The California Association of Realtors® (C.A.R.) said today that rising home prices in the state are putting a dent in housing affordability.  Fifty-six percent of homebuyers earning the median income in their local area could afford to purchase a median priced existing single-family home in their local area in the first quarter of 2012.  By the first quarter of this year that percentage had dropped to 44.  The affordability of condominiums and townhomes in California dropped from 65 percent in Q1 2012 to 53 percent in the most recent period.

C.A.R.'s Traditional Housing Affordability Index (HAI) measures affordability on a statewide basis and also for regions and select counties within the state.  C.A.R. says its Index is considered the most fundamental measure of housing well-being for home buyers in the state.

On a state-wide basis a home buyer would need a minimum annual income of $66,800 to qualify to purchase an existing single-family home at the median price of $350,490.  Assuming a 20 percent down payment and an effective interest rate of 3.55 percent the monthly mortgage payment including taxes and insurance would be $1,670.  The median home price was $279,190 in first-quarter 2012, and an annual income of $56,320 was needed to purchase a home at that price.  In the U.S. as a whole 65 percent of homebuyers could qualify for a mortgage under the same parameters compared to 71 percent a year earlier

All regions of the state experienced significant year-over-year declines in housing affordability, with Bay Area and Southern California counties recording the largest decreases in the index due to higher home prices.

At an index of 77 percent, Madera County was the most affordable county of the state, while San Francisco and San Mateo counties tied for the least affordable at 23 percent.

While it is striking that, within even such a large state there can be such a range of affordability in terms of this index, when extrapolated to actual dollars, the variations between different areas of the same state are more startling.  For example, in the above referenced Madera County affordable means that a minimum income of $24,230 is required to purchase the median priced house which costs $127,140 to purchase and requires $610 in monthly payments.  In San Mateo that median priced home would cost $814,000 or $3,880 in monthly principal, interest, tax, and insurance payments and to qualify would require an income of $155,140.