”Survey says” looks at various rankings and scorecards judging geographic locations while noting these grades are best seen as a mix of artful interpretation and data.
Buzz: A Southern California house hunter theoretically needs a $178,400 income to qualify to buy the region’s median-priced home – a requirement that grew 22% in a year.
Source: My trusty spreadsheet reviewed the homebuying affordability index of the California Association of Realtors for the five-county region in 2023’s first quarter. This yardstick assumes a potential buyer has a 20% downpayment and a monthly payment (principal, interest, taxes and insurance included) equal to 30% of income, and is buying the median-priced existing, single-family house.
I’m not a huge fan of most affordability indexes, but they are helpful to compare cost burdens across various geographies.
So let’s start with Southern California’s $178,400 household income requirement. It targets the purchase of the $720,000 median-priced home, a price that fell 2% over 12 months.
The modest price dip could not overcome a mortgage rate spike to 6.5% in 2023’s first quarter from 4% at the start of 2022 and 3.1% in 2021.
Thus, the Realtor math shows only 19% of Southern Californians could qualify to buy in 2023’s first three months vs. affordability of 24% a year earlier and 29% in 2021.
These stats strongly suggest that if you thirst for affordability, move away from the coast! But even those savings are shrinking.
Here’s a look at the region’s counties, ranked by jumps in the income requirement …
San Bernardino County: $115,200 required, up 26% in a year. That income buys a $464,500 median house that’s 1% costlier in 12 months. Thus, first-quarter affordability was 30% vs. 39% a year ago and 45% in 2021. Record low was 19% in 2005.
Riverside County: $148,000 required, up 23% in a year, for a $597,000 median (2% cheaper in 12 months). So affordability shrank to 22% vs. 28% a year ago and 36% in 2021. Record low was 14% in 2005.
Orange County: $296,400 required – seventh-highest among the state’s counties – up 19% in a year. That’s for the $1.2 million median (5% cheaper in 12 months). So 12% affordability vs. 13% a year ago 20% in 2021. Record low was 10% in 2005-06.
Los Angeles County: $185,200 required, up 18% in a year, for $746,750 median (6% cheaper in 12 months). So 17% affordability vs. 20% a year ago and 24% in 2021. Record low was 9% in 2005-06.
Ventura County: $205,200 required, up 17% in a year, for $828,750 median (6% cheaper in 12 months). So 17% affordability vs. 21% a year ago and 27% in 2021. Record low was 10% in 2006.
How does local affordability stack up?
Well, it’s on par with the statewide metric: Buyers need an annual income of $188,400, up 19% in a year. Those paychecks buy the $760,260 median home that’s 5% cheaper in 12 months. Affordability runs 20% now vs. 24% a year ago and 27% in 2021. California’s low was 11% in 2007.
Or there’s the Bay Area and its $277,600 requirement, up 4% in a year, to buy the $1.12 million median home (17% cheaper in 12 months.) So 21% affordability now vs. 20% a year ago and 23% in 2021.
But this all appears awful compared with the national norm.
A U.S. house hunter needs a $92,000 income, up 26% in a year, for the $371,200 median home (1% costlier in 12 months). The national record low, by this math, was 10% in 2006.
That adds up to 40% of Americans today having “affordable” homes to buy vs. 47% a year ago and 54% in 2021.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at firstname.lastname@example.org
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