Since the price run-ups of early 2013, affordability has been a major hamper for the real estate market nationwide – inhibiting the ability of would-be buyers to afford new homes regardless of city, state or region. Of course some markets have been hit harder than others, and in the same respect some markets have bounced back faster than others, but where does California land in the mix? A new study suggests that middle class buyers would be better off elsewhere.
According to the recent study from Trulia, six of the seven least affordable markets for the middle class are found throughout the Golden State – an astonishing figure considering that California is the only state to have multiple markets among the top 10.
No surprise — San Francisco took the first spot in least affordable markets for the middle class nationwide, where only 15% of for-sale homes are affordable for middle class residents. San Francisco was followed closely by Los Angeles, San Diego, Orange County, San Jose and Ventura County, where middle class residents were able to afford 22%, 25%, 26%, 30% and 33% of for-sale homes respectively.
For this study, middle class was defined separately for each market based on local median household income, and a home was considered “affordable” when the total monthly payments – mortgage, insurance and taxes – were equal to or less than 31% the median income.
It’s truly no surprise that affordability has hit California hard though. Throughout 2013 prices jumped by record breaking numbers – increasing roughly one-third across Southern California in the past two years – and when paired with the low income growth of recent years, many would-be buyers simply cannot afford a new home.
Unfortunately, the problem may continue to worsen. According to Trulia’s chief economist Jed Kolko, “Unless incomes increase substantially, homeownership will slip further beyond the reach of many households.”
Aside from a higher median income, what else can help these struggling buyers?
What are your thoughts? We’d like to hear from you!