(The Center Square) – According to the latest quarterly analysis from the California Association of Realtors, only 15% of Californians can afford to purchase the median-priced home, a decline of 1 percentage point from the quarter before and 3 percentage points from the year before. California homes are now the least affordable they’ve been since the peak of the housing market in 2007 before the Great Recession.
The analysis found that to afford the median $843,600 California single-family home, a household requires a minimum annual income of $221,200. The only counties where more than 35% of residents could afford to buy a single family home were in the far north of the state — in Lassen, Tehama and Shasta counties.
California is estimated to have a 4.5 million unit housing shortage due to significant increase in population since the 1970s without a large enough accompanying increase in housing construction.
“Interest rates appear to have peaked, and further economic slowdown could result in further rate drops before the end of the year,” noted the report. “The rate decline should alleviate pressure on both the supply and demand sides of the housing market, which could help improve housing affordability in the coming quarters.”
Lower interest rates mean more developers can afford to get loans out for more projects, which could help reduce the cost of housing in the future. Lower interest rates also enable buyers to finance larger sums of money more affordably, which has the effect of driving up home prices. If interest rates decrease at a relatively faster rate than home prices increase, the number of Californians who can afford a home will increase.
“State policies imposed by the majority party have created winners and losers – and most California families fall on the wrong side of the equation,” said State Sen. Roger Niello, R–Fair Oaks, to The Center Square. It’s not just borrowing costs and the rising home prices but also Insurance and taxes that impact the ability for people to afford homeownership.”