Only 14% of O.C. Households Can Afford Median-Priced Home

A combination of higher mortgage rates and higher housing prices put the typical single-family resale home out of reach of all but 14% of Orange County’s households in April, down from 15% in March.

The California Assn. of Realtors reported Tuesday that a household needed an annual income of $79,980 to qualify for a mortgage after making a 20% down payment on the county’s median-priced resale home. The median price in April was $243,485.

The median for new single-family detached homes was even higher, at $347,600, according to a survey by First American Title Insurance Co. in Santa Ana.

Housing experts said the inability of all but a select few in Orange County to afford a home has led to a decline in sales that may eventually bring rampant price inflation to an end and make more households eligible to buy homes.

Last week, the association reported that sales of resale single-family homes in Orange County fell 26% in April while prices rose a heady 2% for the month.

Average Home-Mortgage Rate at 10.1%

The average of all fixed and adjustable interest rates for home mortgages was 10.1% in early April, up a quarter of a percentage point from March and nearly 1 point higher than a year ago.

Joel Singer, the association’s chief economist, said the rate of affordability may become more stable over the short term if interest rates fall as he expects. But he said lower interest rates would probably send home prices higher, which again would drive down affordability.

“It’s going to remain dismal. I do not think we have seen the bottom yet,” Singer said.

The percentage of Orange County households able to purchase the typical home is less than half the rate of two years ago, when 31% could afford to buy, and it is sharply lower than in April 1988, when 25% of all households qualified.

Market Likely to Remain Dismal

The Los Angeles-based trade association bases its “affordability index” on average interest rates for fixed and adjustable 30-year mortgages. The association assumes a 20% down payment on a median-priced house and maximum spending on mortgage payments of 30% of household income.

Across the state, 17% of households could afford the median-priced home of $200,784, which would require a minimum annual income of $65,953.

The San Francisco Bay Area was the least affordable region in California, with only 10% of the households there earning the income needed to purchase the $261,520 median-priced home. The most affordable area was Sacramento, where 43% of the households earned enough for the median-priced $99,726 home.

Nationally, 45% of all households could afford the median price of $93,500, down from 46% in March.

AFFORDABILITY INDEX FOR EXISTING HOMES Fourteen percent of Orange County households could afford to buy the median-priced resale home in the county in April, compared to 15% in March and 25% in April, 1988.

Median Selling Price April March April 1989 1989 1988 Orange County $243,485 $238,807 $195,207 United States 93,500 92,000 88,000 California 200,784 195,815 159,542 S.F. Bay Area 261,520 249,508 195,598 Los Angeles 215,871 207,830 169,832 San Diego 176,057 166,984 137,560 Riverside/ 119,124 119,884 101,270 San Bernardino

Monthly Mortgage Payment April March April 1989 1989 1988 Orange County $1,999 $1,941 $1,505 United States 768 748 678 California 1,649 1,592 1,230 S.F. Bay Area 2,148 2,028 1,508 Los Angeles 1,773 1,689 1,309 San Diego 1,446 1,357 1,060 Riverside/ 978 975 781 San Bernardino

Minimum Percent Annual Income Qualified April March April April March April 1989 1989 1988 1989 1989 1988 Orange County $79,980 $77,653 $60,188 14% 15% 25% United States 30,713 29,916 27,133 45 46 47 California 65,953 63,673 49,191 17 18 24 S.F. Bay Area 85,904 81,132 60,309 10 11 22 Los Angeles 70,909 67,580 52,364 14 16 23 San Diego 57,831 54,298 42,414 19 21 28 Riverside/ 39,130 38,983 31,224 32 32 40 San Bernardino

Source: California Assn. of Realtors