California Home Prices Have Decreased, But Remain Unaffordable to Many

Home prices in California have Decreased, but remain unaffordable to many.

Using data from a California Budget Project Report, here is some affordability information on selected California Counties:

County	Median-Priced Home (Aug 2007)	Income Needed to Purchase Median Priced Home	Median Household Income (2006)	Income Needed as a Percentage of Median Income
California	$465,000	$113,162	$56,645	199.8%
Fresno	$274,250	$66,741	$42,732	156.2%
Los Angeles	$549,000	$133,605	$51,315	260.4%
Marin	$899,500	$218,902	$81,761	267.7%
Monterey	$575,000	$139,932	$55,045	254.2%
Orange	$625,000	$152,100	$70,232	216.6%
Sacramento	$312,250	$75,989	$53,930	140.9%
San Diego	$470,000	$114,379	$59,591	191.9%
San Francisco	$809,000	$196,878	$65,497	300.6%
Santa Barbara	$530,000	$128,981	$53,477	241.2%
Santa Clara	$700,000	$170,352	$80,838	210.7%

Affordability assumes a 5 percent down payment on a 30-year conventional fixed-rate mortgage with a 6.63% interest rate.

The affordability of a home in California requires almost 2 times the median household income. So how did most Californians buy a home during this time?

Lenders loosened underwriting standards and promoted relatively risky loans including Adjustable rate mortages with short term promotional interest rates, non traditional mortgages primarily interest-only and "payment-option" loans and Subprime Loans.

In addition other factors helped Californians purchase homes during the Housing Boom including mortgage interest rates declining significantly, Californians moving to less expensive areas, Californians buying smaller homes than have previous homebuyers, and the state's welathiest residents experiencing substantial income gains.

Percent of Income on Housing

The Federal Government recommends that families spend no more than 30 percent of their incomes on housing. However, in California, 43.5% of Households are spending more than 30% of their incomes on Housing (compared to 29.1% for the Rest of the US). 18.8% of California Households say they spend 50% or more of their incomes on housing (compared to 10.9% for the Rest of US).


Mortgage Delinquencies and Foreclosures

Because of the subprime crisis and slowing economy, the mortgage delinquencies and foreclosures have increased substantially in california from 2005 to 2007.

Notices of Default

1. 2005: 54,953
   
2. 2006: 104,977
   
3. 2007: 254,824
   

Foreclosures

1. 2005: 2,920
   
2. 2006: 12,672
   
3. 2007: 84,326
   

California Counties that have the highest foreclosure percentages from 3rd Quarter 2006 to 3rd Quarter 2007

1. Merced: 1310%
   
2. Monterey: 1230%
   
3. San Benito: 1140%
   
4. Madera: 1122%
   
5. Kern: 1004%
   

California Counties that have the lowest foreclosure percentages from 3rd Quarter 2006 to 3rd Quarter 2007

1. San Francisco: 200%
   
2. San Luis Obispo: 257%
   
3. Kings: 260%
   
4. Santa Cruz: 317%
   
5. San mateo: 319%
   
6. San Diego: 376%
   
7. Sutter: 383%