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STRONG WAGE GROWTH, LEVEL HOME PRICES BUOY HOUSING AFFORDABILITY

STRONG WAGE GROWTH, LEVEL HOME PRICES BUOY HOUSING AFFORDABILITYHigher wages and lower seasonal home prices combined to push California housing affordability higher in the first quarter of 2016, compared to the previous quarter, according to a recent report by C.A.R. Affordability was flat when compared to the previous year as rising home price offset income gains.

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in first-quarter 2016 rose to 34 percent from the 30 percent recorded in the fourth quarter of 2015 and was unchanged from first-quarter 2015, according to C.A.R.’s Traditional Housing Affordability Index (HAI).  This is the 12th consecutive quarter that the index has been below 40 percent and is near the mid-2008 low level of 29 percent.  California’s housing affordability index hit a peak of 56 percent in the first quarter of 2012.

Home buyers needed to earn a minimum annual income of $92,571 to qualify for the purchase of a $465,280 statewide median-priced, existing single-family home in the first quarter of 2016.  The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,314, assuming a 20 percent down payment and an effective composite interest rate of 4.01 percent.  The effective composite interest rate in fourth-quarter 2015 was 4.07 percent and 3.97 percent in the first quarter of 2015.  

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