August 11, 2005
California homes less and less affordable-report
By Jim Christie
SAN FRANCISCO (Reuters) - The number of California
households able to afford a median-priced home in the state
fell to 16 percent in June from 18 percent a year earlier,
nearing a record low amid soaring home prices, according to a
report released on Thursday.
The percentage has been under 20 percent for the past year
and is closing on a record low 14 percent set in the summer of
1989, reflecting the effect of fast-rising home prices across
the state, according to the California Association of Realtors.
The minimum household income needed to buy a median-priced
home at $542,720 in California in June was $125,870, based on
an average mortgage interest rate of 5.71 percent and assuming
a 20 percent down payment, according to the realtors' group.
"One thing we can safely assume is that home prices will
continue to go up through this busy season so affordability is
likely to fall another point or two this year," said Robert
Kleinhenz, an economist with the realtors' group.
The San Diego, Santa Barbara and Monterey regions, along
with the northern end of the state's Wine Country region, were
the least affordable area for California home buyers in June.
Less than 10 percent of households in each market were able
to afford to buy a median-priced home.
Analysts are split over whether the fast-paced gains in
California home prices reflect a housing bubble poised to pop
or deflate, or whether the prices will continue rising amid the
state's economic recovery from the long high-tech slump.
California's persistent shortage of housing, its growing
population and relatively low long-term mortgage interest rates
have propelled housing prices up sharply in recent years,
requiring home buyers to increasingly take on interest-only
mortgage to become home owners.
A year earlier in California, the minimum household income
needed to buy a median-priced home was $111,420, when the
median price of a home stood at $468,050 and the prevailing
interest rate stood at 6.01 percent.
The top ten least affordable U.S. metropolitan areas for
home ownership are in California, with San Francisco at the top
of the list, according to a report released earlier this week
by the National Housing Conference.
According to the affordable housing advocacy group, a
household would require $223,576 in annual income to buy a
median priced home of $705,000 in San Francisco.