Buying a Home Today: Rates, Prices, and Loans

Rarely has housing affordability in California been
as high as it is now. The statewide median home
price in California is at 2001-2002 levels and
mortgage rates hit their lowest level ever in 2011.
Yet, the media reports that households are having
trouble obtaining loans and the share of first-time
buyers in the market is much lower than expected,
given such low prices and rates. Which begs the
question, is this measure of housing affordability
accurate?
Homes Are Very Affordable Now
C.A.R.’s Housing Affordability Index (HAI) has
been around since the 1980s, and was intended to
be a predictive measure of housing, showing
households’ ability to purchase a home at the
prevailing market prices, rates, and incomes. The
HAI assumes a 20 percent down payment, the
median price for a geographic area (e.g. $292,120
for California’s 3rd quarter of this year), and the
corresponding monthly payment for principal,
interest, taxes and insurance should account for no
more than 30 percent of a household’s income.
See entire report