**California Housing Affordability Continues to Decline as Interest Rates Rise and Inventory Shrinks**
*California Association of Realtors reports only 16% of households qualify for a median-priced home*
The dream of buying a home in California has become even more elusive as rising interest rates and limited inventory drive up prices. According to a recent report from the California Association of Realtors, only 16% of households were able to qualify for a median-priced single-family home in the second quarter. This is a decline from 19% in the first quarter and 17% compared to the previous year.
**Affordability Crisis Threatens California’s Growth and Population**
California is grappling with an affordability crisis that not only impacts its residents but also has the potential to hinder the state’s economic growth. The skyrocketing cost of housing in California has led many people and companies to leave the state or choose not to move there. The disparity in housing prices between California and other parts of the US is a major deterrent.
Oscar Wei, the deputy chief economist for the California Association of Realtors, warns that if steps are not taken to address the supply shortage and improve affordability, California could lose its competitive edge in the long run. A tight supply and dwindling affordability will constrain the state’s growth potential.
**California’s Housing Affordability Compared to National Average**
In contrast to the grim housing affordability situation in California, nationally, more than a third of households can afford to purchase a median-priced home of $402,600. This further highlights the stark difference between housing costs in California and the rest of the country.
**High Income Requirements for Homeownership in California**
To qualify for a 30-year mortgage on an existing single-family home at California’s median price of $830,620, buyers in the second quarter needed a minimum annual income of $208,000. This income requirement reflects a 20% down payment on the home. For condos and townhouses, with a median price of $640,000, a minimum income of $160,400 was necessary to secure a loan.
**Rising Mortgage Rates Increase Monthly Costs for Buyers**
While single-family home prices in California decreased by 2.4% between June of the previous year and this year, buyers’ monthly expenses surged due to rising mortgage rates, which hovered around 7%. As a result, homeowners with lower-rate loans are choosing to stay put rather than selling their homes, further limiting the availability of homes for sale. In June, the number of new listings dropped by 29% compared to the same period last year.
**Historical Perspective: California’s Lowest Affordability Rates in 2007**
The current affordability crisis in California brings to mind the situation in 2007 when the state experienced its lowest affordability rates at a dismal 11%. Loose lending policies at the time contributed to a housing price bubble that eventually burst and led to the Great Recession.
In conclusion, California’s housing market continues to face significant challenges in terms of affordability. The declining affordability rates and the increasing cost of homeownership threaten the state’s economy and population growth. Urgent actions are required to address the supply shortage and make housing more attainable for Californians. Otherwise, California risks losing its competitiveness in the long run.