California Home Affordability to Hit Record Lows in 2005

The CAR forecasted that the median price for a single family home in California is expected to rise 15% next year. This would put the median price home at $522,930 we are already at about 21% home affordiablity assuming the current home prices and low mortgage rates.

If home values continue to climb as forecasted and mortgage rates go up you will see a significant drop in home affordability. Here are some recent quotes from Ann Pettijohn, CAR association president:

"Home buyers next year will face slightly higher mortgage interest rates, approaching 7 percent by year's end, which will make it more difficult for many families in California to be able to afford a home."

"Coupled with rising home prices, affordability in California will fall to an all-time annual low of 16 percent next year."

Something I always found wrong with the affordability index is the fact that it assumes current mortgages and a 20% down payment. I have personally been involved in over 800 transactions and I can say not too many clients have $90,000 - $100,000 for a down payment unless they already own a home that they are selling.

For more information or to search homes for sale in California please visit California Real Estate Center

Thanks for Reading.
Jessie J. Beaudoin