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Affordability: Only 1 in 3 consumers can afford homes

Affordability: Only 1 in 3 consumers can afford homes

By Ron Trujillo/

Less than one of every three California households could afford the median-priced home in the second quarter – and many of those able to buy would need to earn at least $101,000 per year.

Only 31% of households could afford to purchase the $516,220 median-priced, single-family home in the state during second-quarter 2016, compared to 34% in the first quarter of the year – and slightly better than the 30% rate for the same three-month period a year earlier, according to the California Association of Realtors.

The closely watched report gave a rather grim picture for home shoppers and those saving for their first home. And the lack of affordable housing, especially in the Bay Area and Southern California, is a significant concern among those in the housing industry, despite brisk sales the past few years.

pleasanton-homeThe across-the-board affordability report is based on the $516,220 median-priced home statewide, with a 20% down payment—$103,244—and an interest rate of 3.85%. The monthly payment, including taxes and insurance on a 30-year mortgage, would be $2,530.

Of course, the median-price means half the homes sell for more, the other half for less. So, home shoppers could afford to buy cheaper-priced homes, including condominiums and townhomes (40% of households in the state could afford the median-priced condo during the second quarter).

Now, CAR also compiles county-by-county affordability rates, based on the median-priced home in those regions.

For example, the Bay Area has three counties where the median price is $1 million-plus – or more than double the statewide price. And, on the flip side, only one market in the 10-county region of the Central Valley is within $100,000 of the median-price in the state (Placer County at $438,490).

Twenty-five of the 29 counties tracked reported a decline in affordability compared to first-quarter 2016, while San Francisco and Madera counties had no change. Only Napa and San Luis Obispo counties enjoyed an increase in affordability.

car-q2-2016-affordability-income-neededSan Francisco (13%), San Mateo (14%) and Santa Cruz (17%) counties were the least affordable in the state. In fact, seven of the nine counties in the Bay Area reported a decline in affordability.

All six Southern California regions endured a decline in affordability. San Bernardino and Riverside counties were the most affordable, at 56% and 41%, respectively.

The Central Valley – think Bakersfield to Sacramento – was the most affordable region in the state. Despite dramatically lower household incomes, homes are significantly cheaper in the 10-county region. For example, Kings, Kern, Madera, Fresno and Tulare counties all had 50% or greater affordability rates in the second quarter.

Homeowners can check the complete quarterly report here.

Fresno photo courtesy of Strangevisitor.




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