Housing affordability in California bounced back in the third quarter with the statewide index for existing single-family home sales inching up to 18 percent after hitting a 15-year low of 16 percent in the second quarter of 2022, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.
The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in third-quarter 2022 rose slightly to 18 percent from 16 percent in the second quarter of 2022 but was down from 24 percent in the third quarter of 2021, according to C.A.R.’s Traditional Housing Affordability Index (HAI). California hit a peak high affordability index of 56 percent in the first quarter of 2012.
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.
A minimum annual income of $192,800 was needed to qualify for the purchase of a $829,760 statewide median-priced, existing single-family home in the third quarter of 2022. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $4,820, assuming a 20 percent down payment and an effective composite interest rate of 5.72 percent. The effective composite interest rate was 5.39 percent in second-quarter 2022 and 3.07 percent in third-quarter 2021. In anticipation of the Fed’s strong push on rate increases in the past few months, the market continued to put upward pressure on yields which resulted in the average 30-year fixed-rate mortgage (FRM) reaching the highest level in 20 years in late September.
The median price of existing single-family homes in California experienced the largest quarter-to-quarter decline in price since the first quarter of 2011. Despite the sizable quarter-to-quarter drop in median price, the share of households in California that could afford to buy a median-priced condominium or townhome continued to slide from last year as the cost of borrowing remained high.
Twenty-seven percent of California households earned the minimum income to qualify for the purchase of a $630,000 median-priced condo/townhome in the third quarter of 2022, which required an annual income of $146,400 to make monthly payments of $3,660. The third quarter 2022 figure was down from 37 percent a year ago.
Nationwide housing affordability also plunged in third-quarter 2022. Compared with California, 39 percent of the nation’s households could afford to purchase a $398,500 median-priced home, which required a minimum annual income of $92,400 to make monthly payments of $2,310. Nationwide affordability was 50 percent a year ago.
Key points from the third-quarter 2022 Housing Affordability report include: