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<\/a>Photo by Y S<\/a> on Unsplash<\/a> <\/em><\/p>\nLike many other states, California has seen its median home price surge over the course of the pandemic, climbing 34 percent annually in the second quarter of 2021. Unlike many other states, however, home prices were sky-high to begin with, which has led to rapidly deteriorating housing affordability.<\/span><\/p>\n During the second quarter of this year, only 23 percent of California households could afford to purchase the $817,950 median-priced single-family home, according to the California Association of Realtors\u2019 <\/span>Traditional Housing Affordability Index<\/span><\/a> (HAI). That\u2019s down from 27 percent of households in the first quarter of 2021 and 33 percent from the same period last year.\u00a0<\/span><\/p>\n Compared to the index\u2019s high point of 56 percent, recorded during the second quarter of 2012 in the wake of the 2008 housing crash, affordability has declined by more than half. CAR attributes worsening affordability in second-quarter 2021 to \u201ca highly competitive market fueled by low interest rates and a tight supply of homes for sale.\u201d<\/span><\/p>\n Assuming a 30-year fixed-rate mortgage at a 3.20 percent interest rate, a household would need to earn at least $150,800 per year to cover the monthly mortgage payment (including principal, interest and taxes). Although the effective composite interest rate has fallen since the second quarter of 2020, home prices have climbed much more quickly.\u00a0<\/span><\/p>\n In contrast to the previous quarter, buying power decreased in 47 of the counties tracked by CAR, increased in three counties (Monterey, Glenn and Mono), and held steady in one county (Lassen). With the exception of San Francisco, which remained unchanged, every county in the state experienced worsening housing affordability.\u00a0<\/span><\/p>\n