Higher interest rates lower California housing affordability in third quarter, C.A.R. reports

LOS ANGELES, Nov. 12, 2015 /PRNewswire-USNewswire/ -- Relatively flat home prices weren't enough to ease housing affordability as higher interest rates reduced the number of Californians who could buy a home in the third quarter, the CALIFORNIA ASSOCIATION OF REALTORS^® (C.A.R.) said today.

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in third-quarter 2015 slipped to 29 percent from the 30 percent recorded in the second quarter of 2015 and was flat from the 29 percent in the third quarter a year ago, according to C.A.R.'s Traditional Housing Affordability Index (HAI). California's housing affordability index hit a peak of 56 percent in the third quarter of 2012.

C.A.R.'s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The Index is considered the most fundamental measure of housing well-being for home buyers in the state.

Home buyers needed to earn a minimum annual income of $98,350 to qualify for the purchase of a $487,420 statewide median-priced, existing single-family home in the third quarter of 2015.  The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,460, assuming a 20 percent down payment and an effective composite interest rate of 4.16 percent. 

The median home price was $485,910 in second-quarter 2015, and an annual income of $96,140 was needed to purchase a home at that price. The effective composite interest rate in second-quarter 2015 was 3.95 percent. 

Key points from the third-quarter 2015 Housing Affordability report include:

• Affordability of condominiums and townhomes also slipped in the third quarter, but were more affordable than single-family homes, with 38 percent of home buyers able to purchase the $390,740 median-priced condo or townhome. An annual income of $78,840 was required to make a monthly payment of $1,970.
• Compared to the previous quarter, housing affordability improved in Marin and Santa Barbara counties, due to a combination of plateauing home prices and continuing wage growth.
• Compared to the previous year, housing affordability declined in all regions except Marin, San Luis Obispo, Santa Barbara, and Santa Cruz, which improved, and held steady in five regions (Napa, Orange, Monterey, Merced, and Placer).
• The remaining 19 regions (Alameda, Contra Costa, San Francisco, San Mateo, Santa Clara, Solano, Sonoma, Los Angeles, Riverside, San Bernardino, San Diego, Ventura, Fresno, Kings, Madera, Sacramento, San Joaquin, Stanislaus, and Tulare) saw declines in housing affordability from the previous year.
• In the Bay Area, Marin posted the only year-to-year improvement in affordability mainly due to flat home prices and growth in annual household income. Other Bay Area counties, such as Santa Clara, Solano, and Sonoma, experienced significant affordability drops as homebuyers looking for more affordable homes moved to outlying counties and drove home prices higher.

See C.A.R.'s historical housing affordability data.

See first-time buyer housing affordability data.

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Leading the way…® in California real estate for more than 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than 175,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

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SOURCE CALIFORNIA ASSOCIATION OF REALTORS

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