Trying to buy a house in Los Angeles probably feels a lot like taking crazy pills. Prices in Northeast LA are shooting up so much that median prices are now above $600,000 in the once reasonably priced area. Echo Park is now a full-on, rich-people enclave where the median is above $800,000. The staggering prices in famously wealthy parts of town are not to be viewed without a handkerchief and your heart medicine in hand. A tiny kernel of good news, though: LA County saw some of the most improvements in affordability in California at the end of 2015, in part because of “flat home prices and lower interest rates.” Unfortunately, the affordability metric is still below 30 percent, according to the California Association of Realtors—meaning fewer than 30 percent of households in the county could afford to buy a median-priced house.
In the last three months of 2015, only 27 percent of all households in LA County could afford to buy a median-priced house there. That’s an improvement from the previous quarter in 2015, when only 24 percent of households could swing purchasing that median-priced house, but it’s also a drop of one percentage point from the last quarter of 2014.
Affordability is calculated using CAR’s Traditional Housing Affordability Index, which considers the monthly payment—including taxes and insurance on a 30-year, fixed-rate loan—and assumes a 20-percent down payment.
While affordability is making small but apparently encouraging gains, the figures themselves are still a little daunting. The median house in LA County was nearly $482,000 in the last quarter of 2015. The monthly payments would run about $2,410, and the minimum income required to qualify to buy the house is $96,420, CAR figures. If that doesn’t sound so bad, consider that the median income in LA County is $55,909, according to US Census figures from 2009 through 2013.
Things are slightly less depressing for would-be homebuyers in the greater LA metro area. There, about 32 percent of households could afford to buy a median-priced house ($442,830) in the last three months of 2015, and the qualifying income to buy the house would be about $88,600. The overall affordability is up one percentage point from the previous quarter in 2015, but down from 34 percent in the final three months of 2014.
Senior Director, Coldwell Banker New Homes Division
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“Fewer properties for sale with such remarkably low interest rates make it a great time to sell but a more difficult time to buy”