Higher wages and lower seasonal home prices combined to push California housing affordability higher in the first quarter of 2016, compared to the previous quarter.
According to a new report by the the California Association of Realtors, affordability was flat when compared to the previous year as rising home prices offset income gains.
The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in the first-quarter of this year rose to 34% from the 30% recorded in the fourth quarter of 2015 and was unchanged from first-quarter 2015.
According to CAR's Traditional Housing Affordability Index (HAI), this was the 12th consecutive quarter that the index has been below 40% and is near the mid-2008 low level of 29%.
The Affordability Index 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 $92,571 to qualify for the purchase of a $465,280 statewide median-priced, existing single-family home in the first quarter of 2016. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,314, assuming a 20% down payment and an effective composite interest rate of 4.01%. The effective composite interest rate in fourth-quarter 2015 was 4.07% and 3.97% in the first quarter of 2015.
The median home price was $483,810 in fourth-quarter 2015, and an annual income of $96,790 was needed to purchase a home at that price.
Condominiums and townhomes were also more affordable compared to the previous quarter. Forty-one percent of California households earned the minimum income to qualify for the purchase of a condominium or town home in the first quarter of 2016, up from 39% from the last quarter of 2015. An annual income of $77,575 was required to make monthly payments of $1,939.
Key points from the first-quarter 2016 Housing Affordability report include:
Compared to affordability in fourth-quarter 2015, 22 of 29 counties tracked saw an improvement in housing affordability, three experienced declines, and four were unchanged.
Affordability improved greatly in the Bay Area, with eight of nine counties seeing an improvement. Southern California, Central Coast, and the Central Valley also saw higher affordability, compared to the previous quarter.
Housing affordability in Southern California improved from the previous quarter in every county, with Los Angeles, Ventura, and San Diego counties leading the way.
During the first quarter of 2016, the five most affordable counties in California were Kings (58%), San Bernardino (57%), Merced (55%), and Kern (55%).
San Francisco (13%), San Mateo (16%), and Santa Cruz (18%) counties were the least affordable areas of the state.