Who can afford a house in California?

Considering recently released numbers, not that many people

The "affordable housing" nobody has in mind
  • The "affordable housing" nobody has in mind

A study released last week by the California Association of Realtors trade group lays bare the facts about how far housing affordability has fallen in the county and throughout the state since prices began to rebound following the market crash of the late 2000s.

The report's takeaways: only 7 of 32 participating counties had a median home price considered affordable to a family making the area's median income. The only Southern California county to make the list was San Bernardino, north of Riverside. Less than one-third of the total available housing, including single-family homes and condominiums, is affordable to someone making more than half of the state's households.

Local Numbers

The median income in San Diego used for the report was $61,770, above the statewide figure of $60,240. Local residential units, again including both houses and condos, are selling at a median $475,230; that's roughly $163,000 (or 52 percent) more than the median household can afford.

As of August 25, there were just under 7500 residential properties available through Sandicor, the region's primary property-listing service. Only 744 of those (less than 10 percent) were priced at or below the $312,180 considered affordable to a typical area home buyer.

What does "affordable" mean?

Even the premise of affordability is somewhat skewed — in order to be able to "afford" a home, the study assumes that the typical buyer has a 20 percent down payment (about $62,000 for the San Diego median), has a strong credit history sufficient to qualify for a "prevailing" interest rate, and a lack of household debt sufficient to support budgeting 30 percent of one's pre-tax income for a housing payment.

While most new buyers don't have hefty sums of cash to put down, and some may not have sterling credit histories, purchases are made possible through lending guidelines that allow buyers to budget as much as 45 percent or more of their gross income toward a housing payment, providing a route to take on greater debts than what the housing industry groups consider affordable.

Trending

According to data provided by real estate tracking firm Core Logic, nearly 2800 single-family home sales in July closed at an average sales price of $520,000, a 6 percent rise from July 2014; 1355 condos sold last month at an average $362,000, up more than 8 percent from a year ago.

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"Even the premise of affordability is somewhat skewed — in order to be able to "afford" a home, the study assumes that the typical buyer has a 20 percent down payment (about $62,000 for the San Diego median), has a strong credit history sufficient to qualify for a "prevailing" interest rate, and a lack of household debt sufficient to support budgeting 30 percent of one's pre-tax income for a housing payment."

What, precisely, is "skewed" about that?!?! "Oh, it isn't fair for them to have to come up with so much down, they should be able to toss out some pocket change!" What then, especially when a 20% down significantly reduces the monthly payments? "Oh, get them into some government program to subsidize them, it's no fair they should have to make the payments on a 97% loan!" What about taxes, insurance, maintenance, etc? More government programs?

The answer is LESS government. No more taxpayer-backing of mortgage loans. Without that magical backstop, lenders will only lend amounts people can actually repay, and that means house prices must go down. Government always distorts markets it enters, and government has very badly distorted housing to the point where $700,000 for a house seems downright reasonable, and if that's too much $500,000 is a downright bargain for a townhouse!

The "median income" that is used must exclude anyone who works by the hour. Very few people make $30 an hour so it would take two people making $15 an hour each to reach the median income. Most San Diego employers of workers "by the hour" think $10-$12 an hour for 30 hours is a "good" wage. While some in the upper middle class may be able to buy a median priced home very few in the middle to lower middle class can afford a home let alone come up with $60k for a down payment. Many employers think that someone making a combined income of $30/hr should also fund their own health care, retirement, college funding, etc. I wonder what the "affordability" factor if only hourly workers were counted.

In my North Park hood, the going price for a house (and OLD ones, at that) is $500,000. And those will still need lots of TLC. If it's across from Morley Field, then count on $600,000s and up. And a Realtor told me there's a shortage of inventory. Whooda thunk it, 10-15 years ago? If that dilapidated shack in the photo were in NP, it would still be worth big bucks!

In 1960, the average blue-collar worker earned 5-6k a year. The average house in San Diego was 10-12k. The average rent on that same 2br house was 100 a month. All other costs, food, (except milk, which only rose merely 200% due to subsidies) fuel and utilities rose 1,000%, or tenfold. Medical costs were relatively low (147 per capita then compared to 8,402 now) and thus, most employers could offer decent health insurance at low prices.10% down and 10% interest were common offerings for home mortgages, but like my grandparents, many saved for a few years (they saved for five years on 2.80 an hour, or 5,600 a year total income while renting) and paid cash. Try that now...Thank you house-flippers and greedy folk! And quit telling me it's easy, grandpa...you baby-boomers were the only true middle-class with a shot.

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