The housing industry in California is in recovery mode and multiple offers and bidding wars are now the norm in many markets. The state median home price continued its year-over-year increase in April for the fourteenth consecutive month at $402,760, up 28.9 percent from April 2012. This gain in price is the highest year-to-year gain since February 1980. The mix of sales played an integral role in the price jump with sales in the higher price segments comprising a larger portion of the market than a year ago. While sales in the State dropped 3.7 percent from last year, they rose 29.1 percent in the $400,000 - $500,000 price range and were up 44.9 percent in the over $500,000 price range.
On one hand, the price gains have resulted in improving the health of the real estate market, but on the other hand, the gains have led to a 12 point decline in the California Housing Affordability Index from 56 percent who can afford a median priced home in the first quarter of 2012 (the highest in the index history) to 44 percent in the first quarter of 2013. This rate is based on a median home price of $350,490 and a minimum qualifying annual income of $66,800, putting the
monthly payment including taxes and insurance at approximately $1,670.
Even with the significant year-over-year decline, the affordability rate is still well above its second quarter of 2007 trough of 11 percent and also above the long run average of 32 percent. At that time the monthly payment was $3,668—more than double the current monthly payment—and the minimum qualifying annual income was $146,701—also more than double the current qualifying income. When adjusted for inflation, the present monthly payment is at 1970’s levels.
Given this perspective, it is still a good buying opportunity, especially in comparison to renting. For the State of California, consumers can save 32percent per month by buying a property.