Only 51% of Southern California households can ‘afford’ entry-level home with ‘generous’ mortgage
Just 51% of Southern California households can comfortably buy an entry-level home — and they’d need to earn at least $70,090 annually, according to a California Association of Realtors first-time buyer financing index.
The association measures buying conditions for a hypothetical first-time house hunter with an index that assumes more generous borrowing terms than “traditional” affordability indexes. This math includes a smaller downpayment (10% vs. 20%); adjustable-loan rates vs. fixed; more household income toward the mortgage payment (40% debt-to-income vs. 30%); and buying a less expensive starter home (85% of the median price).
In the region comprising Los Angeles, Orange, Riverside, San Bernardino, and Ventura counties, the first quarter’s 51% first-timer affordability rate was slightly higher than 49% in the previous quarter and unchanged from 51% a year ago. Buyers needed an annual income of $70,090 to comfortably make the $2,340-a-month mortgage, taxes and insurance payments on a $432,650 home. For the traditional homebuyer, affordability dropped to 33% with $107,110 income needed to comfortably pay $2,680 a month for a $509,000 home.
Local affordability levels, even with more generous terms, fare poorly against statewide and national first-timer measurements. Here’s the breakdown in the first quarter:
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Statewide, single-family-home: 50% affordability vs. 46% previous quarter and 50% year ago. Income of $75,160 needed for $2,510 payment on $463,950 home. The first-timer “affordability” yardstick has run between 73% and 26% since 2004. And by “traditional” math, only 32% affordability with $114,860 income needed.
Statewide, condo/townhome: 58% affordability vs. 55% previous quarter and 56% year ago. Income of $61,970 needed for $2,070 payment on $382,500 home. By “traditional” math, only 41% affordability with $94,690 income needed.
Nationwide: 72% affordability vs. 70% previous quarter and 72% year ago. Income of $35,090 needed for $1,170 payment on $216,580 home. By “traditional” math, only 57% affordability with $53,620 income needed.
Here’s how first-time affordability looked in four counties covered by the Southern California News Group in the first quarter …
Los Angeles County: 45% affordability vs. 42% previous quarter and 45% year ago. Income of $75,550 needed for $2,520 payment on $466,340 home. By “traditional” math, only 28% affordability with $115,450 income needed. First-time “affordability” has run between 68% and 19% since 2004.
Orange County: 42% affordability vs. 38% previous quarter and 39% year ago. Income of $110,160 needed for $3,670 payment on $680,000 home. By “traditional” math, only 24% affordability with $168,340 income needed. First-time “affordability” has run between 62% and 21% since 2004.
Riverside County: 57% affordability vs. 57% previous quarter and 58% year ago. Income of $56,320 needed for $1,880 payment on $347,650 home. By “traditional” math, only 39% affordability with $86,070 income needed. First-time “affordability” has run between 81% and 25% since 2004.
San Bernardino County: 67% affordability vs. 65% previous quarter and 68% year ago. Income of $41,300 needed for $1,380 payment on $254,960 home. By “traditional” math, only 50% affordability with $63,120 income needed. First-time “affordability” has run between 88% and 28% since 2004.
And don’t feel too bad … you could live up north! In the Bay Area, first-timer affordability ran 44% in the first quarter vs. 39% in the previous quarter and 41% a year ago. Income of $121,870 is needed for the $4,060 payment on a $752,250 home. By “traditional” math, only 26% could buy and that’s with a $186,230 income.