Housing affordability outlook improves in Q4 2021 as prices level off

The California Association of Realtors reports the housing affordability outlook improved in the fourth quarter of 2021. C.A.R. indicates this is likely due to the moderation of home price growth and the increase in household incomes.

The percentage of homebuyers who could afford to purchase a median-priced, singlefamily home in California in fourth-quarter 2021 inched up to 25 percent from 24 percent in the third quarter of 2021, but was down from 27 percent in the fourth quarter of 2020, according to C.A.R.’S Traditional Housing Affordability Index. The Q4 2021 figure is less than half of the affordability index peak of 56 percent in the first quarter of 2012.

A minimum annual income of $148,000 was needed to qualify for the purchase of a $797,470 statewide median-priced, single-family home in the fourth quarter of 2021. The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $3,700, assuming a 20 percent down payment and an interest rate of 3.28 percent.

Compared with California, half of the nation’s households could afford

to purchase a $361,700 median-priced home, which required a minimum annual income of $67,200 to make monthly payments of $1,680. Nationwide affordability was down from 55 percent a year ago.

“California can’t be compared with the rest of the nation. More so, the Bay Area is different from the rest of California and the nation,” said Brett Caviness, president of the Silicon Valley Association of Realtors. “The amenities here are next to none. Here we not only have many of the top 100 high schools and the top higher education institutions in the nation, we also have beautiful weather and proximity to beaches and mountains. We have a diverse population and are a melting pot of cultures, the arts and entertainment. Silicon Valley is the base of the tech industry.”

With all these amenities, Caviness said, “It makes sense that no matter how the market is, whether up or down, homes in California and particularly those in the Bay Area will cost more and be less affordable than most homes nationwide.”

The C.A.R. report indicates in fourth-quarter 2021, San Mateo County was the least affordable Bay Area county, with just 19 percent of households able to purchase a $2,100,000 medianpriced home there. San Mateo also had the highest required minimum annual income of $390,000 to qualify for the purchase of a medianpriced home.

The other two counties with minimum qualifying incomes exceeding $300,000 were San Francisco, where 21 percent of households could purchase a $1,825,000 median-priced home with a qualifying annual income of $338,800, and Santa Clara, where 22 percent of households could purchase a $1,675,000 medianpriced home with a qualifying income of $311,200.

For the state as a whole, Lassen (63 percent) was the most affordable county in fourthquarter 2021, followed by Kings (54 percent), Merced (45 percent), Shasta (45 percent) and Tuolumne (45 percent). Meanwhile, Mono (13 percent), Orange (17 percent) and Santa Cruz (17 percent) were the least affordable counties in the state.