Higher prices and elevated mortgage rates pushed borrowing costs to all-time highs, causing California's housing affordability to drop to the lowest level in nearly 17 years during the second quarter of this year, according to the California Association of Realtors. On a year-over-year basis, statewide home prices jumped 9% from Q2 2023, as competition and low inventory applied upward pressure on home prices.
Based on C.A.R.'s Traditional Housing Affordability Index, only 14% of the state's homebuyers could afford to purchase a median-priced existing single-family home in Q2 2024, down from 17% in the first quarter of 2024 and down from 16% in Q2 2023.
California buyers needed a minimum annual income of $236,800 to qualify for the purchase of a $906,600 statewide median-priced single-family home in Q2 2024. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $5,920, assuming a 20% down payment and an interest rate of 7.10%.
The minimum annual income required exceeded $200,000 for the sixth time in seven quarters, setting a new record high. The monthly PITI for a typical single-family home in California also hit a record high, rising by double digits from both the previous quarter and the same quarter last year.
"It has gotten tougher for buyers to purchase a median-priced home in the current market environment, especially in the Bay Area. Despite higher household incomes, higher home prices and elevated mortgage rates continue to keep housing affordability near its all-time lows across most counties," said Eileen Giorgi, president of the Silicon Valley Association of Realtors. "However, recent indicators that show the economy weakening and inflation calming are signs to the Fed that it's high time to cut interest rates."
Only 16% of homebuyers in both San Mateo and Santa Clara counties could afford to purchase a median-priced single-family home in Q2 2024, down from 17% and 18%, respectively, from the previous quarter and Q2 2023.
San Mateo County households needed a minimum annual income of $574,800 to qualify for the purchase of a $2,202,300 countywide median-priced single-family home. At that purchase price, the monthly payment, including taxes and insurance (PITI) on a 30-year, fixed-rate loan would be a whopping $14,370, assuming a 20% down payment and an interest rate of 7.10%.
Santa Clara County wasn't far behind. Homebuyers there needed a minimum annual income of $524,000 to qualify for the purchase of a $2,008,000 countywide median-priced single-family home in Q2 2024. At that purchase price, the monthly payment, including taxes and insurance (PITI) on a 30-year, fixed-rate loan, would be $13,100. Both counties, along with Alameda, also at 16%, came second to Napa (11%) with the lowest affordability in the nine-county Bay Area.
San Mateo and Santa Clara counties were also the only two counties in California with a minimum qualifying income of more than $500,000. Marin and San Francisco were third and fourth, requiring a minimum income of $469,200 and $444,000, respectively.
Mono (5%), Monterey (8%), and Santa Barbara (9%) were the least affordable counties in California, with each requiring a minimum income of at least $267,600 to purchase a median-priced home. Lassen (52%) remained the most affordable county in California, followed by Glenn (35%), Del Norte (34%), and Tehama (34%). Lassen continued to have the lowest minimum qualifying income ($65,200) to purchase a median-priced home in second-quarter 2024.
Giorgi is hopeful, noting the 30-year fixed mortgage rate remained essentially flat at 6.49% last week. "Recent mortgage rate drops have created a favorable window for buyers sitting on the sidelines to buy a home before competition and prices pick up," she said.
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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