Can’t Afford to Buy a House Here? Well, There’s Always Lima, Ohio : Real estate: A survey shows that the median-income family in O.C. can afford only 44% of homes sold. The most affordable prices are in the Midwest.
Orange County, long one of the least affordable housing areas in the nation, has become an even tougher place for a family to buy a home because of the nationwide surge in interest rates, a new survey shows.
The survey by the National Assn. of Home Builders said a typical Orange County family could afford to buy 44% of the houses that were sold in the county during the last three months of 1994. That was down from 53% in the first quarter last year, according to the survey.
As a result, Orange County ranked 16th from the bottom among 183 metropolitan areas surveyed by the trade association.
However, the survey said county residents could buy a home more easily than their counterparts in Los Angeles, San Diego, San Jose and San Francisco. For the fourth year in a row, San Francisco had the lowest affordability index of all, this time at 18%.
The index measures the ability of the typical family to purchase a home in its own market by comparing median family income, which was $58,800 in Orange County, with the median home price.
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The survey uses income estimates from the U.S. Department of Housing and Urban Development and house sales and price data from TRW Redi Property Data. It also takes into consideration differences in property taxes and property insurance rates in a market area.
The survey does not reflect the effects of Orange County’s bankruptcy, which analysts expect will dampen housing sales. But lower sales will drive down prices and ultimately raise the county’s affordability index.
Indeed, sales in Orange County already are slowing down, in part, brokers say, because of concerns about reduced social services and the specter of higher taxes, layoffs and other possible cutbacks as a result of the bankruptcy.
Earlier this week, TRW Redi reported that Orange County saw home sales plunge 27% in February from a year earlier, compared with a monthly drop of 18% for all of Southern California. In February, the average price of an Orange County house fell slightly to $235,689 from $237,706 a year earlier.
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Allan Gantt, a longtime broker in Fullerton, said he’s already seen the fallout from the county’s fiscal troubles.
“We just had an escrow on a property with an employee of the county, but they canceled because they weren’t sure they were going to have a job,” Gantt said. “I wouldn’t be surprised if property values drop another 3%-5% this year.”
The drop in Orange County’s affordability index from the start of last year mirrors the nationwide trend and reflects the surge in mortgage interest rates, which has made it especially tough for potential first-time buyers.
“Home prices have not been moving, and income growth has been steady,” said Gopal Ahluwalia, the analyst for the builders group who put together the study. “It’s the interest rate that has been dramatic.”
Nationwide, an average of fixed and adjustable mortgage rates jumped to 7.8% in the fourth quarter from 6.9% in the first three months of last year.
The latest survey by the builders group confirmed what has long been known about California’s pricey home market: Despite relatively higher incomes, California cities still accounted for seven of the nation’s 10 least affordable and 15 of the 25 least affordable.
But Riverside County had a relatively high affordability index of 64%, and Ventura County’s index was 55%. Among California areas in the survey, Bakersfield housing was ranked as the most affordable, with an index of 70%, putting that city in the middle of the pack among the 183 areas surveyed.
The most affordable housing areas in the country were in the Midwest. Lima, Ohio, was ranked as the most affordable; a typical family there earning a median income of $38,600 could have bought 88% of the houses sold during the fourth quarter.
Nationally, the survey said a family earning a median income of $39,900 could afford to buy 62% of the houses sold.
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Housing Affordability
The rise in mortgage interest rates has made it even tougher for people in Orange County to buy homes. A family with the countywide median income of $58,800 could buy just 44% of the houses actually sold. How Orange County compares, fourth quarter, 1994:
Orange County: 44.4%
Los Angeles / Long Beach: 40.1%
San Francisco: 18.0%
United States: 62.3%
Nationwide Index
Orange County’s 44.4 ranking on the index placed it as the 16th least affordable metropolitan area to purchase a home.
Least Affordable 1. San Francisco 18.0 2. Salinas, Calif. 23.7 3. Santa Cruz, Calif. 28.7 4. Santa Rosa, Calif. 29.8 5. El Paso, Tex. 37.5
Most Affordable 1. Lima, Ohio 88.4 2. Elkhart, Ind. 86.8 3. Kokomo, Ind. 85.8 4. Melbourne, Fla. 83.8 5. Duchess County, N.Y. 83.7
Source: National Assn. of Home Builders, Washington, D.C.
