Highly competitive market depresses California housing affordability in second-quarter 2021, C.A.R.

• Twenty-three percent of California households could afford to purchase the $817,950 median-priced home in the second quarter of 2021, down from 27 percent in first-quarter 2021 and 33 percent from second-quarter 2020.

• A minimum annual income of $150,800 was needed to make monthly payments of $3,770, including principal, interest and taxes on a 30-year fixed-rate mortgage at a 3.20 percent interest rate.

• Thirty-seven percent of home buyers were able to purchase the $585,000 median-priced condo or townhome. An annual income of $108,000 was required to make a monthly payment of $2,700.

• Infographic

LOS ANGELES (Aug. 12) – A highly competitive market fueled by low interest rates and a tight supply of homes for sale pushed the state’s median home price nearly 34 percent higher than a year ago and depressed housing affordability in California in the second quarter of 2021, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in second-quarter 2021 dropped to 23 percent from 27 percent in the first quarter of 2021 and from 33 percent in the second quarter of 2020, according to C.A.R.’s Traditional Housing Affordability Index (HAI). The second-quarter 2021 figure is less than half of the affordability index peak of 56 percent in the second quarter of 2012.

C.A.R.’s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The index is considered the most fundamental measure of housing well-being for home buyers in the state.

A minimum annual income of $150,800 was needed to qualify for the purchase of a $817,950 statewide median-priced, existing single-family home in the second quarter of 2021. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $3,770, assuming a 20 percent down payment and an effective composite interest rate of 3.20 percent. The effective composite interest rate was 3.08 percent in first-quarter 2021 and 3.43 percent in second-quarter 2020.

Housing affordability for condominiums and townhomes also declined in second-quarter 2021 compared to a year ago, with 37 percent of California households earning the minimum income to qualify for the purchase of a $585,000 median-priced condominium/townhome, down from 40 percent during the previous quarter and from 44 percent in second-quarter 2020. An annual income of $108,000 was required to make monthly payments of $2,700.

Compared with California, half of the nation’s households could afford to purchase a $357,900 median-priced home, which required a minimum annual income of $66,000 to make monthly payments of $1,650. Nationwide affordability also fell from 57 percent a year ago.

Key points from the second-quarter 2021 Housing Affordability report include:

• Compared to the previous quarter, housing affordability declined in 47 tracked counties, improved in three counties (Monterey, Glenn, Mono) and was unchanged in one (Lassen). Compared to the previous year, housing affordability declined in all but one county (San Francisco), which remained unchanged.

• In the San Francisco Bay Area, affordability declined from both the previous quarter and year ago in every county except San Francisco, which held even at 19 percent from a year ago. San Mateo County was the least affordable, with just 17 percent of households able to purchase the $2,117,500 median-priced home. Forty percent of Solano County households could afford the $570,000 median-priced home, making it the most affordable Bay Area county.

• Affordability also fell from both the previous quarter and year ago in every Southern California county with Orange County being the least affordable (17 percent) and San Bernardino County being the most affordable (43 percent)

• In the Central Valley region, Kings County was the most affordable at 56 percent, and San Benito was the least affordable at 25 percent.

• In the Central Coast region, Santa Barbara County was the least affordable at 13 percent and San Luis Obispo County was the most affordable at 21 percent.

• During the second quarter of 2021, Lassen (62 percent) remained the most affordable county in California, followed by Kings (56 percent) and Kern, Tulare, Shasta and Glenn (all at 45 percent). The minimum required qualifying income was less than $66,400 for each of these counties. Lassen also had the lowest minimum qualifying income in the state to purchase a median-priced home at $46,000.

• Mono (9 percent), Santa Barbara (13 percent), and Santa Cruz (15 percent) were the least affordable counties in the state, with each of them requiring a minimum income of at least $176,800 to purchase a median-priced home. San Mateo remained on top of all counties in terms of minimum qualifying income, with the figure reaching $390,400 in the second quarter of 2021. It was one of four counties in California (all in the Bay Area) that required a minimum qualifying income of more than $300,000 in second-quarter 2021.

