Rising home prices drag down third-quarter California housing affordability

The California Association of Realtors reports double-digit home price increases pushed California’s third quarter housing affordability to its lowest level in nearly two years, as the state continues to grapple with a serious shortage of homes for sale. The third-quarter 2020 affordability findings are the lowest since the fourth quarter of 2018.

The percentage of homebuyers who could afford to purchase a median-priced, existing single-family home in California in third-quarter 2020 fell to 28 percent from 33 percent in the second quarter of 2020 and was down from 31 percent in the third quarter a year ago, according to C.A.R.’S Traditional

Housing Affordability Index. California’s housing affordability index peaked at 56 percent in the third quarter of 2012.

A minimum annual income of $127,200 was needed to qualify for the purchase of a $693,680 statewide median-priced, existing single-family home in the third quarter of 2020. The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $3,180, assuming a 20 percent down payment and an interest rate of 3.15 percent. The interest rate was 3.43 percent in secondquarter 2020 and 3.85 percent in third-quarter 2019.

Affordability held steady at 22 percent in Santa Clara County, where a minimum annual income of $256,800 was needed to qualify for the purchase of a $1,400,000 countywide median-priced, existing single-family home in the third quarter of 2020. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $6,420, assuming a 20 percent down payment and an interest rate of 3.15 percent.

San Mateo and San Francisco counties, where affordability was at 19 percent and 22 percent, respectively. San Francisco County required an annual minimum qualifying income of over $305,000 to purchase a medianpriced home. San Mateo County required the highest income of all counties in California at $324,000.

In the third quarter of 2020, the most affordable counties in the state were Lassen (63 percent), Kings (59 percent), and Tuolumne (52 percent). The minimum qualifying income was $59,600 or less for each of these counties. Mono (16 percent), Santa Barbara (17 percent), Monterey, San Mateo and Santa Cruz (all at 19 percent) were the least affordable counties in the state.

While C.A.R. says the passage of Proposition 19 at the Nov. 3rd election is expected to free up housing inventory. The proposition limits property tax increases on primary residences for seniors and people with severe disabilities, so they can move closer to family, downsize, or find a home that better fits their needs.

Mary Kay Groth, president of the Silicon Valley Association of Realtors, says more action is needed.”without fundamental changes aimed at building more homes, affordable housing will remain a crisis in our region and state,” says Groth.

The statewide median home price in thirdquarter 2020 increased 13.6 percent from the previous quarter and jumped 13.8 percent from third-quarter

2019. Compared with California more than half of the nation’s households (55 percent) could afford to purchase a $313,500 medianpriced home, which required a minimum annual income of $57,600 to make monthly payments of $1,440.

Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to rmeily@silvar.org.