November 10, 2021
California housing affordability improves in third-quarter 2021 as mortgage rates remain low and prices begin leveling off, C.A.R. reports
Twenty-four percent of California households could afford to purchase the $814,580 median-priced home in the third quarter of 2021, up from 23 percent in second-quarter 2021 but down from 28 percent in third-quarter 2020.
A minimum annual income of $148,400 was needed to make monthly payments of $3,710, including principal, interest and taxes on a 30-year fixed-rate mortgage at a 3.07 percent interest rate.
Thirty-seven percent of home buyers were able to purchase the $600,000 median-priced condo or townhome. A minimum annual income of $109,200 was required to make a monthly payment of $2,730.
LOS ANGELES (Nov. 10) – A slightly less competitive housing market combined with modest household income growth allowed more Californians to purchase a median-priced home in the third quarter of 2021, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.
The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in third-quarter 2021 edged up to 24 percent from 23 percent in the second quarter of 2021 but was down from 28 percent in the third quarter of 2020, according to C.A.R.’s Traditional Housing Affordability Index (HAI). The third-quarter 2021 figure is less than half of the affordability index peak of 56 percent in the third quarter of 2012.
C.A.R.’s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The index is considered the most fundamental measure of housing well-being for home buyers in the state.
A minimum annual income of $148,400 was needed to qualify for the purchase of a $814,580 statewide median-priced, existing single-family home in the third quarter of 2021. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $3,710, assuming a 20 percent down payment and an effective composite interest rate of 3.07 percent. The effective composite interest rate was 3.20 percent in second-quarter 2021 and 3.15 percent in third-quarter 2020.
Despite setting a record high median price in third-quarter 2021, affordability for condominiums and townhomes was unchanged from the previous quarter. Thirty-seven percent of California households earned the minimum income to qualify for the purchase of a $600,000 median-priced condo/townhome in the third quarter of 2021, which required an annual income of $109,200 to make monthly payments of $2,730. The third quarter 2021 figure was down from 42 percent a year ago.
Compared with California, half of the nation’s households could afford to purchase a $363,700 median-priced home, which required a minimum annual income of $66,400 to make monthly payments of $1,660. Nationwide affordability was down from 55 percent a year ago.
Key points from the third-quarter 2021 Housing Affordability report include:
Compared to the previous quarter, housing affordability declined in 10 tracked counties, improved in 30 counties, and remained unchanged in 11. Compared to the previous year, 41 counties experienced a drop in housing affordability from a year ago, seven counties remained unchanged, and only three counties improved (San Francisco, Monterey, Lassen).
In the San Francisco Bay Area, affordability improved from the previous quarter in every county, except Napa, which held even at 23 percent. Alameda and San Mateo counties were the least affordable, tied at just 19 percent of households able to purchase the $2 million and $1.3 million median-priced home, respectively. Forty-two percent of Solano County households could afford the $580,000 median-priced home, making it the most affordable Bay Area county.
In the Southern California region, affordability improved from the previous quarter in four counties (Los Angeles, Orange, San Diego, and Ventura) and was unchanged in Riverside (33 percent), and San Bernardino, which was the most affordable (43 percent).
In the Central Valley region, Kings County was the most affordable at 56 percent, and San Benito was the least affordable at 27 percent.
In the Central Coast region, Santa Barbara and Santa Cruz counties were tied for the least affordable, and San Luis Obispo County was the most affordable at 24 percent.
During the third quarter of 2021, Lassen (68 percent) remained the most affordable county in California in the third quarter of 2021, followed by Kings (56 percent) and Tulare (46 percent). The minimum qualifying income was less than $58,800 for each of these counties. Lassen also had the lowest minimum qualifying income to purchase a median-priced home at $39,200.
Mono (13 percent), Santa Barbara (17 percent) and Santa Cruz (17 percent) were the least affordable counties in the state, with each of them requiring at least a minimum income of $153,200 to purchase a median-priced home in those counties. Purchasing a median-priced home in San Mateo required the highest minimum annual income, reaching $364,000 in the third quarter of 2021.
Three additional Bay Area counties required minimum annual incomes of over $300,000 in third-quarter 2021, including San Francisco ($331,600), Marin ($305,200), and Santa Clara ($300,400).
Housing affordability declined the most on a year-over-year basis in Yuba and Tehama, dropping 13 points and 10 points, respectively. The plunge in affordability was due primarily to the surge in the counties’ median prices from a year ago, relative to the moderate rise in household income. Yuba County’s median price increased 20.9 percent in third-quarter 2021, and Tehama’s grew 25.7 percent year-over-year. Calaveras County had the largest median price growth (29.1 percent) but the fourth largest drop in affordability (8 points) from a year ago.
See C.A.R.’s historical housing affordability data. See first-time buyer housing affordability data.
Leading the way…® in California real estate for more than 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than 200,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.