LOS ANGELES (CBSLA) — Rising interest rates could be cooling California’s red-hot housing market, making it more affordable for more would-be homeowners.
The number of Californians who were able to purchase a home in the fourth quarter of 2017 ticked up just a bit, thanks to slightly lower home prices and steady mortgage rates, California Association of Realtors said Tuesday.
The percentage of home buyers who could afford to purchase a median-priced, existing single-family home edged up to 29 percent from 28 percent in the third quarter of 2017, according to CAR’s Traditional Housing Affordability Index. This is the 19th consecutive quarter that the index has been below 40 percent.
California’s housing affordability was at its peak in the first quarter of 2012, when 56 percent of buyers could afford to purchase a home.
A minimum annual income of $111,260 was needed to qualify for the purchase of a $550,990 statewide median-priced, existing single-family home in the fourth quarter of 2017. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,780, assuming a 20 percent down payment and an effective composite interest rate of 4.17 percent.
The effective composite interest rate in third-quarter 2017 was 4.16 percent and 3.91 percent in the fourth quarter of 2016.
Conversely, the affordability of condominiums and townhomes dipped in fourth-quarter 2017 compared to the previous quarter, with 37 percent of California households earning the minimum income to qualify for the purchase of a $449,720 median-priced condominium/townhome, down from 38 percent in the third quarter. An annual income of $90,810 was required to make monthly payments of $2,270. Thirty-eight percent of households could afford to purchase the $446,800 priced condo or townhome in third-quarter 2017.
(© Copyright 2018 CBS Broadcasting Inc. All Rights Reserved. City News Service contributed to this report.)