Housing affordability for all Californians deteriorates as home prices set record highs and interest rates surge, C.A.R. reports
Affordability gap for Black and Hispanic/Latino households remains wide
- About one in five of all Californians earned enough income to support the purchase of an $822,320 statewide median-priced home in 2022, down from just over one in four from 2021.
- By ethnic groups, about one-fourth of White California households and a little over one in 10 Black and Hispanic/Latino California households could afford the same median-priced home, while 31 percent of Asians could buy a median-priced home.
- Assuming a 20 percent down payment, a minimum annual income of $186,800 was needed to make monthly payments of $4,670, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 5.47 percent interest rate.
LOS ANGELES (April 5) – Housing affordability deteriorated in 2022 for all California ethnic home-buying groups, as home prices soared to record highs last year, and interest rates jumped to levels not seen in more than a decade, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.
Twenty-one percent of all Californians earned the minimum income needed to purchase a home in 2022, down from 27 percent in 2021. At the same time, housing affordability for White/non-Hispanic households fell from 32 percent in 2021 to 26 percent in 2022. Twelve percent of Black and Hispanic/Latino households could afford the same median-priced home in 2022, down from 16 percent and 17 percent in 2021, respectively. The significant difference in housing affordability for Black and Hispanic/Latino households illustrates the homeownership gap and wealth disparity for communities of color, which could worsen as the economy slows and rates remain elevated in 2023.
Housing affordability was better for Asians but also declined from the prior year, with the index registering 31 percent of Asian homebuyers who could afford the median-priced home in 2022, down from 38 percent in 2021, according to C.A.R.’s Housing Affordability Index.
The housing affordability gap between Blacks and the overall population in California improved from 11.7 percentage points in 2021 to 9.8 percentage points in 2022, and the gap for Hispanics/Latinos improved from 10.5 percentage points in 2021 to 9.4 percentage points in 2022.
According to the Census Bureau’s American Community Survey, the 2021 homeownership rate for all Californians was 55 percent, 63 percent for Whites, 60 percent for Asians, 44 percent for Hispanics/Latinos, and 37 percent for Blacks.
With Black and Latino families having much less wealth than the national average, C.A.R. last year strongly advocated for funding the California Dream For All Shared Appreciation Loan assistance program, which provides a loan for 20 percent of the home purchase price, in the California 2022-2023 state budget. This program will help bridge down payment and closing cost hurdles that people of color often experience more acutely and allow many working Californians to get on the housing ladder and gain the benefits of homeownership.
Additionally, in an effort to address California’s growing housing affordability crisis and racial homeownership divide, C.A.R. has partnered with nonprofit housing organizations to provide closing cost grants up to $10,000 for eligible first-time home buyers from an underserved community. In 2022, C.A.R. awarded $1 million in closing cost grants through its Housing Affordability Fund’s Closing Cost Assistance program.
C.A.R.’s Housing Affordability Index (HAI) measures the percentage of households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The index is considered the most fundamental measure of housing well-being for home buyers in the state.
A minimum annual income of $186,800 was needed to qualify for the purchase of a $822,320 statewide median-priced, existing single-family home in 2022. The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $4,670, assuming a 20 percent down payment and an effective composite interest rate of 5.47 percent. The 2022 California median income for Whites was $105,640, $120,040 for Asians, $76,310 for Hispanics/Latinos and $64,190 for Blacks — an income gap of nearly one-third that of the overall population, which was $93,380.
Multimedia: Affordability by Ethnicity Slides
Key points from C.A.R.’s 2022 Housing Affordability by Ethnicity report include:
- Of the major regions for which C.A.R. tracks affordability by ethnicity, the affordability gap between Black and the overall population in 2022 was the largest in Contra Costa, Kern and Santa Clara counties, with each registering a gap of -14 percent. Other counties that had a double-digit affordability gap for Black households include San Francisco (-12 percent), Alameda (-11 percent), San Diego (-11 percent) and Sacramento (-11 percent).
- For Hispanic/Latino households, the affordability gap was the biggest in Santa Clara (-12 percent), Contra Costa (-11 percent), Ventura (-9 percent) and San Diego (-9 percent).
- At an affordability index of 7 percent, Alameda, Santa Clara and San Diego were the least affordable counties for Black households, while Fresno and Riverside were the most affordable counties at 31 percent for the ethnic group.
- The least affordable county in 2022 for Hispanic/Latino homebuyers was Orange County at 8 percent, and the most affordable was Kern at 32 percent.
- For Asian households, Orange County was also the least affordable, with 15 percent earning the minimum income required to buy a median-price home. Kern was the most affordable county with 54 percent of Asian households having the minimum income required to buy a median-priced home.
- San Mateo was the least affordable county for White households, with 14 percent earning the minimum income required to buy a median-price home. Fresno was the most affordable at 48 percent.
Leading the way…® in California real estate for more than 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than 200,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.