Housing affordability in California has reached its lowest level in nearly 16 years, with the California Association of Realtors announcing that only 16% of homebuyers could afford to purchase a median-priced, existing single-family home in the second quarter of 2023. This decline, attributed to persistently high-interest rates and a shortage of homes on the market, reflects a stark contrast from the 56% peak recorded in the first quarter of 2012.
The C.A.R.'s Traditional Housing Affordability Index (HAI) shows that in the second quarter of 2023, an annual income of $208,000 was required to qualify for the purchase of a statewide median-priced, existing single-family home of $830,620. The monthly payment for such a home, including taxes and insurance, would be around $5,200 on a 30-year fixed-rate loan, with a 20% down payment and an effective composite interest rate of 6.61%.
Interest rates, which have remained above 6% for three consecutive quarters and are near a 17-year high, are expected to continue to challenge housing affordability in the upcoming months. The effective composite interest rate was 6.48% in the first quarter of 2023, up from 5.39% in the second quarter of 2022.
Additionally, while the median price of condominiums and townhomes in California declined year over year, it increased from the previous quarter, leading to a dip in the share of households that could afford a typical condo/townhome to 26% in the second quarter of 2023. To afford the $640,000 median-priced condo/townhome, an annual income of $160,400 would be required.
Nationally, housing affordability is more attainable, with more than a third of households being able to purchase a $402,600 median-priced home. However, nationwide affordability was down from 38% a year ago.
The second-quarter 2023 Housing Affordability report also revealed:
- Affordability declined in 47 counties, with no county recording an improvement quarter-to-quarter.
- Lassen County, located in Northern California on the Nevada border, remained the most affordable county, requiring the lowest minimum qualifying income of $62,400.
- The least affordable counties included Mono, Santa Barbara, San Luis Obispo, Monterey, and Orange County, each requiring a minimum income of at least $216,800.
- San Mateo County, located just south of San Francisco, required the highest minimum qualifying income at $504,400, the only county exceeding $500,000.
- The persistent crunch in affordability was most notable in Kings County, with a year-over-year decline of seven points, followed by Lake, Amador, and Glenn counties. Elevated mortgage rates were identified as the primary factor for the high borrowing costs and reduced affordability across most counties.
With the current trends showing no signs of immediate improvement, prospective buyers are likely to continue facing significant barriers to homeownership in the Golden State.
