Go Back

First Quarter 2018 Housing Affordability

Strong wage growth and steady home prices buoy California housing affordability, C.A.R. reports

Twenty-eight regions see improvement from previous quarter, with six of nine Bay Area counties posting higher

  • Thirty-one percent of California households could afford to purchase the $538,640 median-priced home in the first quarter of 2018, up from 29 percent in fourth-quarter 2017 but down from 32 percent a year ago.
  • A minimum annual income of $111,500 was needed to make monthly payments of $2,790, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 4.44 percent interest rate.
  • Thirty-nine percent of home buyers were able to purchase the $449,720 median-priced condo or townhome. An annual income of $93,090 was required to make a monthly payment of $2,330.

LOS ANGELES (May 15) – Higher wages and lower seasonal home prices combined to push California’s housing affordability higher in the first quarter of 2018, compared to the previous quarter, the CALIFORNIA ASSOCIATION OF REALTORS said today.

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in first-quarter 2018 edged up to 31 percent from 29 percent in the fourth quarter of 2017 but was down from 32 percent in the first quarter a year ago, according to C.A.R.’s Traditional Housing Affordability Index (HAI). This is the 20th consecutive quarter that the index has been below 40 percent. 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 homebuyers in the state.

A minimum annual income of $111,500 was needed to qualify for the purchase of a $538,640 statewide median-priced, existing single-family home in the first quarter of 2018. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,790, assuming a 20 percent down payment and an effective composite interest rate of 4.44 percent. The effective composite interest rate in fourth-quarter 2017 was 4.17 percent and 4.36 percent in the first quarter of 2017.

Condominiums and townhomes also were more affordable in first-quarter 2018 compared to the previous quarter with 39 percent of California households earning the minimum income to qualify for the purchase of a $449,720 median-priced condominium/townhome, up from 38 percent in the fourth quarter. An annual income of $93,090 was required to make monthly payments of $2,330.

Key points from the first-quarter 2018 Housing Affordability report include:

  • Housing affordability improved from fourth-quarter 2017 in 28 tracked counties and declined in 14 counties. Affordability in six counties was unchanged.
  • Strong wage growth in the San Francisco Bay Area pushed affordability higher from the previous quarter in six of nine Bay Area counties (Alameda, Contra Costa, Napa, San Francisco, San Mateo, and Santa Clara). Affordability decreased in two Bay Area counties (Solano and Sonoma) and held steady in Marin.
  • In Southern California, affordability improved in Los Angeles, Riverside, San Bernardino, and Ventura counties, while affordability in Orange and San Diego counties remained flat during first-quarter 2018.
  • In the Central Valley, six counties posted an increase in affordability from the previous quarter (Fresno, Kern, Madera, Sacramento, San Benito, and Stanislaus). Affordability in Merced, San Joaquin, and Tulare declined but held steady in Kings and Placer counties.
  • Affordability in the Central Coast improved moderately, driven by flat or declining home prices. Monterey, San Luis Obispo, and Santa Barbara experienced higher affordability, while Santa Cruz posted a decline as a result of subdued wage growth and price declines.
  • During the first quarter of 2018, the most affordable counties in California were Lassen (68 percent), Kern (56 percent), and Kings and San Bernardino (both at 52 percent).
  • Mono (8 percent), San Francisco, San Mateo, and Santa Cruz (all at 15 percent), counties were the least affordable areas in the state.

© 2006 - 2018. All Rights Reserved.