• Housing affordability declined the most on a year-over-year basis in Santa Barbara and Tehama, with each county dropping 18 and 16 points, respectively from second-quarter 2020 to second-quarter 2021. The plunge in affordability was due primarily to the surge in the counties’ median prices from a year ago. Santa Barbara County’s median-price increase of 72.5 percent in second-quarter 2021 was the highest increase of all counties in the quarter, and Tehama’s 45.9 percent year-over-year increase was the second highest. Mendocino, which had the third largest affordability drop (15 points) from a year ago, had the seventh highest price growth of all counties in the latest quarter.
  

See C.A.R.’s historical housing affordability data. See first-time buyer housing affordability data.

Leading the way…® in California real estate for more than 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than 200,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

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C.A.R. news release: July home sales and price report

For release: August 16, 2021

California housing market continues to normalize as home sales and prices curb in July, C.A.R. reports

• Existing, single-family home sales totaled 428,980 in July on a seasonally adjusted annualized rate, down 1.6 percent from June and down 2.0 percent from July 2020.

• July’s statewide median home price was $811,170, down 1.0 percent from June and up 21.7 percent from July 2020.

• Year-to-date statewide home sales were up 27.3 percent in July.

LOS ANGELES (Aug. 16) – California’s housing market moderated for the third straight month in July with both home sales and prices tempering from the heated market conditions seen over the past year, while still staying above pre-pandemic levels, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today. Infographic: https://www.car.org/en/Global/Infographics/m/a/July-2021-Sales-and-Price

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 428,980 in July, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2021 if sales maintained the July pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

July home sales dipped 1.6 percent on a monthly basis from 436,020 in June and were down 2 percent from a year ago, when 437,890 homes were sold on an annualized basis. July’s sales level was the second highest level in a July in the past six years. Despite the downward trend, California home sales maintained a solid year-to-date increase of 27.3 percent.

“The California housing market continues to normalize from the white-hot conditions we experienced at the height of the pandemic with both sales and prices moderating as we slowly transition from the peak home-buying season into the fall,” said C.A.R. President Dave Walsh. “The market remains solid, however, as sales were still the second highest level for a July in the last six years, and the statewide median price continues to perform above last year’s level by double-digits. Housing supply, while improved, remains tight and market competition is still heated with homes flying off the market in record time.”

After setting record highs for the past four consecutive months, California’s median home price slipped 1 percent on a month-to-month basis to $811,170 in July, down from June’s $819,630 and up 21.7 percent from the $666,320 recorded last July. The median price in California remained above the $800,000 benchmark for the fourth consecutive month.

“Despite dipping slightly from its record peak set in June, California’s median price remains elevated as supply constraints continue to provide upward pressure to support home prices,” said C.A.R. Vice President and Chief Economist Jordan Levine. “However, home prices should ease as housing inventory improves in the third quarter and the market continues to normalize during the traditional off-season.”

Other key points from C.A.R.’s July 2021 resale housing report include:

• At the regional level, all major regions posted a dip in sales from a year ago, when home sales began to surge as mortgage rates continued their downward trend. Both Far North (-15.2 percent) and Central Valley (-12 percent) experienced double-digit, year-over-year sales declines, while Central Coast (-9.7 percent) dropped nearly 10 percent. San Francisco Bay Area (-1.4 percent) and Southern California (-1.4 percent) held up relatively well, but more affordable counties within the regions such as Napa (-36.9 percent), Solano (-14.7 percent) and San Bernardino (-13.2 percent) also recorded sharp declines from a year ago.

• Nearly three-quarters of all counties — 38 of 51 — tracked by C.A.R. had a year-over-year decrease in closed sales in July, with 26 counties declining by more than 10 percent in sales from last year. Merced had the sharpest sales decline from a year ago at -39 percent, followed by Calaveras (-37.1 percent) and Napa (-36.9 percent). Counties with a drop from last year had an averaged decrease of -17.6 percent in July. Thirteen counties had a year-over-year sales increase in July, compared to 44 counties in June. Glenn (57.1 percent) had the largest sales gain from last year, followed by Del Norte (27.3 percent) and Yuba (18.6 percent). San Francisco (15.2 percent) and Santa Clara (11.3 percent) also had a double-digit sales growth in July.

