Housing Affordability Plummets
Housing affordability plunged sharply in May, as steep gains in prices statewide prevented more people from owning homes even as mortgage rates edged down, a report released Thursday showed.
The percentage of those able to purchase a median-priced home dropped to 27% in May from 34% a year earlier, according to the monthly report compiled by the California Assn. of Realtors.
The rate from April to May of this year was unchanged.
It marked the second straight month that the statewide index has recorded a decline of seven percentage points on a year-to-year basis, keeping affordability at its lowest level in 11 years.
In May, median prices, meaning half cost less and half cost more, rose 25% to $321,130.
“Any improvement in affordability attributable to reductions in mortgage rates have been offset at the state level by a steep increase in median prices,” said Robert Bailey, president of the California Assn. of Realtors.
Although agreeing that home prices have risen faster than incomes, other analysts disagreed with the findings. The index fails to measure the edge steep equity gains have given buyers, helping to make up for incomes.
In Orange County, “affordability has remained fairly constant or has improved a little bit,” said Mark Robbins Boud, a housing consultant at Real Estate Economics in Laguna Niguel.
Sales have risen significantly over the last year, he said. “To say that affordability is significantly worse when we’re getting a [big] increase in sales volume doesn’t make sense,” he said.
Low mortgage rates have created an enormous number of buyers, but the increase in prices makes it harder for renters to become homeowners. To purchase a median-priced home, buyers need an income of $70,100 compared with $61,100 from a year earlier.
Potential sellers have been inhibited from moving up because they find less home for their money, a key factor behind the supply of unsold homes on the market to put the state on track for the fifth straight year of record lows, the Realtors group said.
In Los Angeles County, the index declined to 32% from a year earlier at 37%; Orange County declined to 22% from 29%; Ventura dropped to 32% from 39%. Riverside and San Bernardino counties edged down to 44% from 47%. The rate nationwide is 56%.
