The Current California Market Affordability Index

The California Market through the Lens of Affordability Relatively flat housing prices and higher interest rates have slightly reduced home-buying affordability for Californians in the third quarter of 2015.

In Q3 2015, home-buyers needed to earn a minimum annual income of $98,350 to qualify for the purchase of a $487,420 statewide median-priced, existing single-family home. This reflected a slight rise from second-quarter 2015’s median home price of affordability but remained in reach for 38 percent of the population; those making an annual income of $78,840 or more.

 Viewed over a longer time frame, the affordability index appears to        have stabilized for the past three years around 30 percent, a  significant drop over the post crisis peak of the affordability index from  2012. We may be in a stable period of “30 percent affordability”,  caused by high – if flattening prices, and slightly higher rates. 

 One factor that could affect affordability is the prospect of the Federal  Reserve implementing its proposed series of graduated increases in  rates over the next two years. If the Fed increased the federal funds  rate at a slow and steady pace, California housing affordability will decline initially, but could stabilize as the state economy continues to grow and the labor market continues to improve, despite a weaker growth in China and Europe.

 

Posted on December 4, 2015 at 7:44 am
Kara Brem | Category: Uncategorized

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