California’s Housing Affordability Continued to Fall in Second Quarter, CBIA Reports
August 22, 2006
Contact:
John Frith
CBIA Vice President for Public Affairs
(916) 443-7933 ext. 332
(916) 803-3005 (cell)
jfrith@cbia.org
or
Deana Vladic
CBIA Communications Specialist
(916) 443-7933 ext. 346
dvladic@cbia.org
(Note to editors: Download a PDF table containing information about the nation’s 50 least affordable housing markets.)
SACRAMENTO — Despite the end of the state’s red-hot housing market, affordability continued to worsen in most California markets during the second quarter of 2006, the California Building Industry Association reported today.
CBIA’s analysis of the quarterly National Association of Home Builders/Wells Fargo Housing Opportunity Index found that during the second quarter of the year, affordability fell in 22 of the 27 California metro areas surveyed. Adding to the grim picture, in 20 metro areas less than 10 percent of the homes could be afforded by families earning the median income there, said Layne Marceau, a Bay Area homebuilder and CBIA’s Chairman for 2006.
“The report paints an increasingly gloomy picture for California families trying to buy a home — particularly families trying to buy their first home,” Marceau said. “In the entire nation, the 10 least affordable places to buy a home are here in California, as are 20 of the bottom 21.
“When will our legislators and our local policy makers here in California finally realize just how serious our housing affordability crisis is, and start taking steps to restore the American dream to more California families?”
California’s homeownership rate is just 57 percent, 13 points below the rest of the nation. This homeownership gap means that 1.6 million California families are being denied the benefits of owning their home, including the fact that homeownership is the biggest source of wealth creation for most families across the nation.
The index calculates the percentage of homes in a metro area that were sold there during a three-month period that could be afforded by a family earning the region’s median income. The index assumes buyers will finance 90 percent of the purchase price with a 30-year fixed-rate mortgage, and takes into account prevailing interest rates, property taxes and insurance costs.
Los Angeles County continued to have the nation’s lowest affordability of the 199 metro areas surveyed, with a miniscule 1.9 percent of the homes sold affordable to the county’s median-income family. Other metro areas in the nation’s bottom five are Orange County (3.2 percent affordable), Monterey County (3.5 percent), Merced County (3.6 percent) and Stanislaus County (4.1 percent). A complete listing of the nation’s 50 least-affordable metro areas, also comparing affordability with the previous quarter, may be downloaded from www.cbia.org.
Marceau noted that nationally, 40.6 percent of homes are considered affordable and that in 98 metro areas across the country, at least half of the homes are still affordable.
“In California, by contrast, only one California metro area — Butte County — has an affordability rating of more than 20 percent, and even then only 25.3 percent of the homes sold there this spring were considered affordable,” Marceau said.
“The state’s increasingly worse rankings on this and other affordability indexes should clearly demonstrate to our elected officials in Sacramento and around the state that they need to enact reforms that would make it possible for our industry to build enough homes to house our growing population — especially more homes designed for first-time buyers.”
He said needed reforms include making more land available for development in a well-planned, orderly way; streamlining the approval process; and reforming the state’s environmental laws, which are too often used not to protect the environment but instead merely to stop or delay growth.
In addition, he said local officials need to take a close look at the “developer fees” they charge, which are really hidden taxes passed along to the new-home buyer. In many cities, fees total more than $50,000 per home and today fees in excess of $100,000 per home are not unheard of.
“California’s continued prosperity demands that the possibility of homeownership exists for our college graduates and young families,” Marceau warned. “If they can’t hope to buy a home here, more and more of our best and brightest leaders of tomorrow will leave California for communities in other parts of the country where homeownership is still a realistic possibility.”
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The California Building Industry Association is a statewide trade association representing some 6,700 businesses — homebuilders, remodelers, subcontractors, architects, engineers, designers and other industry professionals. A recent study determined that homebuilding generates approximately $68 billion a year to the California economy and creates an estimated 487,000 jobs statewide. More information is available on the Association's Web site, www.cbia.org.
More information about the Housing Opportunity Index, including how it is calculated, is available at http://www.nahb.org/generic.aspx?sectionID=135&genericContentID=533)
