I have received a few calls and emails from my blogs and podcasts regarding the California Affordability Index.
Many investors, builders (weighing risk) and buyers express frustration with the sky-high prices and interest rates making the California market unaffordable to over 80% of the population.
These conversations brought me to two topics today:
- An article from Redfin News, and
- What exactly does one have to do to afford South Bay homes?
Redfin News Article
An article authored by Dana Anderson at Redfin News caught my eye after it shared insights on homeowners across the U.S.
A survey of existing homeowners concluded that nearly 40% of current homeowners do not believe they could afford their home today.
This illustrates the strange cocktail of low interest rates and low supply in the home market that prevent many Americans from being able to afford present day prices, and that includes current homeowners.
So, if you are frustrated with home affordability, you are not alone…and many homeowners themselves simply would not be able to afford their home in today’s economic environment.
(If you want to reference the full article, see it here.)
What Does it Take to Buy in the South Bay
My popular affordability blogs and podcasts highlight affordability across the state of California.
But what if we wanted to understand the financial aspects around specific local cities in our neighborhoods? Well, I crunched the numbers for you, and it may be shocking to some.
*Please note, these numbers are calculated on median prices of single-family homes at the end of Q1 2024 in each city. And then assumed a 20% down payment, 6.86% principle & interest rate, and 1.38% for property taxes and insurance. I then used the ratio for that payment to calculate the salary needed according to C.A.R.
Torrance $230,310/yr. salary
Rancho Palos Verdes $343,068/yr. salary
El Segundo $343,545/yr. salary
Redondo Beach $355,065/yr. salary
Hermosa Beach $422,220/yr. salary
Palos Verdes Estates $546,975/yr. salary
Manhattan Beach $556,590/yr. salary
Rolling Hills $1,197,928/yr. salary
When you break it down like C.A.R. does for the state, you can see how significant the annual earning power must be to afford a median priced SFR in our local South Bay cities.
Conclusion
This is all really food for thought.
Some may feel worse, and some may feel better after reading these numbers.
Of course, buyers are struggling with these numbers, especially if they are first time homebuyers. But the fact of the matter is that many local homeowners are not likely to afford the current home they live in if they bought pre-2019 as well.
Is this healthy? Probably not.
It is, however, the current home market we are dealing with in 2024 and there are no signs of large cracks to be concerned of just yet.
See you next week.
Richard Haynes
DRE: 01779425
For more South Bay real estate insights, subscribe and follow Richard’s social channels below:
The Richard Haynes Real Estate ShowA leader in South Bay real estate for the better part of a decade, Richard thrives as an advisor to his clients with over $248 million in sales as a broker or investment principal at his boutique agency, Haynes. Richard is known for his keen local market insights which have been featured in the L.A. Times, The Street, and Forbes, along with his weekly South Bay real estate blog. [read more]