• Median prices in all major regions remained elevated, but only the Far North region set a new record high in July. All regions recorded a double-digit surge in median price, with the Far North (25.7 percent) up the most year-over-year, followed by the San Francisco Bay Area (23.9 percent), Southern California (22.1 percent), Central Valley (19.7 percent), and Central Coast (10.8 percent).

• Nearly all — 49 out of 51— counties tracked by C.A.R. recorded price growth on a year-over-year basis, with 46 of them reporting a double-digit rate increase from last year. Tehama had the largest price gain of 52.5 percent, followed by Siskiyou (38.3 percent) and Mendocino (34.0 percent). Thirteen counties set new record high median prices in July. Mariposa (-10.1 percent) and Santa Barbara (-6.9 percent) were the only counties with a price drop from the same month last year.

• The state housing supply condition continued to improve with active listings reaching the highest level since last October. The number of for-sale properties increased 15.4 percent in July from the prior month as more homes were being listed on the market. Despite an increase in total active listings in July, new listings added in the month dipped slightly for the first time after gaining year-over-year for four straight months. New active listings inched up from June by 0.7 percent but dipped on a year-over-year basis by 0.9 percent in July 2021. Housing supply typically climbs during this time of the year and remains on an upward trend until late July/early August.

• The imbalance between supply and demand continued to heat up the market, with many buyers offering sales bids over the asking price. In July, over 70 percent of homes sold above their asking price, making it the tenth consecutive month since September 2020 that more than half of homes sold above their asking price.

• Nearly four out of five counties reported by C.A.R. declined in active listings from last July, and 28 of them dropped by double-digits when compared to the same time last year. Marin continued to have the biggest decline in active listings, plunging 52.2 percent year-over-year, while San Luis Obispo (-46.3 percent) and Plumas (-44.6 percent) had the second and the third largest drop from a year ago. Ten counties posted an increase in active listings in July, with Stanislaus (28.5 percent), Lassen (19.1 percent), and San Bernardino (17.8 percent) being the only counties that surged by double-digits from the same month a year ago.

• The Unsold Inventory Index (UII) improved slightly from 1.7 months in June to 1.9 months in July but remained sharply below last year’s level of 2.1 months. The index indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales.

• The median number of days it took to sell a California single-family home remained flat from June at 8 days in July but was down from 17 days in July 2020.

• C.A.R.’s statewide sales-price-to-list-price ratio* was 103.8 percent in July and 100 percent in July 2020.

• The statewide average price per square foot** for an existing single-family home remained elevated. At $394, July’s price per square foot was another all-time high. The price per square foot was $304 in July a year ago.

• The 30-year, fixed-mortgage interest rate averaged 2.87 percent in July, down from 2.98 percent in July 2020, according to Freddie Mac. The five-year, adjustable mortgage interest rate was an average of 2.49 percent, compared to 3.02 percent in July 2020.

Note: The County MLS median price and sales data in the tables are generated from a survey of more than 90 associations of REALTORS® throughout the state and represent statistics of existing single-family detached homes only. County sales data are not adjusted to account for seasonal factors that can influence home sales. Movements in sales prices should not be interpreted as changes in the cost of a standard home. The median price is where half sold for more and half sold for less; medians are more typical than average prices, which are skewed by a relatively small share of transactions at either the lower end or the upper end. Median prices can be influenced by changes in cost, as well as changes in the characteristics and the size of homes sold. The change in median prices should not be construed as actual price changes in specific homes.

*Sales-to-list-price ratio is an indicator that reflects the negotiation power of home buyers and home sellers under current market conditions. The ratio is calculated by dividing the final sales price of a property by its last list price and is expressed as a percentage. A sales-to-list ratio with 100 percent or above suggests that the property sold for more than the list price, and a ratio below 100 percent indicates that the price sold below the asking price.

**Price per square foot is a measure commonly used by real estate agents and brokers to determine how much a square foot of space a buyer will pay for a property. It is calculated as the sale price of the home divided by the number of finished square feet. C.A.R. currently tracks price-per-square foot statistics for 50 counties.

Leading the way…® in California real estate for more than 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than 200,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.