Just 15% of Californians can afford a home, lowest rate in 16 years
“Swift swings” takes a quick peek at one economic trend.
The number: Just how unaffordable is California housing? The share of folks who can make a purchase pencil out hit a 16-year low.
The source: My trusty spreadsheet eyeballed the California Association of Realtors’ third-quarter affordability study that compares pricing, financing and wages. The metric measures who can qualify to purchase a single-family house buy based on an assumption the buyer can put 20% down on a mortgage, creating a payment – taxes and insurance included – that’s 30% of household income.
The quick analysis: Just 15% of Californians could afford to buy in the quarter as high mortgage rates and stubbornly high prices make the purchasing math near impossible for many house hunters.
The only time house shopping was less affordable was during the easy-money days of the mid-2000s. The last time this affordability yardstick was higher was in the third quarter of 2007, just before the housing bubble burst.
Realtors estimate a successful purchase this summer required at least a $221,200 income for the estimated $5,530 monthly payment to buy the $843,600 median-priced house. Costs were tied to the third quarter’s 7.14% mortgage rate – up from 6.61% three months earlier and 5.72% one year ago.
The 15% rate compares to 16% three months ago, 18% a year ago, 35% when rates hit historical lows at 2020’s start, and 32% average over 33 years.
How does this unaffordability rank? The latest rate is the No. 9 lowest since 1991. The high was 56% in March 2012. The low was 11% in June 2007.
Side note: Ponder the lesser burden a typical US house hunter faces, using the same math. A buyer needs an income of $106,800 to meet a $2,670 payment – that’s 52% lower than California – on a $406,900 house.
National affordability is slipping, too, as 34% of US households could afford a home this summer vs. 36% in the spring quarter and 39% 12 months earlier.
The sound bite: “Interest rates appear to have peaked, and further economic slowdown could result in further rate drops before the end of the year,” the Realtors’ report stated. “The rate decline should alleviate pressure on both the supply and demand sides of the housing market, which could help improve housing affordability in the coming quarters.”
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com