Good luck if you're looking to buy a home in California.
Fewer than 1 in 5 homebuyers, or around 16%, can afford to buy a median-priced, single-family home in the state, according to new data released from the California Association of Realtors.
Housing affordability in California hit a 16-year low in the second quarter of this year, the association's Traditional Affordability Index revealed. The percentage of homebuyers able to purchase a median-priced, single-family home dropped from 19% in the first quarter of this year, from 17% a year ago and from 51% during the second quarter of 2012 – the last time a majority of homebuyers could afford a home in California, according to data from the historical housing affordability index. In comparison, 36% of homebuyers currently can afford a median-priced home in the U.S.
This dip comes as interest rates stayed above 6% for the third straight quarter and home prices remained elevated due to low inventory.
According to the report, a minimum income of $208,000 would be needed to qualify to purchase an $830,620 home -- the estimated statewide median home price during the second quarter of this year. The monthly payment, including taxes and insurance, on a 30-year fixed-rate loan, would be $5,200, assuming a 20% down payment and an interest rate of 6.6%.
For homebuyers in San Mateo and Santa Clara counties, the minimum required income would be much higher. San Mateo requires the highest minimum qualifying income in the state. A buyer would need $504,400 to purchase a median-priced home at $2.01 million. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $12,610.
Santa Clara, the second least-affordable county, would require a minimum income of $451,200 to purchase a median-priced home at $1.8 million. The monthly payment on a median-priced home would be $11,280.
Even condominiums and townhomes are becoming unaffordable for homebuyers, according to the report's findings. Only 25% of California households can afford a typical condo/townhome. Buyers would need an annual income of $160,400 to make the monthly payment of $4,010 on a $640,000 median-priced condo/townhome.
"Housing affordability in Silicon Valley is at a critically low point. The qualifying income to purchase a median-priced home in both counties is a struggle to meet, even for dual-income families," Jim Hamilton, president of the Silicon Valley Association of Realtors, said. "Homebuyers are up against higher interest rates, few homes for sale and higher prices. Since so many homeowners either bought at those historically low 30-year, fixed-rate loans or refinanced their home at 2.5% to 3% interest rates a couple of years ago, housing inventory will most likely remain extremely low for some time to come, only adding more pressure on an already stressed housing market."
He said this week's news about mortgage rates reaching their highest level in nine months dampens the outlook for potential homebuyers even more. The average 30-year, fixed-rate mortgage reached 7.24% on Monday, Aug. 14, as reported by Mortgage News Daily.
"Many expected moderate inflation in July would minimize the chances of another Fed rate hike and bring down interest rates; instead, rates have continued to climb in the past couple of weeks," Hamilton said. "Rates will likely stay elevated through the rest of the third quarter until the Fed decides on its next rate move."
Hamilton added that Realtors continue to urge their state and local officials to find ways to build more homes.
"More housing supply will ease the pressure on home prices and prevent them from escalating once more. If housing affordability continues to decline, California will be a renter state," Hamilton said. "We would lose more service workers, including teachers, who can't afford to purchase a median-priced home close to where they teach."
Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.
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