It’s still expensive, but getting better. A lower cost of borrowing and higher income levels allowed more Californians to afford a home purchase during the third quarter of 2019, according to a new report by the California Association of Realtors (CAR).
The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in the third quarter of 2019 edged up to 31% percent from 30% percent in the second quarter, and up from 27% in the third quarter a year ago, according to CAR’s Traditional Housing Affordability Index (HAI). California’s housing affordability index hit a peak of 56% percent in the third quarter of 2012.
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.
A minimum annual income of $120,400 was needed to qualify for the purchase of a $613,470 statewide median-priced, existing single-family home in the third quarter of 2019. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $3,010, assuming a 20% down payment and an effective composite interest rate of 3.85%, the lowest rate since the third quarter of 2016. The effective composite interest rate was 4.17% in second-quarter 2019 and 4.77% a year ago.
Housing affordability for condominiums and townhomes also improved in the third quarter compared to the previous quarter, with 43% of California households earning the minimum income to qualify for the purchase of a $465,000 median-priced condominium/townhome, up from 40% in the previous quarter, and from 36% a year ago. An annual income of $91,200 was required to make monthly payments of $2,280.
Affordability improved in all Southern California regions, with Los Angeles and Orange counties tied for being the least affordable (25%) and San Bernardino County being the most affordable (51%).
Compared with California, more than half of the nation’s households (56%) could afford to purchase a $280,020 median-priced home, which required a minimum annual income of $54,800 to make monthly payments of $1,370.
