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First Quarter 2015 California Housing Affordability Increases to 34%

Seventeen regions see improvement from previous quarter, with Napa, Merced, Marin, San Luis Obispo, Los Angeles, and Alameda counties leading the way

LOS ANGELES (May 12) – Lower interest rates and stabilizing home prices over the past year combined to make it easier for more Californians to purchase a home in the first quarter of 2015, 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 first-quarter 2015 rose to 34 percent from the 31 percent recorded in the fourth quarter of 2014 and up from 33 percent in the first quarter a year ago, according to C.A.R.’s Traditional Housing Affordability Index (HAI). This is the second consecutive quarter of improvements for the state and the highest level since second-quarter 2013. California’s housing affordability index hit a peak 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.

Home buyers needed to earn a minimum annual income of $87,700 to qualify for the purchase of a $442,430 statewide median-priced, existing single-family home in the first quarter of 2015. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,190, assuming a 20 percent down payment and an effective composite interest rate of 3.97 percent.

The median home price was $418,570 in first-quarter 2014, and an annual income of $86,800 was needed to purchase a home at that price. The effective composite interest rate in first-quarter 2014 was 4.46 percent.

Key points from the first-quarter 2015 Housing Affordability report include:

• The affordability picture was promising when comparing quarterly changes. Seventeen regions had improvements, nine had declines, and two were unchanged. Compared to first-quarter 2014, 11 regions had improvements, 12 had declines, and six held steady.

• Marin, San Luis Obispo, and Monterey counties saw the largest year-to-year improvements in affordability, mainly due to increases in median annual household income and interest rate declines.

• Contra Costa, Solano, and San Joaquin counties experienced the largest year-to-year declines in affordability, resulting from double-digit home price growth.

• Affordability in Santa Clara and Sacramento counties held steady from the previous quarter, primarily due to moderate home price growth, which was offset by interest rate declines.

• Marin, Napa, and Santa Cruz counties had the largest quarter-to-quarter improvements in affordability, mainly due to increases in the median annual household income, and declines in the interest rate and prices.

• Contra Costa, Santa Barbara, and San Mateo counties posted the largest quarter-to-quarter declines in affordability as the result of strong home price gains.

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