California Home Affordability Slipping Away in Q1

According to the California Association of Realtors ('C.A.R.'), the combination of continued price increases and relatively higher interest rates during the first quarter of 2014 led to decreased housing affordability in all regions of California.

 

While the percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California rose slightly from 32 percent in the fourth quarter of 2013 to 33 percent in the first quarter of 2014, affordability declined sharply from the 44 percent rate reported in the first quarter of 2013, according to C.A.R.'s Traditional Housing Affordability Index (HAI).

 

                                                         California home

 

C.A.R.'s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California.  C.A.R. 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 $86,419 to qualify for the purchase of a $416,720 statewide median-priced, existing single-family home in the first quarter of 2014.  The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $2,160, assuming a 20 percent down payment and an effective composite interest rate of 4.46 percent.  The effective composite interest rate in fourth-quarter 2013 was 4.43 percent and 3.56 percent in the first quarter of 2013.

The median home price was $431,540 in fourth quarter 2013, and an annual income of $89,247 was needed to purchase a home at that price. 

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