Strong wage growth and level home prices buoy California housing affordability

Higher wages and lower seasonal home prices combined to push California housing affordability higher in the first quarter of 2016, compared to the previous quarter, according to the CALIFORNIA ASSOCIATION OF REALTORS®. Affordability was flat when compared to the previous year as rising home price offset income gains.

Making sense of the story

• Thirty-four percent of California households could afford to purchase the $465,280 median-priced home in the first quarter, up from 30 percent in fourth-quarter 2015 and unchanged from 34 percent in first-quarter 2015.

• A minimum annual income of $92,571 was needed to make monthly payments of $2,314, including principal, interest, and taxes on a 30-year fixed-rate mortgage at 4.01 percent interest rate.

• Forty-one percent of home buyers were able to purchase the $389,910 median-priced condo or townhome. An annual income of $77,575 was required to make a monthly payment of $1,939.

• Home buyers needed to earn a minimum annual income of $92,571 to qualify for the purchase of a $465,280 statewide median-priced, existing single-family home in the first quarter of 2016.

• Condominiums and townhomes were also more affordable compared to the previous quarter. Forty-one percent of California households earned the minimum income to qualify for the purchase of a condominium or townhome in the first quarter of 2016, up from 39 percent from the last quarter of 2015.

• Compared to affordability in fourth-quarter 2015, 22 of 29 counties tracked saw an improvement in housing affordability, three experienced declines, and four were unchanged.

• Affordability improved greatly in the Bay Area, with eight of nine counties seeing an improvement. Southern California, Central Coast, and the Central Valley also saw higher affordability, compared to the previous quarter. Source: CAR