California housing out of reach for first-time buyers

A new report released by an industry trade group found that only 24 percent of California households could afford to buy an entry-level home during the second quarter.

Although the percentage is up slightly from 23 percent for the same period a year ago, the California Association of Realtors' First-time Buyer Housing Affordability Index found that homes today are more expensive and require buyers to have higher minimum incomes than they did a year ago.

The minimum household income needed to purchase an entry-level home at $504,080 in California in the second quarter of 2007 was $101,550, based on an adjustable interest rate of 6.29 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $3,380 for the second quarter of 2007.

This is compared to the $98,720 minimum annual income needed to buy an entry-level home in the second quarter of 2006 at $482,000, based on an adjustable interest rate of 6.48 percent. The total monthly payment a year ago was $3,290.

Residents of Southern California's High Desert region had the most buying power in the second quarter, with 45 percent of households able to afford an entry-level home at $265,570, the total monthly payments of which were $1,780.

In the coastal regions of Santa Barbara and Monterey, the least affordable regions in the state, just 12 percent and 17 percent of households, respectively, could afford to buy a starter home in the second quarter.

The minimum household income required to purchase the entry-level Santa Barbara-area home at $707,170 was $142,460, while those in the Monterey region needed to earn $129,480 to buy a $642,740 home. The total monthly payment in Santa Barbara would be $4,750, and in Monterey, $4,320.

All rights reserved. This article may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of Inman News. Use of this article without permission is a violation of federal copyright law.