Affordability Lowest Since 2008 in California

The affordability of California homes
is dropping rapidly as prices continue to soar and now higher
interest rates are compounding the problem. The California
Association of Realtors®
(C.A.R.) reported today that its Home Affordability Index (HAI)
dropped 8 percentage points from the first quarter of 2013 to the
second.

The
HAI measures the percentage of homebuyers who can afford to purchase
a median-priced single-family home in the the state. C.A.R. also
reports on the affordability in select regions and counties within
California.

A
significant number of homebuyers were shut out of the market during
the quarter as home prices and interest rates rose. The
affordability index fell from 44 percent in the first quarter to 36
percent in the second, the first time the index had dropped below 40
percent affordability rate since the third quarter of 2008.. During
the second quarter of 2012 the index was at 51 percent.

In the second quarter the price of a median priced
single-family home statewide was $415,770 compared to $316,490 a year
earlier. The effective composite interest rate was 3.64 percent
compared to 3.55 percent in the first quarter of 2013 and 2.82
percent in Q2 2012a. These increases meant that, to purchase that
median priced home would require an annual income of $79,910 to
qualify for a 30-year fixed rate mortgage including taxes and
insurance and assuming a 20 percent down payment. The required
monthly payment on this mortgage would be $2000. In the second
quarter of 2012 the qualifying income to purchase a median priced
home was $62,440.

C.A.R. Said nearly all regions of the state
experienced sharp quarter-over-quarter declines in housing
affordability, with Bay Area and coastal regions recording the
greatest decreases in the index due to significantly higher home
prices. At an index of 71 percent, Madera County was the most
affordable county of the state, while San Francisco and San Mateo
counties tied for the least affordable at 17 percent. The housing
affordability index for the United States in the second quarter was
60, based on a median home price of $203,500 and qualifying income of
$39,110.

Article source: http://www.mortgagenewsdaily.com/08122013_california_affordability.asp

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