Thursday, December 01, 2005

LA Tops List of Least-Affordable!

Los Angeles is the least-affordable housing market in the nation, and is joined by 17 other California cities in the top 20 least-affordable places, according to the latest Housing Opportunity Index numbers released today by the National Association of Home Builders. The index, which is compiled by NAHB and Wells Fargo, is the percentage of homes purchased in the third quarter of this year that were affordable to those earning the median income. Here's a snippet from the news release:
California once again dominated the HOI rankings for the least affordable major metropolitan areas. Right behind Los Angeles on this list was Santa Ana-Anaheim-Irvine, Calif., followed by San Diego-Carlsbad-San Marcos, Calif. and Stockton. The metro of New York-White Plains-Wayne, N.Y.-N.J. was the only non-California entry on the list of the five least affordable major housing markets.
These are grim statitstics for anyone looking to purchase a home.

As you review the chart below, which includes the national ranking of all California cities in the index, remember that the HOI is the percentage of homes affordable to those earning the median income. In Los Angeles the median income is $54,500. To put that in perspective, consider what the California Association of Realtors has said about what it costs to buy a home in The Golden State:
The minimum household income needed to purchase a median-priced home at $543,980 in California in September was $128,270, based on an average effective mortgage interest rate of 5.90 percent and assuming a 20 percent downpayment.
To find your county's median income, visit the Quickfacts section of the U.S. Census website. Here's the California-ranking chart:

Another interesting way to look at this is to compare the rise in median home prices to what's happened to median income since 1991 (If you have any trouble viewing the charts, click on them and a larger version will appear in yoru browser):

Finally, here's the complete HOI list in order of least- to most-affordable. This data was pulled from within the HOI report and does not exist in this form on the NAHB site. Again, you'll find median income levels for your county in the Quickfacts section of the U.S. Census website:

— The Boy in the Big Housing Bubble