Bubble talk? It’s back — and three CA cities are most at risk
With mortgage rates at a seven-year high and record-home prices in many regions of the state, more consumers are concerned about affordability and buying at the peak of the housing market.
And homeowners, who have enjoyed dramatic equity gains, are also beginning to worry that the bubble is about to burst.
“Rising mortgage rates have pushed home prices to the least affordable level we’ve seen in 10 years, both nationally and at the local level,” says Daren Blomquist, senior vice president of ATTOM Data Solutions. “Close to one-third of the U.S. population now lives in counties where buying a median-priced home requires at least $100,000 in annual income.”
California is the epicenter of the $100,000-plus income needed to purchase a home. Consumers needed annual income of $100,000 or more in 20 of the 50 counties tracked by the California Association of Realtors during the second quarter. And only one of every four consumers could afford the median-priced home during the April-through June period, the lowest rate in a decade.
ATTOM Data Solutions identified 12 cities that are the most likely for a correction based on lack of affordability and record-high home prices. Three cities in California were on the list: Santa Rosa, San Jose and San Francisco-Oakland, which faces the biggest risk of a downturn. The case against the three regions:
- Santa Rosa
Median sales price: $610,000, up 6% from a year ago
Local average income: $52,858, up 4% from a year ago
Actual income needed to afford a home: $170,683
Share of local average income needed to buy a home in third-quarter 2018: 90.4%
Share of local average income needed to buy a home historically: 78.6%
Difference: 11.8 percentage points
- San Jose-Santa Clara-Sunnyvale
Median sales price: $1,19 million, up 2% from a year ago
Local average income: $129,207, up 7% from a year ago
Actual income needed to afford a home: $327,284
Share of local average income needed to buy a home in third-quarter 2018: 70.9%
Share of local average income needed to buy a home historically: 57.4%
Difference: 13.5 percentage points
- San Francisco-Oakland (will list Contra Costa County)
Median sales price: $615,000, up 10% from a year ago
Local average income: $67,860, up 3% from a year ago
Actual income needed to afford a home: $174,423
Share of local average income needed to buy a home in third-quarter 2018: 72%
Share of local average income needed to buy a home historically: 58.5%
Difference: 13.4 percentage points
To determine affordability, the amount of income needed to make monthly house payments was calculated, assuming a 3% down payment and a 28% maximum front-end debt-to-income ratio.
Feature photo of San Jose subdivision by PBK/Shutterstock. Photo of Buena Vista neighborhood in San Francisco by Naebly/Shutterstock.
Family-friendly Folsom tops best cities list
California has much to offer families, from beautiful beaches and Disneyland to a booming economy and the most comprehensive paid family-friendly leave program.
But some cities are just better for families than others, with more attractions and pediatricians to lower crime rates and home prices.
WalletHub crunched data and determined Folsom, a suburb about 25 miles from the state Capitol in downtown Sacramento, is the most family-friendly city in the Golden State. The city, known for its lake and prison (thanks to Johnny Cash) scores on affordability and family fun.
Other cities in the top 10: San Ramon, Los Altos, El Dorado Hills, Dublin, Danville, Pleasanton, Cupertino, Aliso Viejo and Roseville.
Readers who know their cities and geography will notice something: Only one city in Southern California cracked the top 10, Aliso Viejo.
The three worst cities for families of the 254 that WalletHub analyzed in California? Adelanto, San Bernardino and Huntington Park.
Photo of Rainbow Bridge in Folsom by Andrew Zarivny/Shutterstock