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Fewer than 1 in 5 residents can afford a home in Bay Area

Louis Hansen, The Mercury News on

Published in Home and Consumer News

The Bay Area continues to lead the state in shattered home-ownership dreams.

Record home prices and rising interest rates have pushed statewide home affordability rates to a 10-year-low. In the Bay Area, fewer than 1 in 5 residents can afford to buy into one of the nation's most expensive real estate markets, according to a study released Wednesday by the California Association of Realtors.

"It's not the worst I've ever seen, but it's pretty darn close," said Dave Walsh, vice president at Alain Pinel in San Jose. "It's a challenge for any segment of society."

A swirl of forces has made the region too pricey for even double-income families: a shortage of new housing, booming job growth bringing more professionals to Silicon Valley, and interest rates ticking up from recent lows.

The run-up in prices has proven a spectacular investment for homeowners, even as many newcomers feel locked out.

Median sale prices for Bay Area homes have increased every month over the previous year for a record six straight years. It's led to an exodus from the area -- only to be replaced by even more newcomers -- and calls for housing reform in Sacramento and in city councils across the region.

The CAR affordability index is based on a region's median household income and the median home sale price. It also assumes a 20 percent down payment and a mortgage rate at the national average.

Nationally, more than half of households can afford an average home priced at $269,000. It takes a household income of $57,000 to pay the mortgage and have enough left over for food, health care and other essentials.

In California, the percentage of residents able to buy a single family home has hit its lowest point -- 26 percent -- since the first quarter of 2008, when the residential housing industry was beset by inflated prices and the subprime mortgage crisis.

A typical state resident needs an annual income topping $125,000 to afford a median home priced at $596,000. In Los Angeles, about 3 in 10 households could afford to buy, while about 4 in 10 residents in the Inland Empire could make a purchase.

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