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Los Angeles surpasses San Francisco as least affordable housing market | 2017-11-10

Los Angeles surpasses San Francisco as least affordable housing market | 2017-11-10

Los Angeles surpasses San Francisco as least affordable housing market | 2017-11-10
November 10
17:23 2017



San Francisco has been the nation’s least affordable housing market for the past five years, that is, until the third quarter of 2017.

For the first time in 19 consecutive quarters, another city surpassed San Francisco as the least affordable housing market – Los Angeles, according to the National Association of Home Builders and Wells Fargo’s latest Housing Opportunity Index.

In Los Angeles just 9.1% of homes sold during the third quarter were affordable to families earning the area’s median income of $64,300. San Francisco fell to the No. 2 spot on in the least affordable housing markets where only 11.1% of homes sold were affordable to those making the area’s median income of $113,100.

However, San Francisco homes remain more expensive at $1.18 million for a median priced home verses the median home price of $583,000 in Los Angeles.

Overall, California continues to dominate the list of least affordable housing markets as many of its markets were located at the bottom of the affordability chart. In descending order, these markets were Santa Ana and its surrounding area, then the San Jose area and finally, Santa Rosa.

For income, NAHB uses the annual median family income estimates for metropolitan areas published by the U.S. Department of Housing and Urban Development. NAHB assumes that a family can afford to spend 28% of its gross income on housing; this is a conventional assumption in the lending industry. That share of median income is then divided by twelve to arrive at a monthly figure. Prices of new and existing homes sold are collected from actual court records by CoreLogic.

Nationwide, 58.3% of new and existing homes sold between July and September were affordable making the national median income of $68,000. This is down from 59.4% of homes sold in the second quarter.

“Though builder confidence remains strong, they continue to deal with the long-term repercussions of this devastating hurricane season, which has exacerbated chronic labor and lot shortages and put upward pressure on material and home prices,” NAHB Chairman Granger MacDonald said.

The national median home price increased to $260,000 in the third quarter, up from $256,000 in the second quarter this year. Average mortgage rates also increased, rising two basis points in the third quarter to 4.1%, up from 4.08% in the second quarter.

“Solid economic growth, along with ongoing quarterly job gains and rising household formations, are fueling housing demand,” NAHB Chief Economist Robert Dietz said. “Tight inventories and a forecast of rising mortgage interest rates through 2018 will keep home prices on a gradual upward path and slowly lessen housing affordability in the quarters ahead.”



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