According to the California Association of Realtor's latest report, all-time high borrowing costs and rising home prices brought California housing affordability in the third quarter 2023 to the lowest level since 2007. Based on C.A.R.'s Traditional Housing Affordability Index, fewer than one in five (15%) homebuyers could afford to purchase a median-priced, single-family home in Q3 2023, down from 16% in the second quarter of 2023 and down from 18% in the third quarter of 2022. The third-quarter 2023 affordability is less than a third of the affordability index peak high of 56% in the first quarter of 2012.
California homebuyers needed a minimum annual income of $221,200 to qualify for the purchase of a $843,600 statewide median-priced single-family home in Q3 2023. Their monthly payment, including taxes and insurance (PITI) on a 30-year, fixed-rate loan, would be $5,530, assuming a 20% down payment and an interest rate of 7.14%.
At the regional level, only 17% of homebuyers could a afford a median-priced home in both San Mateo and Santa Clara counties. San Mateo County was the only county in the state that required a minimum qualifying income over half a million dollars. Homebuyers there needed a minimum qualifying income of $516,000 in order to purchase a $1,970,000 median-priced home. Their monthly payment would be $12,900.
Santa Clara County came in second, with buyers needing a minimum required income of $484,800 to purchase a $1,850,000 median-priced home there. Their monthly payment would be $12,120.
"Despite higher household incomes, higher home prices and elevated mortgage rates continue to be the primary factors that kept affordability near the all-time low across most counties," said Silicon Valley Association of Realtors President Jim Hamilton, expressing his disappointment in the drop in housing affordability. He noted he is hopeful that the Fed will continue to put a pause on future rate hikes and eventually bring the interest rate down.
"Previous Fed rate hikes have succeeded in slowing down the economy and easing inflation. The October inflation rate of 3.2% is much lower than anticipated and makes it less likely homebuyers will see mortgage interest rates jump to 8% again anytime soon," said Hamilton. "In fact, economists predict the interest rate could come down as soon as Spring of 2024. A rate decline would alleviate pressure on both supply and demand in the housing market and help improve housing affordability."
According to C.A.R., Lassen (58%) remained the most affordable county in California, followed by Tehama (39%) and Shasta (35%). These counties are located in the Far North region of the state. Of all counties in California, Lassen required the lowest minimum qualifying income ($55,600) to purchase a median-priced home in third-quarter 2023.
Mono (5%), Monterey (9%), San Luis Obispo (10%), and Santa Barbara (10%), were the least affordable counties in the state, with each of requiring at least a minimum income of $226,800 to purchase a median-priced home.
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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