A combination of continued price increases and relatively higher interest rates during the first quarter of this year have led to decreased housing affordability in all regions of California, according to the California Association of Realtors (CAR).
While the percentage of home buyers who could afford to purchase a median-priced, existing, single-family home in California rose slightly from 32% in the fourth quarter of 2013 to 33% in the first quarter of this year, affordability declined sharply from the 44% rate reported in the first quarter of 2013, according to CAR's traditional housing affordability index.
Home buyers needed to earn a minimum annual income of $86,419 to qualify for the purchase of a $416,720 statewide median-priced, existing, single-family home in the first quarter. Comparatively, the median home price was $431,540 in the fourth quarter of 2013, and an annual income of $89,247 was needed to purchase a home at that price.
California's housing affordability has dropped 23% since its peak in the first quarter of 2012 and has steadily declined since then as rising interest rates and increasing home prices contributed to the lack of affordability.
Approximately 77% of the counties reviewed by CAR experienced a quarter-over-quarter decline in affordability, and all counties realized a double-digit decline in year-over-year comparisons.
The Bay Area tops the list of least affordable markets, while affordability in the Inland Empire still ranks relatively higher. Nevertheless, both regions saw a 22 percentage-point drop in affordability since their peaks in the first quarter of 2012. By comparison, national affordability only declined by 12 percentage points since affordability peaked in the first quarter of 2012.