San Diego was one of the most expensive regions for home buyers in California in the second quarter of this year, with just 26 percent able to comfortably purchase the median-priced house, said a report from the California Association of Realtors released Wednesday.
The Realtor organization calculates affordability by comparing the median, single-family home price to the number of households earning the minimum annual income needed to make payments after purchase. The study said the statewide affordability was 29 percent and San Diego’s rate was down 2 percent from the first three months of 2017.
Affordability rates are determined by an estimated monthly housing payment that does not exceed 30 percent of gross monthly income. Using that calculation, buying the median-priced San Diego County home required a minimum qualifying income of $121,260 a year. The monthly mortgage payment, including taxes and insurance, came to $3,030 a month.
San Diego’s affordability rate in the second quarter was nearly half of what it was in 2012, when 46 percent of homes were considered affordable. Since then, home prices have generally increased faster than incomes in the region. Out of 43 counties included in the report, San Diego was the twelfth least affordable, tied with San Luis Obispo County.
“I’m thinking it’s going to get a lot worse,” said Bob Kevane, president of the Greater San Diego Association of Realtors. “For normal people, they just don’t have the incomes.”
He said government fees on construction, a slow approval process for new homes and community opposition to new housing projects are reasons for rising prices.
The association’s index makes a few assumptions that might not apply to all buyers. It assumes a homebuyer will make a 20 percent down payment, even though there has been a growth in mortgages that allow for significantly less down, and that they will have a 30-year, fixed-rate loan.
Also, its estimate for San Diego County’s median home price of $605,000 is based on sales of single-family houses, not condos, which are becoming a bigger part of the county’s market as planners increasingly push for multifamily housing over traditional houses. The overall median home price in June was $543,000, said real estate tracker CoreLogic.
Alan Gin, economist with the University of San Diego, said the study’s findings jibe with a trend that has been worrying the region’s leaders.
“I don’t think we are going to get a big improvement” on affordability, he said. “Even though we have incomes going up, the problem we have here is that we have lack of construction. Yes, we have people that want to get in homes. But a lack of supply is driving up prices.”
The residential building industry has had a rough start this year. Building permits were down by 17 percent in the first six months of 2017 compared to the same time in the previous year, said the U.S. Census Building Permits Survey.
However, new buyers have been finding affordable homes farther from job centers, including Otay Ranch and Riverside County, where the homes can be $200,000 to $300,000 less than the San Diego County newly-built median price.
The rest of the state features extremes in affordability. In San Francisco, 12 percent of homes were affordable, with a minimum qualifying income of $290,630. In Tehama County, 57 percent of homes were affordable, with a minimum qualifying income of $40,490.
In San Diego County, the affordability rate hit 9 percent in the first quarter of 2006 but increased sharply during the housing market crash. It hit a high point at the end of 2011 and start of 2012 with 46 percent affordability. By 2013, it had dropped to 27 percent and has stayed around the same rate ever since.