4th Quarter Housing Affordability stats are in. C.A.R. is reporting that higher wages and seasonal price declines are holding California housing affordability in check. For our local markets of Marin, Napa and Sonoma, the same holds true with the exception of Sonoma County.
Sonoma County’s 4th quarter Affordability Index (A.I.) is at 26, which means that 26% of households can afford the median priced home of $589,000. The income required to afford the estimated monthly payment of that median priced home ($2,900) is $116,100. The 3rd quarter A.I. was at 27, and this time last year (4th quarter of 2015) it was at 28. So currently, our affordability index is up slightly. “Due to Sonoma county’s booming economy, quality of life and affordability relative to the rest of the bay area, demand is up and wages are not keeping pace with the rate of appreciation,” commented Bill Facendini, President and Broker of Terra Firma Global Partners.
In Napa county the A.I. is up to 26 from 25 last quarter, and 21 at this time last year. The median home price is $620,000, requiring an annual income of $122,210 to be able to afford the $3,060 estimated monthly payment.
Marin, consistently with the lowest affordability of our three territories, has enjoyed a slight increase in affordability over the last year. 4th quarter A.I. is at 20, compared with 19 last quarter and 17 at this time last year.
The question everyone asks, what will this year’s real estate market bring? Interest rates will likely play a major role. With the Fed expected to raise rates 3 times over the next year, CAR economists expect rates to be around 4.4% by the end of the year. Still extremely low by historical standards, however a big enough increase to affect affordability. The charts below illustrate the changes to the affordability index if mortgage rates increase. If you have any questions about the real estate market, please feel free to get in touch with us and we will connect you with a REALTOR® in your marketplace.