Los Angeles supplants San Francisco as the nation’s least affordable housing market.
In its latest update to the Housing Opportunity Index (“Index”), the National Association of Home Builders identified Los Angeles to be the most expensive housing market in the nation, overtaking San Francisco, who had held the dubious number ranking for nearly five years.
According to the NAHB, just 9% of the homes sold in Los Angeles during the third quarter were deemed to be “affordable” for families with a median income of $64,300. Expectedly, the Bay Area and Silicon Valley remain some of the most expensive areas to live in the nation. San Francisco boasts a median income of $113,100, but only 11% of homes were considered affordable based on a median home sale price of $1.18 million dollars – the highest median sales price in the nation. The San Jose-Sunnyvale-Santa Clara market was marginally more affordable, as families with a median income of $113,300 would still struggle to afford homes with a median price of $940,000. The Sacramento metro region also ranked towards the bottom of the affordability scale, with 37% of homes being considered affordable based on a $75,200 median income and $380,000 median sale price. There were no California metropolitan areas that ranked in the top 15 for affordability in the Western United States. Redding was California’s most affordable region, with 63% of homes being considered affordable based off of a $61,800 median income and $233,000 median sale price.
The Midwest maintained its reputation for affordable housing, with its metropolitan areas routinely boasting affordability ratings over 80%. For example, Springfield, Ohio has a 89% affordability score, based off on a $60,800 median income and $109,000 median home sale price. Notably, the most affordable California metropolitan area would be considered one of the least affordable areas in the Midwest.
In determining affordability, the Index relies on the annual median family income for metropolitan areas, and uses several assumptions: 1) that a family can afford to spend 28% of its gross income on housing, 2) a 30-year fixed rate mortgage with a 10% down payment, 3) estimates on property taxes and property insurance for the area. Since its founding in 1940, the NAHB has grown to represent over 140,000 members in the homebuilding industry, ranging from homebuilders, financers, and building material suppliers, and its market analyses are often cited as an indicator of the nation’s housing trends.