimum qualifying annual income of $504,400 to purchase a $2,012,500 countywide median-priced, single-family home in Q2 2023. Their monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $12,610.
In Santa Clara County, only 18% of households could purchase a home in Q2 2023, compared with 21% in Q1 2023 and 18% in Q2 2022. Homebuyers needed a minimum annual income of $451,200 to qualify for the purchase of a $1,800,000 median-priced home. Their monthly payment would be $11,280.
"Housing affordability in Silicon Valley is at a critically low point. The qualifying income to purchase a median-priced home in both counties is a struggle to meet, even for dual income families. Homebuyers are up against higher interest rates, few homes for sale, and higher prices," said Jim Hamilton, president of the Silicon Valley Association of Realtors. "Since so many homeowners either bought at those historically low 30-year fixed-rate loans or refinanced their home at 2.5% to 3% interest rates a couple of years ago, housing inventory will most likely remain extremely low for some time to come, only adding more pressure on an already stressed housing market."
Hamilton said Realtors continue to urge their state and local officials to find ways to build more homes. "More housing supply will ease the pressure on home prices and prevent them from escalating once more. If housing affordability continues to decline, California will be a renter state. We would lose more service workers, including teachers, who can't afford to purchase a median-priced home close to where they teach."
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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