High prices, climbing interest rates and flat incomes are pushing home-buying out of reach for more Southern Californians, according to a new report Friday from Zillow. And that’s starting to bring back behavior seen in the bubble days of the mid-2000s.
Just 43% of homes on the market right now in the Los Angeles area are “affordable” by historic standards, Zillow reported, meaning the typical family could buy the house and spend 35% or less of their household income on mortgage payments.
That 35% was the L.A.-area average from 1985 through 2000 -- before the housing bubble -- according to Zillow’s calculations. Today, though, the typical family buying the typically priced home would need to spend 39% of its income on a mortgage, the highest rate of any place in the country.
That number has grown fast -- up from 30% at the end of 2012 -- after home prices jumped by nearly one-fifth last year and as interest rates have climbed in recent months. If the rate on a 30-year fixed mortgage keeps rising to 5% by next year, the typical Los Angeles family will need to spend nearly 47% of its income to make payments.
Nationwide, payments on median-priced home costs 15.1% of median household income.
This run-up in homeownership costs in Southern California and a few other markets is causing echoes of the housing bubble, at least locally, said Zillow chief economist Stan Humphries. Home buyers are putting less money down, relying on “non-traditional” financing and moving further out in order to find a house they can afford, he said.
“As affordability worsens, we’re already beginning to see more of the kinds of worrisome trends we saw en masse during the years leading up to the housing crash,” he said. “We’re not in a bubble yet, but we’re beginning to see the early signs of one in some areas.”