California Association of Realtors (C.A.R.) pointed out on Tuesday (August 13) that due to the rising prices and mortgage rates, more and more people are unable to afford buying a house.
According to C.A.R.’s Traditional Housing Affordability Index, in the second quarter of 2024, only 14% of homebuyers in California had the ability to afford a median-priced detached home at $906,600, the lowest level in nearly 17 years. This index not only dropped from 17% in the first quarter but also fell below one-third of the peak in the second quarter of 2012 at 56%.
In addition, the proportion of California families able to afford condos and townhouses also dropped to 22%, lower than the 24% in the first quarter and lower than the 25% in the same period of 2023. The data shows that families with a minimum annual income of $180,000 can afford a median-priced condo or townhouse at $690,000.
C.A.R.’s housing affordability index shows the percentage of all California families able to afford the median house price; it is considered the most basic standard of measuring the housing welfare of California buyers.
California’s current high housing prices have been hovering above $900,000 since April. The minimum annual income for buyers to purchase a single-family home worth $906,600 in California is $236,800. If the buyer makes a 20% down payment and pays at a 7.1% 30-year fixed mortgage rate, the monthly mortgage and insurance expenses would be close to $6,000.
Compared to California, housing prices in other regions of the United States are significantly cheaper, with the national median house price being less than half of California’s at $426,900.
Data from the National Association of Realtors (NAR) shows that about one-third of households in the entire U.S. have the ability to purchase a median-priced single-family home, with monthly payments around $2,750 and an annual income of $110,000 required.
Real estate experts from C.A.R. believe that as the market transitions from the spring housing season to a slower season, California’s housing prices may decline due to cooling market competition and ongoing improvements in housing inventory. On the other hand, with the Federal Reserve signaling rate cuts, interest rates are expected to continue decreasing over the next few months, thereby improving Californians’ housing affordability in the next quarter.
Freddie Mac data shows that in the week ending on the 8th, the average 30-year fixed mortgage rate was 6.47%, and the average 15-year fixed mortgage rate was 5.63%.
Looking at the situation in 58 counties in California, the San Francisco Bay Area has the most expensive housing prices in the state in the second quarter, specifically San Mateo County and Santa Clara County. C.A.R. notes that the median house prices in these two counties are both above $2 million, requiring buyers to have a minimum annual income exceeding $500,000.
Apart from the aforementioned counties, Marin County north of the Golden Gate Bridge and the city and county of San Francisco follow closely, with the minimum buyer income thresholds at $469,200 and $444,000, respectively; both counties have median house prices exceeding $1.7 million.
In Southern California, Orange County and San Diego County have the highest average median house prices at over $1.4 million and $1.05 million, respectively; Los Angeles County had a median house price around $850,000 in June; Imperial County has the most affordable housing in the entire region, at $395,000.
Although housing prices in California are generally high, houses under $350,000 or even $250,000 can still be found. In Glenn County in the Central Valley and Lassen County in the northern region, the median house prices in June were $340,450 and $249,950, respectively.