Photo by Carrie Hays on Unsplash
Historically low mortgage rates have not been enough offset the affordability challenges facing many homebuyers in the Los Angeles market.
Dwindling inventory levels, surging buyer demand, and a preference for detached, single-family homes combined to create a decline in housing affordability across Los Angeles during the third quarter of 2020. According to a recent report from the California Association of Realtors, just 23 percent of households in the city could afford the monthly mortgage payment on a median-priced home of $708,870.
Angelenos would need to earn a minimum annual income of $130,000 to comfortably cover the $3,250 monthly payment, including taxes and insurance, on a 30-year fixed-rate mortgage of 3.15 percent. Affordability fell by 9 percentage points compared to Q2 2020 and 2 percentage points on a year-over-year basis.
Across the Greater Los Angeles Area, the index fared slightly better with 31 percent of households able to afford the typical home worth $610,000. A minimum qualifying income of $112,000 would allow the buyer to take on a $2,800 monthly payment. Affordability for the metropolitan area dipped 5 percent from Q2 and 2 percent over the same period a year ago.
Los Angeles County and Orange County tied as the least affordable regions in Southern California last quarter. Neighboring San Bernardino County was deemed the most affordable at 51 percent.
Statewide, only 28 percent of households could afford to purchase the $693,680 median-priced home — the lowest index reading since Q4 2018. An annual income of $127,200 would be needed to float the monthly mortgage of $3,180, assuming a 20 percent downpayment.
California’s median home price jumped 13.6 percent over the previous quarter and 13.8 percent from Q3 2019, contributing to the affordability woes. The state stands in stark contrast to the rest of the country, where 55 percent of households can afford the $313,500 median-priced home, requiring an annual income of at least $57,600 with a monthly mortgage payment of $1,440.
