Housing Affordability Declines Statewide

Alameda County one off just seven counties not pinched

Lower interest rates in the second quarter of 2014 failed to offset continued home price increases, lowering housing affordability statewide and in 19 of 26 counties in California, the California Association of Realtors (C.A.R.) reported last week.

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California fell from 33 percent in the first quarter of 2014 to 30 percent in the second-quarter. This number was down from 36 percent this time last year, according to C.A.R.’s Housing Affordability Index (HAI).

Home buyers needed to earn a minimum annual income of $93,590 to qualify for the purchase of a $457,140 statewide median-priced, existing single-family home in the second quarter of 2014. The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $2,340, assuming a 20 percent down payment and an interest rate of 4.32 percent.

The median home price was $416,720 in first-quarter 2014, and an annual income of $86,420 was needed to purchase a home at that price. Housing affordability has dropped 26 percent since first-quarter 2012, when housing peaked as the most affordable in California.

Home prices increased at double-digit rates throughout 2013. Interest rates are now higher than levels observed in early 2013. The monthly payment, including taxes and insurance (PITI) and minimum income required to purchase a home, shot up by more than 66 percent at the statewide level.

During the second quarter of 2014, the three most affordable counties in California were Kings County, where 64 percent of home buyers could afford a home. San Bernardino County followed with 58 percent and Merced County was a close third at 57 percent).

All three of the least-affordable counties were in the Bay Area. In San Francisco, San Mateo and Marin counties only 14 percent of home buyers could afford a home. The Alameda County number was not available at press time.

Only Monterey County experienced an improvement in housing affordability from the previous quarter, Housing affordability in San Mateo, Sonoma, San Luis Obispo, Santa Barbara, Fresno and Kings counties was unchanged quarter to quarter.