Thanks to falling housing prices, the ability of prospective home buyers to afford a home in California is improving again. Housing affordability in October rose for the third consecutive month as buyers continued to shift away from homes in pricey urban areas toward more affordable outlying communities, the California Assn. of Realtors said Tuesday.
Statewide, 19% of families could afford to buy the median priced home, which sold for $193,557 in October, compared to 18% in September and 17% in August, the realtors group said. A year ago, 21% of California households could afford the median priced home.
Buyers found little relief in fast-growing urban areas such as Los Angeles and Orange County, however. The median price of a Los Angeles home rose slightly in October to $222,842 from $221,954, while the median Orange County price rose to $253,034 from $250,885.
Assuming a 20% down payment, Angelenos would have to earn $73,675 annually to buy a home, and Orange County residents would need to earn $83,657. Although these qualifying incomes were also up slightly from month-ago levels, the affordability rate remained constant at 14% in both counties, the real estate group said.
However, realtors said the Los Angeles and Orange County figures do not reflect a steep slowdown in salability of high-priced homes.
"In price ranges of $250,000 and above, there has been a real slippage of 10% to 12% from where prices were in March or April of this year," said Chuck Lamb, senior partner at the Century 21-Lamb Group in Northridge. "The balloon just burst."
There is a lag between the time that the real estate market ebbs and when housing prices begin to show a decline because sellers are reluctant to lower prices, according to real estate experts.
"Sellers' expectations tend to lag the market by three to six months," said Leslie Appleton-Young, vice president of research and economics for the California Assn. of Realtors. "If people want to move and have to move, they have to price realistically to the current market. But because a significant number of people who sell don't have to move, they just take their houses off the market when they don't get their price. That makes prices real sticky on the way down."
But the biggest factor in the rising affordability rates is the trend to buy in outlying areas, real estate experts said.
"A huge amount of the population will be housed farther and farther out of the city," said Jim Wilson, an analyst with Montgomery Securities in San Francisco. "That will make it look like the average price is falling, while the prices will actually be flat in many areas."
But Wilson still expects housing prices to drop another 5% to 10% on average during 1990.
Realtors and analysts are still divided on whether the rising affordability will spur a rebound in the currently lackluster housing market, however. Sales volume is down steeply from year-ago levels, realtors said.
Lamb believes that the market will improve in January, the traditional end of seasonal slowdowns. But Appleton-Young said that will depend on what happens with the overall economy.
HOUSING AFFORDABILITY INDEX FOR OCTOBER '89
Median Monthly Minimum Home Sales Housing Qualifying Price Payment Annual Income United States $92,100 $761 $30,450 California (single family) 193,557 1,600 63,993 California (condo) 144,504 1,194 47,775 Los Angeles 222,842 1,842 73,675 Orange County 253,034 2,091 83,657 Riverside/San Bernardino 129,920 1,074 42,953 Sacramento 121,017 1,000 40,010 San Diego 181,135 1,497 59,886 San Francisco Bay 262,271 2,168 86,710 Ventura 251,364 2,078 83,104
Percent Households Qualifying United States 47 California (single family) 19 California (condo) 31 Los Angeles 14 Orange County 14 Riverside/San Bernardino 29 Sacramento 35 San Diego 19 San Francisco Bay 11 Ventura 11
Source: California Assn. of Realtors