Affordability Declines as Prices, Mortgage Rates Rise : Median-Priced Home Out of Reach for 7 of 10 in County

Increasing home costs and rising mortgage rates pushed the median-priced Orange County home beyond the reach of more than 70% of all county residents in July, the California Assn. of Realtors said Tuesday.

The affordability of Orange County housing is declining even though a recent Chapman College report shows that the county’s median annual household income of $42,960 ranks among the highest in the nation.

The Los Angeles-based Realtors association estimated that only 29% of the county’s households could afford to purchase a median-priced, existing single-family home in July, down from 31% in July, 1986.

The number of qualifying households has fallen from an estimated 35% in January, pushing the “housing affordability index” for Orange County to its lowest level in 1987.

The median price for an Orange County home was $168,656 in July, up 13% from the median price of $149,181 a year earlier, the association reported.

At the same time, the minimum annual income needed to qualify for the purchase of a median-priced home rose to $52,864 in July from $49,676 a year ago, the report said, while the median monthly house payment increased to $1,322 from $1,242.

“What it means for Orange County is that affordability is clearly dropping, despite the fact that the Orange County economy is doing very, very well,” said Joel Singer, the association’s chief economist. “I think the real concern here is that housing affordability problems will start to reduce labor mobility and eventually lower the rate of growth in the Orange County economy.”

The association, which surveys six California regions, found that in July, Orange County had the second highest median home price and was the third least affordable region surveyed.

The San Francisco Bay area was the least affordable, with a median home price of $175,030 and a minimum income of $54,861 required. Only 17% of the area’s residents were qualified for a loan to buy a median-priced home, the association said.

‘Gap Greatest Since 1979’

A recent Chapman College report supported the association findings, noting that “the gap between housing affordability in Orange County and the nation (is) at its greatest level since 1979.”

To Singer, the long-term outlook for housing affordability in Orange County is “uncertain” and is hampered in part by the local slow-growth movement.

Maralyn Olsson, 38, sees the statistics in a more personal light. Two years ago, Olsson bought a small patio home in Irvine by herself for $112,500. Today, Olsson, who is executive assistant to the chairman of a local electronics firm, doubts whether she could afford to buy anywhere in the county.

“There’s not much around for lower-income and single people,” Olsson said. “At $168,000, I would say it would be real tough (to buy). To me, it’s not so hard coming up with your down, but you get royally ripped on closing costs. I think it would make me go too tight, and I like to live comfortably. I wouldn’t do it.”

AFFORDABILITY INDEX FOR EXISTING HOMES Only 29% of Orange County households could afford to buy the median-priced

resale home in the county in July, compared with 31% in July 1986.

Median Monthly Minimum Per Selling Price Mtg. Pymt. Annual Income Qual ’87 ’86 ’87 ’86 ’87 ’86 ’87 United States $85,800 79,900 $ 672 665 $26,893 26,606 48% California 141,599 137,110 1,110 1,141 44,383 45,659 31% S.F. Bay Area 175,030 166,011 1,372 1,382 54,861 55,280 17% Orange County 168,656 149,181 1,322 1,242 52,864 49,676 29% Los Angeles 143,220 134,371 1,122 1,119 44,891 44,744 28% San Diego 128,333 120,427 1,006 1,003 40,225 40,101 31% Riverside/ San Brdino. 99,325 96,180 778 801 31,132 32,027 44%

cent ified ’86 United States 47% California 29% S.F. Bay Area 15% Orange County 31% Los Angeles 27% San Diego 29% Riverside/ San Brdino. 41%

Source: California Assn. of Realtors