“Survey Says” looks at various rankings and scorecards that judge geographic locations and notes that these ratings are best seen as a combination of clever interpretation and data.
Buzz: A Southern California home seeker theoretically needs an income of $178,400 to qualify to purchase a region’s median-priced home, a requirement that grew 22% in one year.
Fountain: My trusty spreadsheet reviewed the California Association of Realtors Home Buying Affordability Index for the Five-County Region in the first quarter of 2023. This criteria assumes a potential buyer has a down payment of 20 % and a monthly payment (principal, interest, taxes and insurance included) equal to 30% of income, and you are purchasing an existing median-priced single-family home.
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I’m not a big fan of most affordability indices, but they are useful for comparing cost loads across various geographies.
So let’s start with the Southern California household income requirement of $178,400. His goal is to purchase a $720,000 median-priced home, a price that has fallen 2% in 12 months.
The modest drop in prices could not outweigh a mortgage rate increase to 6.5% in the first quarter of 2023 from 4% in early 2022 and 3.1% in 2021.
Thus, Realtor’s math shows that only 19% of Southern Californians could qualify to buy in the first three months of 2023 vs. affordability of 24% a year earlier and 29% in 2021.
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These statistics strongly suggest that if you thirst for affordability, stay away from the coast! But even those savings are shrinking.
Here’s a look at the region’s counties, ranked by income requirement jumps…
San Bernardino County: $115,200 required, 26% more in one year. That income buys a median home of $464,500 that is 1% more expensive in 12 months. Thus, first quarter affordability was 30% versus 39% a year ago and 45% in 2021. The all-time low was 19% in 2005.
Riverside County: $148,000 required, an increase of 23% in one year, for an average of $597,000 (2% cheaper in 12 months). Thus, affordability dropped to 22% from 28% a year ago and 36% in 2021. The all-time low was 14% in 2005.
Orange County: $296,400 is required, seventh highest among counties in the state, up 19% in one year. That’s by the median of $1.2 million (5% cheaper in 12 months). Affordability of 12% vs. 13% a year ago and 20% in 2021. The all-time low was 10% in 2005-06.
Los Angeles County: $185,200 required, an 18% increase in one year, for an average of $746,750 (6% cheaper in 12 months). Affordability of 17% vs. 20% a year ago and 24% in 2021. The all-time low was 9% in 2005-06.
Ventura County: $205,200 required, up 17% in one year, for an average of $828,750 (6% cheaper in 12 months). Affordability of 17% vs. 21% a year ago and 27% in 2021. The all-time low was 10% in 2006.
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How does local affordability compare?
Well, it’s on par with the state metric: Buyers need an annual income of $188,400, up 19% in a year. Those paychecks buy the $760,260 median home that is 5% cheaper in 12 months. Affordability is 20% now up from 24% a year ago and 27% in 2021. California’s low was 11% in 2007.
Or there’s the Bay Area and its $277,600 requirement, up 4% in a year, to buy a $1.12 million median home (17% cheaper in 12 months). So 21% affordability now vs. 20% a year ago and 23% in 2021.
But all this seems horrible compared to the national norm.
A US home hunter needs an income of $92,000, up 26% in one year, for a median home of $371,200 (1% more expensive in 12 months). The national historical minimum, according to these mathematics, was 10% in 2006.
That adds up to 40% of Americans who have “affordable” homes to buy today, up from 47% a year ago and 54% in 2021.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]
