C.A.R. analysis finds significant disparity between home prices and what buyers can truly afford
Dearth of housing supply at affordable prices exacerbates housing affordability issue.
- Only seven of 32 reporting counties in California had a home price that a typical median-income household in the counties can afford.
- Less than one-third of the state’s housing inventory was at or below the home price a typical household earning the median income can afford.
- San Francisco’s second quarter median home price was 225 percent higher than what a typical median-income household in that county can purchase.
LOS ANGELES (Aug. 20) – Only seven of California’s counties are affordable to home buyers who earn the areas’ median household income, while homes in 25 counties were out of reach for the typical household, according to analysis by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). Furthermore, less than a third of the state’s inventory of available single-family homes, condominiums, and townhomes for sale was at or below the home price that a household earning the California median income of $60,244 can afford.
“The significant disparity between what home buyers can realistically afford and actual home price is discouraging, especially in the San Francisco Bay Area,” said C.A.R. President Chris Kutzkey. “While housing is affordable in some regions of the state, California lacks an adequate supply and mix of affordable housing in locations where the majority of the state’s workforce resides.”
In the second quarter of 2015, the statewide median price of $446,980 was nearly 50 percent higher than what a California household with the median income of $60,244 could afford to purchase.
Twenty-five of the 32 reporting California counties had a higher median price than the actual home price that a household earning a median income could afford. As expected, San Francisco was the least affordable county where households earning the median income of $75,910, were only able to afford a $383,670 home – a difference of $863,900 or 225 percent, compared to the actual second quarter 2015 median home price of $1,247,570. San Mateo County was the second least affordable county, with the typical median-income household able to afford a $452,020 home, compared to the actual median-priced home of $1,075,390 – a difference of $623,370 or 138 percent.
Only seven California counties – primarily in the Central Valley and Northern California – had homes that a median-income household could afford, with Kings County being the most affordable in terms of the price differential. In Kings County, a median-income household could afford to purchase a home priced at $243,730, or $57,400 more than the actual median home price of $186,330. Merced, San Bernardino, Tulare, Shasta, Fresno, and Madera counties rounded out the remaining affordable counties, with median-income buyers able to afford a home more than the actual median home price of those counties.
Further exacerbating high housing costs is the lack of supply of homes that a household earning the median income can afford. Statewide, less than a third (29 percent) of the available homes, including single-family, condos, and townhomes, were at or below the $304,490 price that a household earning the median income can afford – $142,490 less than the actual California median price of $446,980.
For the Bay Area, the picture is even bleaker, with San Francisco and San Mateo counties having available, affordable inventory of only 2.1 percent and 3.1 percent, respectively.
Seven of the 32 counties reported by C.A.R. had an inventory of 10 percent or below the corresponding home price that a median-income household can afford, with two counties (San Francisco and San Mateo) having affordable inventory of less than 4 percent. Only Kings, San Bernardino, and Merced counties had inventory near 50 percent or higher at or below the price that a typical household can afford.
Methodology: By calculating how much home a median-income household can afford, C.A.R. demonstrates whether a typical household earns enough income to qualify for a mortgage loan on a median-priced home at the state and the county levels based on most recent home prices and income data. Median prices were calculated based on sales data on existing single-family homes, condos, and townhomes collected by C.A.R. The typical household is defined as one earning the median household income, estimated based on statistics released by the U.S. Bureau of the Census. The analysis assumes a down payment of 20 percent of the median home price and a 30 year fixed-rate mortgage with a rate set on the prevailing mortgage interest rate. The prevailing mortgage interest rate is the effective rate on loans closed on existing homes from the Federal Housing Finance Board. It is also assumes the monthly PITI (principal, interest, taxes, and insurance) can be no more than 30 percent of a household's income.
Leading the way...® in California real estate for 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 175,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
Home Price a Typical Median-income Household Can Afford (Includes existing single-family homes, condominiums, and townhomes)