Is housing affordability improving? What’s the overall affect after months of severe housing inventory shortages? According to the California Association of REALTORS®’ (C.A.R.) “Housing Affordability Index” (HAI), home affordability statewide improved only slightly in the fourth quarter 2017.
In the fourth quarter of last year, C.A.R. said only 29 percent of California households could afford the state’s $550,990 median-priced single family home, up slightly from 28 percent in the third quarter 2017 but down from 31 percent in fourth quarter 2016. In San Diego County, only 26 percent of households could afford to purchase a median-priced home in the fourth quarter, which remained unchanged from the previous quarter.
C.A.R. said it was the 19th consecutive quarter for its HAI index to be below 40 percent. Home affordability statewide in the 3rdQ 2017 dropped to its lowest level in a decade. California’s housing affordability index hit a peak of 56 percent in the 1stQ of 2012.
C.A.R.’s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. The index is considered the most fundamental measure of housing well-being for homebuyers in the state.
To afford the statewide median-priced single family home of $550,990, a household would need to earn $111,260 annually to make the necessary $2,780 monthly payments, according to C.A.R. The payment includes principal, interest, and taxes on a 30-year, fixed-rate mortgage with a 20 percent down payment and an effective composite interest rate of 4.17 percent. The effective interest rate in the 3rdQ 2017 was 4.16 percent and 3.91 percent in the 4thQ 2016.
C.A.R. also said that the affordability of condominiums and townhomes also dipped slightly in the 4thQ. C.A.R. said 37 percent of California households earn the minimum income to qualify for the purchase of a $449,720 median-priced condominium or townhome, down from 38 percent of households who could afford to purchase the $446,800 priced condo or townhome in the 3rdQ. In the 4thQ, an annual income of $90,810 would be required to make monthly payments of $2,270.
Meanwhile, on Friday morning, Feb. 16, C.A.R. released its January homes sales and price report. C.A.R. said January’s statewide median home price was $527,800, down 4.0 percent from December and up 7.3 percent from January 2017. In San Diego County, the median sole price of an existing single-family home was $590,000 in January, 2.5 percent lower than the $605,000 sales price figure for December 2017 and $550,000 in January 2017.
In San Diego, the median number of days a home remained unsold on the market was 21 days in January 2018, compared to 18 days in December 2017 and 25 days in January 2017.
C.A.R. said single-family home sales statewide in January 2018 totaled 388,000 on a seasonally adjusted annualized rate, down 7.6 percent from December (420,960 homes) and down 2.9 percent from January 2017 (400,580 homes). The month-to-month decline was the largest in more than two years. The 388,000 total marked the first time in nearly two years for California’s housing market to drop below the 400,000 level. In March 2016, the statewide sales figured dropped below 400,000.
“A persistent shortage of housing inventory and continued affordability crunch is beginning to eat away at the market as buyers struggle to find available homes for sale,” said C.A.R. President Steve White.
“A tale of two markets continues to be the theme of California’s housing market with the lower end of the market bearing the brunt of the housing shortage as sales of homes priced under $300,000 declined by 17.2 percent from a year ago,” said C.A.R. Senior Vice President and Chief Economist Leslie-Appleton-Young. “At the other end of the spectrum where inventory is less constrained, homes priced $1 million and higher posted solid annual sales gains, especially in the $1.5 million-$2 million range, which jumped 24 percent.”
C.A.R.’s statewide home sales totals are based on information collected from more than 90 local REALTOR® associations and MLSs.
In other recent real estate news, some housing analysts expressed a more positive outlook on the market, according to news reports.
“If you look back at 2017, it was a robust year,” said Mark Goldman, finance and real estate lecturer at San Diego State University. “Interest rates were quite good, the economy was continuing to barrel ahead, wages were strong, employment was strong and millennials were aging into the homebuying market.”
“The economy is solid, unemployment is low,” said Alan Gin, economist at University of San Diego’s Burnham-Moores Center for Real Estate. “People hear that housing prices are going up and they want to jump in before it gets out of hand even more.”
Also, California was home to 13 of the nation’s 20 “hottest” housing markets in January, with San Diego ranking sixth, according to Realtor.com., the officials website of the National Association of REALTORS®. Realtor.com said the typical home was on the market just 46 days in San Diego, compared to 89 days nationally. In San Jose, the center of Silicon Valley, the market moved even faster with homes selling in 33 days.