Pleasanton Weekly

Real Estate - November 15, 2013

Affordable homes declining

Higher housing prices shutting out buyers

by Jeb Bing

Housing affordability fell in the year's third quarter for the sixth consecutive time after reaching an all-time high in the spring of 2012, the California Association of Realtors reported.

Significantly higher home prices shut out more California home buyers during the quarter, CAR said.

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California dropped to 32% in the third quarter, down from 36% in first quarter of the year and from 49% in third quarter of 2012.

CAR's Traditional Housing Affordability Index (HAI) showed the third quarter 2013 figure fell below 35% for the first time since the third quarter of 2008.

CAR's HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. CAR 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 $89,170 to qualify for the purchase of a $433,940 statewide median-priced, existing single-family home in the third quarter of 2013. The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $2,230, assuming a 20% down payment and an effective composite interest rate of 4.36%. The effective composite interest rate in second-quarter 2013 was 3.64% and 3.72% in the third quarter of 2012.

The median home price was $339,930 in third-quarter 2012, and an annual income of $65,828 was needed to purchase a home at that price.

California housing affordability hit a record high of 56% in first quarter of 2012. Since then, a lack of housing supply and high demand have driven up home prices sharply and significantly reduced affordability.

Nearly every county experienced a double-digit decline in affordability when compared to last year, reflecting the substantial increase in California home prices on a year-to-year basis. Sacramento, Monterey and Sonoma counties experienced the largest year-to-year declines, while San Mateo, Marin and San Francisco counties experienced the smallest year-to-year declines.

At an index of 64%, San Bernardino County was the most affordable county of the state, while San Mateo County was the least affordable at 15%.

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