You needed a six-figure income to afford a typical house sold in the Los Angeles metro area this past summer, according to the latest California Association of Realtors housing affordability index released Thursday, Nov. 2.
The minimum income needed to afford the median-priced house in the Los Angeles metro area was $101,270 during the third quarter, up $10,000 from the same quarter in 2016. That’s an 11 percent increase.
CAR assumes you’re using conventional financing — that is, making a 20 percent down payment on a 30-year fixed-rate mortgage. And it uses the traditional affordability metric of paying no more than 30 percent of gross earnings on your monthly house payment.
Some professionals say buyers often can stretch their incomes and buy with smaller down payments or adjustable-rate loans to reduce the minimum income needed.
But the CAR index shows that steadily rising home prices continue to erode into consumers’ ability to switch from renting to homeownership.
By county, minimum incomes vary even more dramatically. CAR’s third-quarter figures show:
- In Orange County, the minimum income needed to afford the median-priced house was $159,370 a year, up from almost $158,000 in the second quarter and $144,000 in the third quarter of 2016. With a median house price of $790,000, the monthly house payment, including taxes and insurance, would be $3,980. That’s affordable to 21 percent of Orange County households, unchanged from the previous two quarters.
- In Los Angeles County, the minimum income needed to afford the typical house was $120,060 a year, up from $103,000 in the second quarter and $104,000 in the third quarter of 2016. With a median house price of $595,110, the monthly house payment would be $3,000, affordable to 22 percent of L.A. County households. The number of households able to afford the typical L.A. county house was 28 percent just last spring.
- In Riverside County, the minimum income needed to afford the typical house was $78,070 a year, up from just over $76,000 in the second quarter and from almost $70,000 in the third quarter of 2016. With a median house price of $387,000, the monthly house payment would be $1,950, affordable to 38 percent of Riverside County households.
- In San Bernardino County, the minimum income needed to afford the typical house was $54,470, up only slightly from the second quarter and up from $48,000 in the third quarter of 2016. With a median house price of $270,000, the monthly house payment would be $1,360, affordable to 51 percent of San Bernardino County households.
Orange County housing affordability has been worse in recent years. O.C. affordability rates were even lower in late 2013 and throughout 2014, CAR figures show.
But that’s the exception.
Affordability rates in the rest of Southern California fell last quarter to the lowest level since 2008.
Statewide, housing affordability hit a 10-year low as tight housing inventory drove home prices higher and reduced purchasing power.
The percentage of California home buyers who could afford a median-priced house in third-quarter fell to 28 percent, down from 29 percent in the second quarter and down from 31 percent in the third quarter a year ago.
A minimum annual income of $112,100 was needed to make monthly payments of $2,800 on the typical California house.
Condos were more attainable for Californians. Thirty-eight percent of Californians were able to afford the $440,000 median-priced condo or townhome. An annual income of $88,770 was required to make the monthly condo/townhome payment of $2,220.
