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Only 29% of households can buy a home in California

Only 29% of households can buy a home in California

By Ron Trujillo/

Fewer than three of every 10 households could afford to buy the median-priced home during the second quarter in California – and those who are able to purchase need to earn almost $111,000 per year.

Fast-rising home prices continue to help homeowners – and hurt home-shoppers, with only 29% of households able to buy the $553,260 median-priced home in the state during the second quarter, according to the California Association of Realtors.

The current quarter figure compares to 32% during the first quarter and 31% a year ago. It’s also the lowest affordability rate since third-quarter 2015.

Historically, low interest rates continue to lose ground to a competitive housing market, where a limited inventory is prompting higher prices and multiple offers.

California, often one of the priciest housing markets in the nation, has endured 17-consecutive quarters where affordability has been below 40%. The Golden State reached an affordability peak of 56% in first-quarter 2012, as the housing market recovered from the downturn, foreclosures and a still-sputtering economy.

During the second quarter, only five counties had affordability rates of more than 50%, led by Tehama and Kern counties at 57% and 54%, respectively. Kern County – the epicenter of the state’s oil industry – is battling its own mini-recession.

On the flip side, there are seven counties where the affordability rate is below 20%, including San Francisco at 12%. San Mateo and Santa Barbara counties were at 14% and 16%, respectively.

CAR, the state association of real estate agents and brokers, bases the affordability figure on the median-priced home of $553,260.

Households need annual income of at least $110,890 in order to qualify for the median-priced home. The monthly payment, including taxes and insurance, on a 30-year fixed-interest loan for the median-priced home would be $2,770, assuming a 20% down payment and an effective composite interest rate of 4.09%.

Photo by Konstantin L/Shutterstock

A double dose of reality

Home prices have almost doubled since affordability reached the peak five years ago, and homebuyers need to earn twice as much money today to purchase the median-priced home.

In first-quarter 2012, the peak of affordability in the state, homebuyers needed to earn at least $56,320 per year in order to purchase the median-priced home of $279,190.

Bay Area blues

Homebuyers in San Francisco needed to earn at least $179,930 in order to purchase the median-priced home of $895,000 during the second quarter.

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