Housing Affordability Edges Down

Housing affordability in California fell in March to its lowest level in nearly two years, a trend that continues to force many prospective buyers to consider lower-priced homes or drop out of the market altogether.

The statewide housing affordability index--measuring the percentage of people who can afford a median-price home in California--dropped to 29% from 34% a year ago, the California Assn. of Realtors said Thursday. It marked the first time since August 2000 that the figure slid under 30%.

Though the figure remains well above historic lows of 14% in the late 1980s, affordability could worsen if mortgage rates begin to rise, as many analysts predict.

Low mortgage rates have created an extraordinary number of consumers willing to consider home purchases. But fewer people are putting their homes up for sale, dropping the supply of unsold homes to extremely low levels.

The imbalance between supply and demand was a major factor in pushing up California median prices in March to a record $305,940.

“Historically low mortgage interest rates, which are once again below 7%, aren’t enough to offset the combination of excessive demand, low inventory of homes for sale and rising prices throughout most of California,” said Robert Bailey, president of the Realtors group.

Most counties across the state posted lower rates of affordability. Orange County remained stable from a year earlier at 29%. But Los Angeles County declined to 33% from 37% a year ago; Ventura fell to 36% from 37%, and the Inland Empire slid to 47% from 49%, the Realtors group said.

The heated market is excluding some buyers. After months of poring over ads and driving through neighborhoods in South-Central Los Angeles, Eric Wesson said he can’t find anything in the $175,000-to-$200,000 range that’s in good condition or makes his family feel secure.

Wesson’s recent bid for a home was rejected because the sellers stuck to an asking price of $172,000, leaving him too little money to renovate. On another home, a competing buyer proposed $10,000 more than Wesson’s full-price offer.

“We couldn’t compete with that,” said Wesson, 43, an operator of heavy machinery.

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Affordability Gap

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