While California still has its fair share of hurdles to overcome, the state is making progress on home affordability, according to a new report from the California Association of Realtors.
The percentage of homebuyers who could afford to purchase a median-priced, existing single-family home in California in first-quarter 2015 rose to 34% from the 31% recorded in the fourth quarter of 2014 and up from 33% in the first quarter a year ago, according to CAR’s Traditional Housing Affordability Index.
Much of this is thanks to lower interest rates and stabilizing home prices over the past year. Also, this is the second consecutive quarter of improvements for the state and the highest level since second-quarter 2013.
California's housing affordability index hit a peak of 56% in the first quarter of 2012.
Homebuyers needed to earn a minimum annual income of $87,700 to qualify for the purchase of a $442,430 statewide median-priced, existing single-family home in the first quarter of 2015.
Additionally, the monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,190, assuming a 20% down payment and an effective composite interest rate of 3.97%.
The median home price was $418,570 in first-quarter 2014, and an annual income of $86,800 was needed to purchase a home at that price. The effective composite interest rate in first-quarter 2014 was 4.46 percent.
However, California still has a ways to go. A recent HousingWire article noted that San Francisco’s bidding wars are nearly at 100%, rising from 88% last year to 94%, with 32% of homes selling over the asking price.
And while Ventura Country’s bidding war percentage is one of the lowest in California, it is one of the fastest growing, moving from 33% last year to 54%.
Dwight Johnston, chief economist for the California Credit Union League, previously spoke with HousingWire on how the solution for first time homebuyers, while maybe obvious, is to save. The California market is not changing anytime soon, and rather than hope for a change, buyers need to play to the system.