“The report also tracked affordability by area code within L.A. County. They found that in the 626 – Pasadena and the San Gabriel Valley – just 11% of median-income-earning households could afford a typical house…
…In the 310 – the Westside and beach towns – 14% could. In the 213 – Downtown and Central L.A. – that figure was 16% while in 818 and 747 in the San Fernando Valley, it’s 16%.”, Tim Logan, “Barely 1 in 5 LA homes affordable to middle class, study finds”, Los Angeles Times
“Like it or not, the reality is that homes have become a luxury item in many world class cities around the world, like Los Angeles. In other words, in these cities it is no longer appropriate (and hasn’t been for a long time) to correlate home prices and price changes to median incomes. Only 1 in 5 homes are affordable to the middle class…so it makes sense to correlate them to the incomes of the upper third or so of Los Angeles residents. In a free market, this will mean that over time, median income jobs and families will move out of Los Angeles to cheaper locales. In our internet age, more people can work anywhere in the U.S. and even the world and from home. (Through Odesk, I have a guy in Russia doing some programming for me on a smart phone application right now and a Yale engineer, coordinating with him from his home in Escondido, in the evenings after his full-time job.) And as middle class jobs and families continue to leave LA, because of its high cost of housing, LA will become more and more a city of the rich and the poor and/or real estate values may decline over time until an equilibrium is reached, with other more affordable cities. Finally, any well-intended intervention by government (to provide more affordable housing), will likely only have a minor effect to this free-market trend and while PC, it probably is not a good use of limited government time and resources.”, Mike Perry, former Chairman and CEO, IndyMac Bank
Barely 1 in 5 L.A. homes affordable to middle class, study finds
A median-income household in L.A. County can afford just 22% of homes for sale, according to a new study out Tuesday. (Bryan Chan / Los Angeles Times)
By Tim Logan
The bad news: Los Angeles County is the second-least affordable housing market in the country for a middle-class family.
The sort-of good news: At least it’s not getting much worse.
That’s according to a new report out Tuesday from real estate website Trulia, which found that a household earning the median income of $54,000 can afford just 22% of homes in L.A. County on 31% of their income or less. Only in San Francisco, at 15%, can fewer middle-class families afford to buy. Six of the seven least-affordable markets in the nation are in California, including San Diego (25%), Orange County (26%) and Ventura County (33%).
The report also tracked affordability by area code within L.A. County. They found that in the 626 – Pasadena and the San Gabriel Valley – just 11% of median-income-earning households could afford a typical house. In the 310 – the Westside and beach towns – 14% could. In the 213 – Downtown and Central L.A. – that figure was 16% while in 818 and 747 in the San Fernando Valley, it’s 16%.
The numbers would come as no surprise to anyone who tracks the housing economy in California, where sky-high prices coupled with soft income growth have driven home-buying out of reach for many. Indeed, considering that prices have climbed by roughly one-third in Southern California over the last two years, it might come as a surprise that affordability hasn’t gotten worse – this year’s affordability figure is just 2 percentage points lower than last year’s rate of 24%. But rock-bottom interest rates have helped to keep the monthly cost of ownership in check, noted Trulia chief economist Jed Kolko.
change eventually, Kolko wrote. Even though home price gains are slowing – the median price in the six-county Southland climbed 6.8% in October, according to CoreLogic DataQuick – they’re still growing faster than incomes. If interest rates start climbing, Kolko wrote, there’s just one likely outcome.
“Unless incomes increase substantially, homeownership will slip further beyond the reach of many households,” Kolko wrote.