We begin a series today looking at parts of the California economy to see how they’ve evolved this past year, starting with the state’s housing market.
Just looking at the numbers, California’s housing market doesn’t look that different from what it was a year ago. The median home price is up a bit; home sales are down a bit.
But beneath those numbers is a cold, hard truth: If you’re a middle-class family with two incomes looking to buy a home, “I think it’s much harder today than it was a year ago,” says Selma Hepp, an economist with the California Association of Realtors.
Hepp says there are very few affordable homes available in places most people want to live.
“The inventory that’s coming on line is not in those areas that are attractive. Where people want to live or they maybe have been renting and waiting for an opportunity to purchase the home – in those areas, there is just simply no inventory,” she says.
Hepp says the median income required to buy a home today is $30,000 higher than it was a few years ago. That means less than a third of California households can afford a home at the median price right now. Five years ago, more than half could.
So Californians are either continuing to rent, sticking with their starter homes, or buying in a place that’s not their first choice.
“We’re seeing many people that would probably prefer to buy in the metropolitan area moving out – even as far as Riverside and Moreno Valley, to take advantage of the prices and opportunities that are available there,” says Los Angeles County realtor Geoff McIntosh, who sells homes from the coast to the desert.
That said, San Francisco realtor Patrick Barber says interest rates are still very low, which means a monthly mortgage payment goes a lot further now than it will in the future.
“If I was a long-term buyer, looking to purchase a home for the next five-plus years, I would look sooner rather than later,” Barber says. “Because when interest rates go up, it’s going to change the affordability of what you can own.”
That would put middle-class homebuyers in an even tighter squeeze than they are now.