Housing affordability fell last quarter in California, reaching the lowest level since 2008, as the housing recovery locked some buyers out.
Only 32% of potential homebuyers in the third quarter could reasonably afford a median priced single-family home, the California Assn. of Realtors said Thursday. That’s a sharp drop from 49% in the third quarter last year.
In the first three months of this year, 36% could afford an existing house at the median price. Home prices have soared this year across California as investors and families battled over few available homes.
A recent report from Fitch Ratings estimated prices in much of coastal California are more than 20% overvalued based on market fundamentals such as income, employment, population, mortgage rates, housing units and rental values.
“Most concerning,” the report said, “there is growing evidence that recent gains have been bolstered by an increase in investment sales, both to institutions and local investors.”
The sharp price increase raised concerns a bubble was forming in some regions, although the market has cooled recently.
According to the Realtors group, Californians must now earn a minimum of $89,170 annually to purchase the median priced home at $433,940. Affordability is defined if a household pays no more than 30% of their monthly income on housing.