Fewer Can Buy Homes

Housing affordability in California dropped in February to its lowest level in five months as double-digit price appreciation pushed more properties out of the reach of potential buyers, the California Assn. of Realtors reported Thursday.

The percentage of households in California able to afford a median-price home fell 5 percentage points to 31%, meaning that less than a third of the state’s residents have enough income to buy such a home.

“These [affordability] rates are not the lowest we’ve gone, but they’re heading in a dangerous direction,” said CAR President Robert Bailey. “We’re freezing people out of the home-buying market again.”

In Los Angeles County, the median price for a home in February rose 18.8% over last year to $267,000, according the CAR figures, resulting in a 5-percentage-point drop in affordability to 33%. In Orange County, where the median home price rose 12.3% last month to $370,000, affordability dropped 1 percentage point to 30%.

Though nowhere near the historic lows that marked the housing boom of 1989-1991--affordability in California was 21% in 1989--the current slide is expected to force a drop in housing stock as anxious buyers race to buy homes before prices go still higher.

Lagging new-home construction and spiraling prices have created a 26-point affordability difference between California and the rest of the nation, where affordability has held steady at 57% over the last several months.

“This is just outrageous,” said Ira Spears, an agent at Century 21 Grisham-Joseph in Whittier. “Working-class people can’t afford a starter home at $300,000. I’m finding that ... large families are looking for small houses or condos again.”

A year ago, a home buyer in Los Angeles County would have had to earn at least $59,046 a year to afford a median-price home of $224,700, according to CAR data. Today, that buyer would have to earn $68,252 for the same home, which now sells for $267,000.

Last month’s low mortgage interest rate of 6.85%, which historically would have given the affordability index a boost, was not enough to offset the huge increase in the median price of a home in California, which was up almost 20% from a year ago, at $289,550, Bailey said.

“At this pace, we’re going to see a further drop in the supply,” Bailey said. “This market is out of balance.”

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Housing Affordability

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