Housing affordability in California fell short in the fourth quarter compared to the year prior as rising prices outweighed the effects of lower mortgage rates.
Thirty-one percent of homebuyers living in the state were able to afford a median-priced existing single-family home last quarter, the California Association of Realtors [1] (C.A.R.) said Thursday [2]. While that was a slight improvement from 30 percent in Q3, it was down from a revised 32 percent in 2013's closing months, the group reported.
The fourth quarter was the seventh straight period in which C.A.R.'s Housing Affordability Index—described by the association as "the most fundamental measure of housing well-being for home buyers in the state"—came in below 40 percent.
Statewide, homebuyers needed to bring in a minimum annual income of $91,550 to be able to afford a house priced at the median $452,140. Assuming a 30-year fixed-rate mortgage with an interest rate of 4.2 percent and a down payment of 20 percent, C.A.R. estimates the monthly payment for that kind of loan would be around $2,290.
Compared to the third quarter, 19 counties across the state saw affordability rise, with Santa Barbara, Contra Costa, Napa, and Los Angeles leading the way.
Three counties reported a drop in affordability as a result of price increases, one of which—San Francisco, where 14 percent of homebuyers earned enough—also made the list of least affordable regions in the state.
The other two, Madera and Merced, were actually listed among the most affordable counties, with more than half of homebuyers earning enough for locally priced homes.
C.A.R.'s affordability report came a day after the National Association of Realtors (NAR) reported a 6 percent rise [3] in U.S. home prices in the fourth quarter, up from a 4.8 percent gain in Q3.
While good news for homeowners, the ongoing and accelerated increase in prices presents "a challenge for buyers who are seeing home prices continue to outpace their wages," said NAR Chief Economist Lawrence Yun.