California is home to nine of the 10 least affordable U.S. metro areas in the third quarter, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index released this week.
The Los Angeles-Long Beach-Glendale, Calif., metro area ranked as the least affordable, according to the index, with 1.8 percent of homes in the area affordable for median-income households.
Bay City, Mich., ranked as the most affordable U.S. metro area in the third quarter, with 90 percent of homes affordable for median-income households, and Indianapolis, Ind., ranked as the most affordable large metro area, with 85.9 percent of homes affordable to median-income households.
In Indianapolis, the median household income was $65,100 in the third quarter, and the median sales price of all homes sold in the metro area during that time was $122,000 — up from $120,000 in the second quarter.
Among the top 30 least affordable metro-area markets in the third quarter, 25 are in California.
Ranked behind Los Angeles for least affordability is Salinas, Calif., followed by Santa Ana-Anaheim-Irvine; Modesto; Merced; Stockton; Madera; San Diego-Carlsbad-San Marcos; and Napa metro areas. The New York-White Plains-Wayne metro area in New York and New Jersey ranks 10th for least affordability.
Indianapolis has been ranked as the most affordable large metro area for five consecutive quarters, according to a National Association of Home Builders announcement about the index.
The index is a measure of the percentage of homes sold in a given area that are affordable to families earning that area’s median income during a specific quarter. Prices of new and existing homes sold are collected from court records by First American Real Estate Solutions, a marketing company. Mortgage financing conditions incorporate interest rates on fixed- and adjustable-rate loans reported by the Federal Housing Finance Board, the home builders association reported.
The index indicates that 40.4 percent of all new and existing homes that were sold during the third quarter were affordable to families earning the median U.S. income of $59,600. That compares with 43.2 percent of homes that were affordable to median-income families in third-quarter 2005 – the index was 50.4 percent in third-quarter 2004 and 61.5 percent in third-quarter 2001.
David Pressley, president for the home builders’ group, said in a statement that the index was roughly level with the second-quarter index, “in part because higher mortgage rates in the period were offset by somewhat lower home prices in many markets.”
According to the report, the national weighted interest rate on fixed- and adjustable-rate mortgages – a key component in calculating the index – was 6.77 percent in the third quarter, which is 12 basis points higher than it was for the previous quarter.
Also near the top of the list for affordable major metros in the third quarter were Youngstown-Warren-Boardman, Ohio-Pa.; followed by Detroit-Livonia-Dearborn, Mich.; Buffalo-Niagara Falls, N.Y.; and Grand Rapids-Wyoming, Mich.
Seven smaller metro markets outranked all others in terms of housing affordability during the third quarter, including Bay City, Mich.; Springfield, Ohio; Mansfield, Ohio; Lansing-East Lansing, Mich.; Lima, Ohio; Battle Creek, Mich.; and Canton-Massillon, Ohio.
In the Los Angeles metro area, the area’s median family income was $56,200 and the median sales price of all homes sold in the area during the period was $523,000.
The California Building Industry Association, in an analysis of the Housing Opportunity Index, reported that affordability fell in 14 of 28 California metro areas surveyed, and there are 20 metro areas in the state in which less than 10 percent of homes are affordable to median-income families, according to the association.
Robert Rivinius, CBIA president and CEO, said in a statement, “Despite all of the doom and gloom about housing prices dropping, affordability has improved only slightly and only in some parts of the state.”
California’s home-ownership rate is 57 percent, Rivinius also noted, which is 13 points below the rest of the nation. “California’s at risk for losing its college graduates and young families,” he also stated. “If they can’t hope to buy a home here, more and more of our best and brightest leaders of tomorrow will leave California for communities in other parts of the country where home ownership is still a realistic possibility.”