Home affordability is the best it has been in Orange County in three years, according to a recent report by the California Association of Realtors. About one in four Orange County households can now comfortably afford to buy a home in one of the state’s priciest real estate markets.
The California Association of Realtors’ affordability index for Orange County ticked up to 23 percent in the first quarter of 2016, up from 21 percent in the last quarter of 2015. The last time home affordability was higher was in the second quarter of 2013.
Even with the recent improvement in home affordability, Orange County is still a tough place to buy a home as rising home values have outstripped local salary growth. The affordability index averaged 23 percent over the last three years, compared to 33 percent during the four years prior to the Great Recession and the early period of recovery.
The California Association of Realtors’ affordability index is based on the local median selling price and makes several key assumptions to gauge how easily residents can afford to buy a home in Orange County. The first assumption is that the buyer makes a down payment of 20 percent. The second is that they pay the prevailing fixed mortgage rate. The third assumption is that house payments, including principal, interest, taxes and insurance, do not exceed more than 30 percent of their household income.
Statewide, the affordability index for single-family homes was 34 percent in the first quarter of 2016, which was the best seen in a year. Twenty-two out of the 29 California counties tracked by the Association of Realtors saw improved housing affordability in the first quarter of 2016 compared to the fourth quarter of 2015. But the Association noted in the index that rising home prices offset income gains over the last year.
In the Los Angeles County, home affordability was 31 percent in the first quarter of 2016. In Riverside County, home affordability was 42 percent. Both Los Angeles and Riverside Counties marked their highest home affordability levels in a year. San Bernardino County’s 57 percent home affordability level was the highest seen since the fourth quarter of 2014.
Another affordability index released by the California Association of Realtors which estimates buying conditions for first-time homebuyers showed that 43 percent of Orange County households could afford to purchase a starter home. That marks no change from the fourth quarter of 2015, but a decrease of 2 percent from the first quarter of 2015, when 45 percent of Orange County households could afford to buy a starter home.
Statewide, more than half of California households, 54 percent, could afford to buy their first home in the first quarter of 2016. In San Bernardino, the first-time buyer affordability index reached 66 percent. In Riverside, it reached 62 percent, and in Los Angeles exactly 50 percent of households could afford to buy their first home.
If you’re looking for a luxury home in Orange County or Southern California, contact one of our real estate professionals today.
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(all data current as of 5/29/2017)
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