Keep up-to-date with the latest information about the short sale market, rules and regulations in California.
Last Updated 11/6/2017
Tight housing inventory across the state has driven home prices higher and reduced the purchasing power for potential buyers. The percentage of home buyers who could afford the median-priced, existing single-family home has fallen to 28 percent, a 10 year low. Affordability hit its peak during the first quarter of 2012 at 56 percent.
According to the California Association of Realtors, an annual income of $112,100 is needed to qualify for the average home price of $555,680. With a 20 percent down payment, the monthly mortgage payment in this scenario, including taxes and insurance would be around $2,800. Los Angeles County saw a massive affordability drop, with only 22 percent of potential homebuyers being able to afford a median priced home of $600,000 in the third quarter. The affordability of townhomes and condominiums also dropped to 38 percent, with an annual income of $88,770 required.
In 2007 lenders began to loosen credit rules and offer newly developed loan types to help offset the low number of people that could afford to purchase a home. This inevitably caused loans to be given to those who could not afford the payments or payment adjustments, which then led to the housing market crash.