Special to the Town Crier
It’s getting more difficult for California homebuyers to buy a home these days. According to the California Association of Realtors, the income required to purchase a home has doubled in five years.
Rising home prices due to tight inventory of homes for sale and high demand weakened California’s housing affordability in the second quarter of 2017. According to the association’s Traditional Housing Affordability Index, the percentage of homebuyers who could afford to purchase a median-priced, existing single-family home in California in the second quarter of 2017 dropped to 29 percent from 32 percent in the first quarter. The index was down from 31 percent in the second quarter of 2016.
The statewide housing affordability index is at its lowest since the third quarter of 2015. The index peaked at 56 percent in the first quarter of 2012.
California homebuyers needed a minimum annual income of $110,890 to qualify for the purchase of a $553,260 statewide median-priced, single-family home in the second quarter of 2017. Their monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,770, assuming a 20 percent down payment and an interest rate of 4.09 percent.
Home prices have nearly doubled since affordability reached its highest level five years ago. Homebuyers now need twice the income to purchase a median-priced home. In the first quarter of 2012, buyers statewide needed a minimum annual income of $56,320 to purchase a home priced $279,190.
In Santa Clara County, 17 percent of homebuyers could afford to buy a $1.18 million median-priced, single-family home in the second quarter of 2017, compared with 19 percent in the previous quarter and in the second quarter of 2016. Homebuyers needed a minimum annual income of $237,210 to qualify for the purchase. Their monthly payment would be $5,930.
Denise Welsh, president of the Silicon Valley Association of Realtors, said the numbers are daunting for homebuyers. Just five years ago, Santa Clara County homebuyers needed a minimum annual income of $130,220 to qualify for the purchase of a $660,000 median-priced single-family home.
“Compare that to the current minimum income of $237,210 they need to purchase a home today,” Welsh said. “For many homebuyers, there is also the challenge of coming up with the down payment.”
Job growth has overtaken housing supply, especially in the Bay Area.
“Companies continue to expand locally, and we cannot continue to keep up with the demand for housing,” Welsh said. “Denser housing isn’t the only answer. An alternative could be mass transit from outlying areas. It exists in other parts of the country. We cannot continually dwell on the problem. We need to seek a solution.”