It’s no surprise that affordability has been a tremendous concern for many home owners living in California, and new data suggests that their worries are far from over. According to the Traditional Housing Affordability Index from the California Association of Realtors, the percentage of homebuyers who could afford to purchase a median-priced, existing single-family home edged up to 28% in the fourth quarter of 2018. Although this is an increase from 27% in the third quarter, the percentage is still slightly lower than 29% in Q4 of 2017.
This comes as no surprise, as CAR notes the index has been below 30% for six of the past eight quarters. “Lower seasonal home prices allowed more Californians to afford a home purchase in the fourth quarter of 2018 compared to the previous quarter, but higher interest rates pushed affordability lower compared to the previous year,” CAR writes.
Across the state, it took a minimum annual income of $122,340 to qualify for the purchase of median-priced single- family home of $564,270. Compared with California, 54% of the nation’s households could afford to purchase a $257,600 median-priced home, requiring a minimum annual income of just $55,850.
This affordability disparity may explain why Redfin’s latest migration report revealed that so many homeowners were relocating to less expensive markets.
According to the report, San Francisco and Los Angeles were among the top metros to report the highest net outflow of residents.
“Rising mortgage rates are exacerbating affordability issues that have been driving people out of expensive coastal metros for the past few years,” Redfin Chief Economist Daryl Fairweather said. “With rates no longer near historic lows, buyers are increasingly cost-conscious, seeking more affordable homes in low-tax states in the South and middle of the country.”